Document:

EXHIBIT 10.38

                                    AGREEMENT

     THIS AGREEMENT is entered into as of the 31st day of December, 1999, by and
     between E.R. "Bo"  Campbell.  ("Executive"),  and  Hibernia National Bank a
     national banking association ("Hibernia").

                             W I T N E S S E T H:

     WHEREAS, Hibernia  and  Executive desire to  continue their relationship as
     employer  and  employee which  began in 1994 under terms that  differ  from
     those  previously  in  effect;

     NOW, THEREFORE, in consideration  of  the  premises  and of  the respective
     representations,  warranties  and  covenants  hereinafter  set  forth,  the
     parties hereto hereby agree as follows:

     1.  EMPLOYMENT.  Hibernia agrees to employ  Executive and Executive  agrees
     to  remain  in the  employ of Hibernia,  upon  the terms and subject to the
     conditions provided herein.

     2.  POSITION AND TITLE.  During  the period of  his  employment  hereunder,
     Executive  shall  report directly to the  Chief Executive Officer and shall
     hold such title as may be mutually agreed by the parties, and shall perform
     services  when and as directed by Hibernia  or its parent company, Hibernia
     Corporation  (the "Company"), as more fully described in Section  3 hereof.

     3.  DUTIES.  Executive's duties shall include business development and such
     duties as may be delegated  to him by the Chief  Executive  Officer  or the
     Board  of  Directors.  During  the  period  of  his  employment  hereunder,
     Executive shall devote such  business  time,  attention,  skill and efforts
     to  the  faithful  performance  of his duties  hereunder as may be mutually
     agreed by Executive and the Chief Executive Officer. During the term of his
     employment  under  this  Agreement, Executive may not serve, or continue to
     serve, on the board of directors or hold any  other office or position with
     any other  financial institution.

     4. COMPENSATION.

        (a) Salary.  Hibernia  will  pay Executive  $___________.00  per year to
            compensate Executive for  the duties and  responsibilities performed
            for  Hibernia  described  in  Section  3  above.   During  the  term
            of  his employment,   Executive's  salary  will  be  paid  currently
            in  equal  installments  twice  monthly,  on the 15th  and  the last
            business  day of each  month, or at  such other  times  as  Hibernia
            may regularly pay its Executives.

        (b) Bonus. Executive will not be entitled to a bonus.

        (c) Benefits.  Executive during the term of his employment shall also be
            entitled to receive such  benefits as  Hibernia  may provide for its
            Executives  pursuant to  any policy of Hibernia  authorized  by  its
            Board of Directors.

     5. TERM.  The  term  of  this  Agreement shall  be  three  years; provided,
        however, that the term of this Agreement shall be automatically extended
        for  an  additional  year  upon  each  anniversary  of the date  of this
        Agreement, unless this Agreement is otherwise terminated by notice given
        by Hibernia  or Executive  on or before any  anniversary  of the date of
        this Agreement.

     6. TERMINATION.
       (a)  Death  or   Disability.

           (i) Employment shall terminate upon Executive's death.

          (ii) If Executive  becomes,  in the  good faith judgment of Hibernia's
               Board of  Directors, physically or mentally  disabled so as to be
               eligible to receive benefits pursuant to the disability insurance
               policy provided to Executive pursuant to this Agreement, Hibernia
               may, at its option, terminate employment upon not  fewer  than 15
               days'  written  notice.

               If  employment  is  terminated  pursuant to this Subsection 6(a),
               Executive or his heirs, estate,  executor and administrator shall
               be entitled to receive, and Hibernia  shall  pay  to Executive or
               his  heirs,  estate,  executor  or  administrator  unpaid  salary
               through the Termination Date, and any benefits to which Executive
               or his estate may then be entitled under benefits insurance plans
               or their equivalent provided by Hibernia  pursuant  to Section  4
               hereof.

       (b)  Termination for Cause.  This Agreement may be immediately terminated
            by Hibernia if:

           (i) Executive knowingly  and intentionally  commits,  or is otherwise
               officially  charged  with, a felony or  a crime  involving  moral
               turpitude  or any  other criminal  activity or unethical  conduct
               that,  in  the good  faith  opinion of the  Board of Directors of
               Hibernia,  would seriously  impair Executive's ability to perform
               his duties  hereunder or would impair the  business reputation of
               Hibernia, either in the market for which Executive is responsible
               or otherwise,

          (ii) in the good  faith opinion of the Board of  Directors of Hibernia
               or the  Company,  Executive  fails to  substantially  perform the
               duties  assigned to him  hereunder if such  failure has continued
               for a period of 30 days after notice of such failure and a demand
               for  performance  has been given by the Company,  or

         (iii) in the good faith opinion of the Board of  Directors  of Hibernia
               or the  Company, Executive  has  violated  any statute,  rule, or
               regulation  under the federal  securities or banking laws  or the
               securities  or  banking  laws of  any  state  which  impairs  the
               business of Hibernia.

       (c)  Termination of Agreement Without Cause.  Hibernia may terminate this
            Agreement  without  cause  at  any time after  the Effective Date by
            paying to Executive  the full  amount of  unpaid  salary to which he
            would have been entitled  through the Termination Date in a lump sum
            and  any  benefits  to which  Executive  or his  estate  may then be
            entitled under benefits insurance plans or their equivalent provided
            by Hibernia pursuant to Section 4 hereof.

     7. PREVIOUS AGREEMENT(S).  Executive and Hibernia agree that this Agreement
     supersedes any and all employment agreements or ther agreements relating to
     benefits to be paid upon a change of control or a termination of employment
     between the Bank, its parents,  subsidiaries,  or their predecessors and/or
     assigns and  Executive,  and  that any and  all such  prior  agreements are
     hereby  terminated and of no further force and effect.

     8. HEADINGS. Section and other headings contained in this Agreement are for
     reference  purposes  only and  shall  not affect  in any way the meaning or
     interpretation of this Agreement.

     9. INTEGRATED AGREEMENT.  This  Agreement,  and  all  other  documents  and
     instruments delivered in accordanc ewith the terms hereof,  constitutes the
     entire understanding and agreement among the parties hereto with respect to
     the  subject  matter  hereof,  and  there   are   no   other    agreements,
     understandings,   restrictions,  representations  or  warranties  among the
     parties other than those set forth herein or herein  provided  for.

    10. AMENDMENTS.  This Agreement  may be amended  or modified  at any time in
     any or all  respects,  but only by an instrument in writing executed by the
     parties hereto.

    11. CHOICE OF LAW. The validity of  the Agreement,  the  construction of its
     terms, and the determination of the rights and duties of the parties hereto
     shall be governed by and  construed in accordance with the internal laws of
     the State of Louisiana applicable  to contracts made to be performed wholly
     within such State.

    12. ASSIGNMENT.  The  rights and  obligations  of  Hibernia pursuant to this
     Agreement shall be  binding  upon  and  inure to the  benefit of Hibernia's
     successors and assigns.  This Agreement may  not be assigned or transferred
     by Executive.

    13. SEVERABILITY.  Each  provision  of  the  Agreement  is  intended  to  be
     severable.  In the  event  that any one or more of the provisions contained
     in this  Agreement  shall for any reason be held to be invalid,  illegal or
     unenforceable,  the same shall not affect the validity or enforceability of
     any  other  provision  of  this  Agreement,  but  this  Agreement shall  be
     construed as if such invalid, illegal or unenforceable provisions had never
     been  contained  therein.  Notwithstanding   the  foregoing,   however,  no
     provision   shall  be  severed   if  it  is  clearly   apparent  under  the
     circumstances  that the parties  would not have entered into the  Agreement
     without  such  provision.

     IN WITNESS  WHEREOF,  the  parties hereto  have executed  this Agreement as
     of the  day and  year  first  above  written.

         EXECUTIVE

         ____________________________________

        HIBERNIA NATIONAL BANK

By:     ____________________________________

        Stephen A. Hansel
        President and Chief Executive OfficerExhibit 4.1

<PAGE>

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

                                    Depositor

                           LONG BEACH MORTGAGE COMPANY

                                 Master Servicer

                                       and

                  NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION

                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT
                          Dated as of February 1, 2000

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

                Floating Rate Mortgage Pass-Through Certificates

                                 Series 2000-LB1

<PAGE>

<TABLE>
<CAPTION>
                                             TABLE OF CONTENTS
                                             -----------------

SECTION                                                                                               PAGE
-------                                                                                               ----

                                                 ARTICLE I

                                                DEFINITIONS

<S>                                                                                                   <C>
1.01.     Defined Terms..................................................................................4
          Accrued Certificate Interest...................................................................4
          Adjustable Rate Mortgage Loan..................................................................4
          Adjustment Date................................................................................4
          Advancing Person...............................................................................4
          Affiliate......................................................................................4
          Aggregate Loss Severity Percentage.............................................................5
          Agreement......................................................................................5
          Assignment.....................................................................................5
          Available Distribution Amount..................................................................5
          Balloon Loan...................................................................................6
          Balloon Payment................................................................................6
          Bankruptcy Code................................................................................6
          Bankruptcy Loss................................................................................6
          Book-Entry Certificate.........................................................................6
          Book-Entry Custodian...........................................................................6
          Business Day...................................................................................6
          Certificate....................................................................................6
          Certificate Factor.............................................................................6
          Certificateholder or Holder....................................................................6
          Certificate Owner..............................................................................7
          Certificate Principal Balance..................................................................7
          Certificate Register and Certificate Registrar.................................................7
          Class   .......................................................................................7
          Class A Certificate............................................................................7
          Class A Principal Distribution Amount..........................................................7
          Class CE Certificate...........................................................................8
          Class Exemption................................................................................8
          Class M-1 Certificate..........................................................................8
          Class M-1 Principal Distribution Amount........................................................8
          Class M-2 Certificate..........................................................................8
          Class M-2 Principal Distribution Amount........................................................8
          Class M-3 Certificate..........................................................................8
          Class M-3 Principal Distribution Amount........................................................9
          Class P Certificate............................................................................9
          Class R-I Certificate..........................................................................9
          Class R-II Certificate.........................................................................9
          Class R-III Certificates.......................................................................9

                                                     i

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Closing Date...................................................................................9
          Code    .......................................................................................9
          Collection Account.............................................................................9
          Commission.....................................................................................9
          Corporate Trust Office........................................................................10
          Corresponding Certificate.....................................................................10
          Credit Enhancement Percentage.................................................................10
          Cumulative Loss Percentage....................................................................10
          Custodial Agreement...........................................................................10
          Custodian.....................................................................................10
          Cut-off Date..................................................................................10
          DCR     ......................................................................................10
          Debt Service Reduction........................................................................10
          Deficient Valuation...........................................................................11
          Definitive Certificates.......................................................................11
          Deleted Mortgage Loan.........................................................................11
          Delinquency Percentage........................................................................11
          Depositor.....................................................................................11
          Depository....................................................................................11
          Depository Institution........................................................................11
          Depository Participant........................................................................11
          Determination Date............................................................................11
          Directly Operate..............................................................................12
          Disqualified Organization.....................................................................12
          Distribution Account..........................................................................12
          Distribution Date.............................................................................12
          Due Date......................................................................................12
          Due Period....................................................................................12
          Eligible Account..............................................................................13
          ERISA   ......................................................................................13
          Estate in Real Property.......................................................................13
          Excess Overcollateralized Amount..............................................................13
          Expense Adjusted Mortgage Rate................................................................13
          Extraordinary Trust Fund Expense..............................................................13
          Fannie Mae....................................................................................13
          FDIC    ......................................................................................13
          Final Recovery Determination..................................................................13
          Freddie Mac...................................................................................13
          Gross Margin..................................................................................13
          Independent...................................................................................14
          Independent Contractor........................................................................14
          Index   ......................................................................................14
          Insurance Proceeds............................................................................14
          Interest Accrual Period.......................................................................14

                                                    ii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Interest Carry Forward Amount.................................................................15
          Interest Determination Date...................................................................15
          Interest Distribution Amount..................................................................15
          Interest Remittance Amount....................................................................15
          Late Collections..............................................................................15
          Liquidation Event.............................................................................15
          Liquidation Proceeds..........................................................................16
          Loan-to-Value Ratio...........................................................................16
          London Business Day...........................................................................16
          Loss Severity Percentage......................................................................16
          Majority Class CE Certificateholder...........................................................16
          Master Servicer...............................................................................16
          Master Servicer Event of Default..............................................................16
          Master Servicer Prepayment Charge Payment Amount..............................................16
          Master Servicer Remittance Date...............................................................16
          Master Servicer Termination Test..............................................................16
          Maximum I-LT6 Uncertificated Interest Deferral Amount.........................................16
          Maximum Mortgage Rate.........................................................................17
          Mezzanine Certificate.........................................................................17
          Minimum Mortgage Rate.........................................................................17
          Monthly Payment...............................................................................17
          Moody's ......................................................................................17
          Mortgage......................................................................................17
          Mortgage File.................................................................................17
          Mortgage Loan.................................................................................17
          Mortgage Loan Purchase Agreement..............................................................17
          Mortgage Loan Schedule........................................................................17
          Mortgage Note.................................................................................19
          Mortgage Pool.................................................................................19
          Mortgage Rate.................................................................................19
          Mortgaged Property............................................................................20
          Mortgagor.....................................................................................20
          Net Monthly Excess Cashflow...................................................................20
          Net Mortgage Rate.............................................................................20
          New Lease.....................................................................................20
          Nonrecoverable P&I Advance....................................................................20
          Nonrecoverable Servicing Advance..............................................................20
          Non-United States Person......................................................................21
          Notional Amount...............................................................................21
          Officers' Certificate.........................................................................21
          One-Month LIBOR...............................................................................21
          One-Month LIBOR Pass-Through Rate.............................................................21
          Opinion of Counsel............................................................................22
          Original Mortgage Loan........................................................................22

                                                    iii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Overcollateralized Amount.....................................................................22
          Overcollateralization Deficiency Amount.......................................................22
          Overcollateralization Increase Amount.........................................................22
          Overcollateralization Reduction Amount........................................................22
          Ownership Interest............................................................................23
          Pass-Through Rate.............................................................................23
          Percentage Interest...........................................................................24
          Periodic Rate Cap.............................................................................24
          Permitted Investments.........................................................................24
          Permitted Transferee..........................................................................25
          Person  ......................................................................................25
          P&I Advance...................................................................................25
          Plan    ......................................................................................26
          Prepayment Assumption.........................................................................26
          Prepayment Charge.............................................................................26
          Prepayment Charge Schedule....................................................................26
          Prepayment Interest Shortfall.................................................................26
          Prepayment Period.............................................................................27
          Principal Distribution Amount.................................................................27
          Principal Prepayment..........................................................................27
          PTCE    ......................................................................................28
          Purchase Price................................................................................28
          Qualified Substitute Mortgage Loan............................................................28
          Rating Agency or Rating Agencies..............................................................29
          Realized Loss.................................................................................29
          Record Date...................................................................................30
          Reference Banks...............................................................................30
          Refinanced Mortgage Loan......................................................................30
          Regular Certificate...........................................................................30
          Regular Interest..............................................................................31
          Relief Act....................................................................................31
          Relief Act Interest Shortfall.................................................................31
          REMIC   ......................................................................................31
          REMIC I ......................................................................................31
          REMIC I Interest Loss Allocation Amount.......................................................31
          REMIC I Overcollateralized Amount.............................................................31
          REMIC I Principal Loss Allocation Amount......................................................32
          REMIC I Regular Interest......................................................................32
          REMIC I Regular Interest I-LT1................................................................32
          REMIC I Regular Interest I-LT2................................................................32
          REMIC I Regular Interest I-LT3................................................................32
          REMIC I Regular Interest I-LT4................................................................32
          REMIC I Regular Interest I-LT5................................................................33
          REMIC I Regular Interest I-LT6................................................................33

                                                    iv

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          REMIC I Regular Interest I-LTP................................................................33
          REMIC I Remittance Rate.......................................................................33
          REMIC I Required Overcollateralized Amount....................................................33
          REMIC II......................................................................................33
          REMIC II Regular Interest.....................................................................33
          REMIC II Regular Interest II-LT1..............................................................33
          REMIC II Regular Interest II-LT2..............................................................34
          REMIC II Regular Interest II-LT3..............................................................34
          REMIC II Regular Interest II-LT4..............................................................34
          REMIC II Regular Interest II-LT5..............................................................34
          REMIC II Regular Interest II-LT6..............................................................34
          REMIC II Regular Interest II-LTP..............................................................34
          REMIC II Regular Interest II-LT2S.............................................................35
          REMIC II Regular Interest II-LT3S.............................................................35
          REMIC II Regular Interest II-LT4S.............................................................35
          REMIC II Regular Interest II-LT5S.............................................................35
          REMIC II Remittance Rate......................................................................35
          REMIC III.....................................................................................35
          REMIC III Certificate.........................................................................35
          REMIC III Certificateholder...................................................................35
          Remittance Report.............................................................................36
          Rents from Real Property......................................................................36
          REO Account...................................................................................36
          REO Disposition...............................................................................36
          REO Imputed Interest..........................................................................36
          REO Principal Amortization....................................................................36
          REO Property..................................................................................36
          Request for Release...........................................................................36
          Required Overcollateralized Amount............................................................37
          Reserve Interest Rate.........................................................................37
          Residential Dwelling..........................................................................37
          Residual Certificate..........................................................................37
          Residual Interest.............................................................................37
          Responsible Officer...........................................................................37
          Scheduled Principal Balance...................................................................37
          Seller  ......................................................................................38
          Senior Interest Distribution Amount...........................................................38
          Servicing Account.............................................................................38
          Servicing Advances............................................................................38
          Servicing Fee.................................................................................38
          Servicing Fee Rate............................................................................39
          Servicing Officer.............................................................................39
          Single Certificate............................................................................39
          Startup Day...................................................................................39

                                                     v

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

          Stated Principal Balance......................................................................39
          Stayed Funds..................................................................................40
          Stepdown Date.................................................................................40
          Sub-Servicer..................................................................................40
          Sub-Servicing Account.........................................................................40
          Sub-Servicing Agreement.......................................................................40
          Substitution Shortfall Amount.................................................................40
          Tax Returns...................................................................................40
          Telerate Page 3750............................................................................40
          Termination Price.............................................................................40
          Terminator....................................................................................40
          Transfer......................................................................................41
          Transferee....................................................................................41
          Transferor....................................................................................41
          Trigger Event.................................................................................41
          Trust Fund....................................................................................41
          Trustee ......................................................................................41
          Trustee's Fee.................................................................................41
          Trustee's Fee Rate............................................................................41
          Uncertificated Balance........................................................................41
          Uncertificated Corresponding Component........................................................41
          Uncertificated Interest.......................................................................42
          Uncertificated Notional Amount................................................................42
          Uninsured Cause...............................................................................42
          United States Person..........................................................................42
          Value   ......................................................................................43
          Voting Rights.................................................................................43
1.02.     Allocation of Certain Interest Shortfalls.....................................................43

                                                ARTICLE II

                                       CONVEYANCE OF MORTGAGE LOANS;
                                     ORIGINAL ISSUANCE OF CERTIFICATES

2.01.     Conveyance of Mortgage Loans..................................................................45
2.02.     Acceptance of REMIC I by the Trustee..........................................................47
2.03.     Repurchase or Substitution of Mortgage Loans by the Seller or
          the Depositor; Payment of Prepayment Charges in the event of breach...........................48
2.04.     Representations and Warranties of the Depositor...............................................53
2.05.     Representations, Warranties and Covenants of the Master Servicer..............................54
2.06.     Issuance of Class R-I Certificates............................................................57
2.07.     Conveyance of REMIC I Regular Interests; Acceptance of
          REMIC II by the Trustee.......................................................................57
2.08.     Issuance of Class R-II Certificates...........................................................57

                                                    vi

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

2.09.     Conveyance of REMIC II Regular Interests; Acceptance of
          REMIC III by the Trustee......................................................................58
2.10.     Issuance of REMIC III Certificates............................................................58

                                                ARTICLE III

                                       ADMINISTRATION AND SERVICING
                                           OF THE MORTGAGE LOANS

3.01.     Master Servicer to Act as Master Servicer.....................................................59
3.02.     Sub-Servicing Agreements Between the Master Servicer and Sub-Servicers........................60
3.03.     Successor Sub-Servicers.......................................................................62
3.04.     Liability of the Master Servicer..............................................................62
3.05.     No Contractual Relationship Between Sub-Servicers and Trustee or
          Certificateholders............................................................................62
3.06.     Assumption or Termination of Sub-Servicing Agreements by Trustee..............................62
3.07.     Collection of Certain Mortgage Loan Payments..................................................63
3.08.     Sub-Servicing Accounts........................................................................64
3.09.     Collection of Taxes, Assessments and Similar Items; Servicing Accounts........................64
3.10.     Collection Account and Distribution Account...................................................65
3.11.     Withdrawals from the Collection Account and Distribution Account..............................67
3.12.     Investment of Funds in the Collection Account and the Distribution Account....................69
3.13.     [intentionally omitted].......................................................................70
3.14.     Maintenance of Hazard Insurance and Errors and Omissions
          and Fidelity Coverage.........................................................................71
3.15.     Enforcement of Due-On-Sale Clauses; Assumption Agreements.....................................72
3.16.     Realization Upon Defaulted Mortgage Loans.....................................................73
3.17.     Trustee to Cooperate; Release of Mortgage Files...............................................75
3.18.     Servicing Compensation........................................................................76
3.19.     Reports to the Trustee; Collection Account Statements.........................................77
3.20.     Statement as to Compliance....................................................................77
3.21.     Independent Public Accountants' Servicing Report..............................................78
3.22.     Access to Certain Documentation...............................................................78
3.23.     Title, Management and Disposition of REO Property.............................................79
3.24.     Obligations of the Master Servicer in Respect of
          Prepayment Interest Shortfalls................................................................82
3.25.     Obligations of the Master Servicer in Respect of Mortgage Rates
          and Monthly Payments..........................................................................82
3.26.     Advance Facility..............................................................................82

                                                    vii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

                                                ARTICLE IV

                                      PAYMENTS TO CERTIFICATEHOLDERS

4.01.     Distributions.................................................................................84
4.02.     Statements to Certificateholders..............................................................90
4.03.     Remittance Reports; P&I Advances..............................................................93
4.04.     Allocation of Realized Losses.................................................................96
4.05.     Compliance with Withholding Requirements......................................................97
4.06.     Commission Reporting..........................................................................98

                                                 ARTICLE V

                                             THE CERTIFICATES

5.01.     The Certificates..............................................................................99
5.02.     Registration of Transfer and Exchange of Certificates........................................101
5.03.     Mutilated, Destroyed, Lost or Stolen Certificates............................................105
5.04.     Persons Deemed Owners........................................................................106
5.05.     Certain Available Information................................................................106

                                                ARTICLE VI

                                   THE DEPOSITOR AND THE MASTER SERVICER

6.01.     Liability of the Depositor and the Master Servicer...........................................108
6.02.     Merger or Consolidation of the Depositor or the Master Servicer..............................108
6.03.     Limitation on Liability of the Depositor, the Master Servicer and Others.....................108
6.04.     Limitation on Resignation of the Master Servicer.............................................109
6.05.     Rights of the Depositor in Respect of the Master Servicer....................................110

                                                ARTICLE VII

                                                  DEFAULT

7.01.     Master Servicer Events of Default............................................................111
7.02.     Trustee to Act; Appointment of Successor.....................................................113
7.03.     Notification to Certificateholders...........................................................115
7.04.     Waiver of Master Servicer Events of Default..................................................115

                                                   viii

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

                                               ARTICLE VIII

                                          CONCERNING THE TRUSTEE

8.01.     Duties of Trustee............................................................................116
8.02.     Certain Matters Affecting the Trustee........................................................117
8.03.     Trustee Not Liable for Certificates or Mortgage Loans........................................118
8.04.     Trustee May Own Certificates.................................................................118
8.05.     Trustee's Fees and Expenses..................................................................118
8.06.     Eligibility Requirements for Trustee.........................................................119
8.07.     Resignation and Removal of the Trustee.......................................................119
8.08.     Successor Trustee............................................................................120
8.09.     Merger or Consolidation of Trustee...........................................................121
8.10.     Appointment of Co-Trustee or Separate Trustee................................................121
8.11.     Appointment of Custodians....................................................................122
8.12.     Appointment of Office or Agency..............................................................122
8.13.     Representations and Warranties of the Trustee................................................122

                                                ARTICLE IX

                                                TERMINATION

9.01      Termination Upon Repurchase or Liquidation of All Mortgage Loans.............................124
9.02      Additional Termination Requirements..........................................................126

                                                 ARTICLE X

                                             REMIC PROVISIONS

10.01.    REMIC Administration.........................................................................127
10.02.    Prohibited Transactions and Activities.......................................................130
10.03.    Master Servicer and Trustee Indemnification..................................................130

                                                ARTICLE XI

                                         MISCELLANEOUS PROVISIONS

11.01.    Amendment....................................................................................131
11.02.    Recordation of Agreement; Counterparts.......................................................132
11.03.    Limitation on Rights of Certificateholders...................................................132
11.04.    Governing Law................................................................................133
11.05.    Notices......................................................................................133
11.06.    Severability of Provisions...................................................................134
11.07.    Notice to Rating Agencies....................................................................134

                                                    ix

<PAGE>

SECTION                                                                                               PAGE
-------                                                                                               ----

11.08.    Article and Section References...............................................................135
11.09.    Grant of Security Interest...................................................................135
</TABLE>

                                        x

<PAGE>

Exhibits
--------

Exhibit A-1   Form of Class A Certificate
Exhibit A-2   Form of Class M-1 Certificate
Exhibit A-3   Form of Class M-2 Certificate
Exhibit A-4   Form of Class M-3 Certificate
Exhibit A-5   Form of Class CE Certificate
Exhibit A-6   Form of Class P Certificate
Exhibit A-7   Form of Class R-I Certificate
Exhibit A-8   Form of Class R-II Certificate
Exhibit A-9   Form of Class R-III Certificate
Exhibit B     [Reserved]
Exhibit C-1   Form of Trustee's Initial Certification
Exhibit C-2   Form of Trustee's Final Certification
Exhibit D     Form of Mortgage Loan Purchase Agreement
Exhibit E-1   Request for Release
Exhibit E-2   Request for Release Mortgage Loans paid in full
Exhibit F-1   Form of Transferor Representation Letter and Form of Transferee
              Representation Letter in Connection with Transfer of the Class CE
              Certificates, Class P Certificates and Residual Certificates
              Pursuant to Rule 144A Under the 1933 Act
Exhibit F-2   Form of Transfer Affidavit and Agreement and Form of Transferor
              Affidavit in Connection with Transfer of Residual Certificates
Exhibit G     Form of Certification with respect to ERISA and the Code
Exhibit H     Form of Custodial Agreement

Schedule 1    Mortgage Loan Schedule
Schedule 2    Prepayment Charge Schedule

                                       xi

<PAGE>

                   This Pooling and Servicing Agreement, is dated and effective
as of February 1, 2000, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, LONG BEACH MORTGAGE COMPANY as Master Servicer and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION as Trustee.

                             PRELIMINARY STATEMENT:

                   The Depositor intends to sell pass-through certificates
(collectively, the "Certificates"), to be issued hereunder in multiple classes,
which in the aggregate will evidence the entire beneficial ownership interest in
each REMIC (as defined herein) created hereunder. The Trust Fund will consist of
a segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement.

                   As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets (other than the Master Servicer Prepayment Charge Payment Amount)
subject to this Agreement as a REMIC for federal income tax purposes, and such
segregated pool of assets will be designated as "REMIC I." The Class R-I
Certificates will be the sole class of "residual interests" in REMIC I for
purposes of the REMIC Provisions (as defined herein). The following table
irrevocably sets forth the designation, the REMIC I Remittance Rate, the initial
Uncertificated Balance and, solely for purposes of satisfying Treasury
regulation Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for
each of the REMIC I Regular Interests (as defined herein). None of the REMIC I
Regular Interests will be certificated.

<TABLE>
<CAPTION>
                        REMIC I                      Initial                 Latest Possible
Designation         Remittance Rate           Uncertificated Balance        Maturity Date(1)
-----------         ---------------           ----------------------        ----------------
<S>                   <C>                        <C>                          <C>
   I-LT1              Variable(2)                $770,983,975.90              February 2030
   I-LT2              Variable(2)                  $6,451,090.00              February 2030
   I-LT3              Variable(2)                    $472,030.00              February 2030
   I-LT4              Variable(2)                    $413,020.00              February 2030
   I-LT5              Variable(2)                    $314,680.00              February 2030
   I-LT6              Variable(2)                  $8,083,546.85              February 2030
   I-LTP                   (3)                           $100.00              February 2030
</TABLE>

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

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loan with the latest maturity date has been designated as
      the "latest possible maturity date" for each REMIC I Regular Interest.

(2)   Calculated in accordance with the definition of "REMIC I Remittance Rate"
      herein.

(3)   The REMIC I Regular Interest I-LTP will not accrue interest.

<PAGE>

                                       -2-

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC II." The Class R-II Certificates will evidence the sole
class of "residual interests" in REMIC II for purposes of the REMIC Provisions.
The following table irrevocably sets forth the designation, the REMIC II
Remittance Rate, the initial Uncertificated Balance and, solely for purposes of
satisfying Treasury regulation Section 1.860G- 1(a)(4)(iii), the "latest
possible maturity date" for each of the REMIC II Regular Interests. None of the
REMIC II Regular Interests will be certificated.

<TABLE>
<CAPTION>
                              REMIC II                      Initial                 Latest Possible
Designation                Remittance Rate           Uncertificated Balance        Maturity Date(1)
-----------                ---------------           ----------------------        ----------------
<S>                          <C>                        <C>                          <C>
   II-LT1                    Variable(2)                $770,983,975.90              February 2030
   II-LT2                    Variable(2)                  $6,451,090.00              February 2030
   II-LT3                    Variable(2)                    $472,030.00              February 2030
   II-LT4                    Variable(2)                    $413,020.00              February 2030
   II-LT5                      7.000%                       $314,680.00              February 2030
   II-LT6                    Variable(2)                  $8,083,546.85              February 2030
   II-LTP                       (3)                             $100.00              February 2030
  II-LT2S                    Variable(2)                      (4)                    February 2030
  II-LT3S                    Variable(2)                      (4)                    February 2030
  II-LT4S                    Variable(2)                      (4)                    February 2030
  II-LT5S                    Variable(2)                      (4)                    February 2030
</TABLE>

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

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loan with the latest maturity date has been designated as
      the "latest possible maturity date" for each REMIC II Regular Interest.

(2)   Calculated in accordance with the definition of "REMIC II Remittance Rate"
      herein.

(3)   The REMIC II Regular Interest II-LTP will not accrue interest.

(4)   This REMIC II Regular Interest has no Uncertificated Balance but will
      accrue interest at the related REMIC II Remittance Rate on the related
      Uncertificated Notional Amount, which is equal to the Uncertificated
      Balance of the Uncertificated Corresponding Component.

<PAGE>

                                       -3-

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III." The Class R-III Certificates will evidence the
sole class of "residual interests" in REMIC III for purposes of the REMIC
Provisions under federal income tax law. The following table irrevocably sets
forth the designation, the Pass- Through Rate, the initial aggregate Certificate
Principal Balance and, solely for purposes of satisfying Treasury regulation
Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for the
indicated Classes of Certificates.

<TABLE>
<CAPTION>
                                                  Initial Aggregate               Latest Possible
Designation          Pass-Through Rate    Certificate Principal Balance        Maturity Date(1)
-----------          -----------------    -----------------------------        ----------------
<S>                      <C>                     <C>                            <C>
 Class A                 Variable(2)             $645,109,000.00                February 2030
 Class M-1               Variable(2)              $47,203,000.00                February 2030
 Class M-2               Variable(2)              $41,302,000.00                February 2030
 Class M-3                 7.000%                 $31,468,000.00                February 2030
 Class CE                Variable(2)              $21,636,342.75                February 2030
 Class P                     (4)                         $100.00                February 2030
</TABLE>

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

(1)   Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
      regulations, the Distribution Date immediately following the maturity date
      for the Mortgage Loans with the latest maturity date has been designated
      as the "latest possible maturity date" for each Class of Certificates.

(2)   Calculated in accordance with the definition of "Pass-Through Rate"
      herein.

(3)   The Class CE Certificates will accrue interest at their variable
      Pass-Through Rate on the Notional Amount of the Class CE Certificates
      outstanding from time to time which shall equal the Uncertificated Balance
      of REMIC II Regular Interests (other than the Uncertificated Balance of
      the REMIC II Regular Interest II-LTP). The Class CE Certificates will not
      accrue interest on their Certificate Principal Balance. (4) The Class P
      Certificates will not accrue interest.

                  As of the Cut-off Date, the Original Mortgage Loans had an
aggregate Scheduled Principal Balance equal to $786,718,442.75.

                  In consideration of the mutual agreements herein contained,
the Depositor, the Master Servicer and the Trustee agree as follows:

<PAGE>

                                       -4-

                                    ARTICLE I

                                   DEFINITIONS

                  SECTION 1.01. Defined Terms.

                  Whenever used in this Agreement, including, without
limitation, in the Preliminary Statement hereto, the following words and
phrases, unless the context otherwise requires, shall have the meanings
specified in this Article. Unless otherwise specified, all calculations
described herein shall be made on the basis of a 360-day year consisting of
twelve 30-day months.

                  "Accrued Certificate Interest": With respect to any Class A
Certificate, Mezzanine Certificate or Class CE Certificate and each Distribution
Date, interest accrued during the related Interest Accrual Period at the
Pass-Through Rate for such Certificate for such Distribution Date on the
Certificate Principal Balance, in the case of the Class A Certificates and the
Mezzanine Certificates, or on the Notional Amount, in the case of the Class CE
Certificates, of such Certificate immediately prior to such Distribution Date.
The Class P Certificates are not entitled to distributions in respect of
interest and, accordingly, will not accrue interest. All distributions of
interest on the Class A Certificates and the Mezzanine Certificates (other than
the Class M-3 Certificates) will be calculated on the basis of a 360-day year
and the actual number of days in the applicable Interest Accrual Period. All
distributions of interest on the Class M-3 Certificates will be based on a 360
day year consisting of twelve 30 day months. Accrued Certificate Interest with
respect to each Distribution Date, as to any Class A Certificate, Mezzanine
Certificate or Class CE Certificate, shall be reduced by an amount equal to the
portion allocable to such Certificate pursuant to Section 1.02 hereof of the sum
of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.24
and (b) the aggregate amount of any Relief Act Interest Shortfall, if any, for
such Distribution Date. In addition, Accrued Certificate Interest with respect
to each Distribution Date, as to any Class CE Certificate, shall be reduced by
an amount equal to the portion allocable to such Class CE Certificate of
Realized Losses, if any, pursuant to Section 4.04 hereof.

                  "Adjustable Rate Mortgage Loan": Each of the Mortgage Loans
identified in the Mortgage Loan Schedule as having a Mortgage Rate that is
subject to adjustment.

                  "Adjustment Date": With respect to each Adjustable Rate
Mortgage Loan, the day of the month on which the Mortgage Rate of a Mortgage
Loan changes pursuant to the related Mortgage Note. The first Adjustment Date
following the Cut-off Date as to each Mortgage Loan is set forth in the Mortgage
Loan Schedule.

                  "Advancing Person": As defined in Section 3.26 hereof.

                  "Affiliate": With respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of

<PAGE>

                                       -5-

voting securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

                  "Aggregate Loss Severity Percentage": With respect to any
Distribution Date, the percentage equivalent of a fraction, the numerator of
which is the aggregate amount of Realized Losses incurred on any Mortgage Loans
from the Cut-off Date to the last day of the preceding calendar month and the
denominator of which is the aggregate principal balance of such Mortgage Loans
immediately prior to the liquidation of such Mortgage Loans.

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

                  "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form (excepting therefrom, if applicable,
the mortgage recordation information which has not been required pursuant to
Section 2.01 hereof or returned by the applicable recorder's office and/or the
asssignee's name), which is sufficient under the laws of the jurisdiction
wherein the related Mortgaged Property is located to reflect of record the sale
of the Mortgage, which assignment, notice of transfer or equivalent instrument
may be in the form of one or more blanket assignments covering Mortgages secured
by Mortgaged Properties located in the same county, if permitted by law.

                  "Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account as of the
close of business on the related Determination Date, (b) the aggregate of any
amounts received in respect of an REO Property withdrawn from any REO Account
and deposited in the Distribution Account for such Distribution Date pursuant to
Section 3.23, (c) the aggregate of any amounts deposited in the Distribution
Account by the Master Servicer in respect of Prepayment Interest Shortfalls for
such Distribution Date pursuant to Section 3.24, (d) the aggregate of any P&I
Advances made by the Master Servicer for such Distribution Date pursuant to
Section 4.03 and (e) the aggregate of any advances made by the Trustee for such
Distribution Date pursuant to Section 7.02(b), reduced (to not less than zero)
by (2) the sum of (x) the portion of the amount described in clause (1)(a) above
that represents (i) Monthly Payments on the Mortgage Loans received from a
Mortgagor on or prior to the Determination Date but due during any Due Period
subsequent to the related Due Period, (ii) Principal Prepayments on the Mortgage
Loans received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans during a period subsequent
to the related Prepayment Period), (iii) Liquidation Proceeds and Insurance
Proceeds received in respect of the Mortgage Loans after the related Prepayment
Period, (iv) amounts reimbursable or payable to the Depositor, the Master
Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to Section 3.11
or Section 3.12 or otherwise payable in respect of Extraordinary Trust Fund
Expenses, (v) Stayed Funds, (vi) the Trustee Fee payable from the Distribution
Account pursuant to Section 8.05, (vii) amounts deposited in the Collection
Account or the Distribution Account in error and (viii) the amount of any
Prepayment Charges collected by the Master Servicer in connection with the
voluntary Principal Prepayment in full of any of the Mortgage Loans or any
Master Servicer Prepayment Charge Payment Amount, and (y) amounts

<PAGE>

                                       -6-

reimbursable to the Trustee for an advance made pursuant to Section 7.02(b)
which advance the Trustee has determined to be nonrecoverable from the Stayed
Funds in respect of which it was made.

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

                  "Balloon Payment": With respect to any Balloon Loan, as of any
date of determination, the Monthly Payment payable on the stated maturity date
of such Mortgage Loan.

                  "Bankruptcy Code": The Bankruptcy Reform Act of 1978 (Title 11
of the United States Code), as amended.

                  "Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation (i.e. "principal cramdown")
or Debt Service Reduction (i.e. "interest cramdown").

                  "Book-Entry Certificate": Any Certificate registered in the
name of the Depository or its nominee. Initially, the Book-Entry Certificates
will be the Class A Certificates and the Mezzanine Certificates.

                  "Book-Entry Custodian": The custodian appointed pursuant to
Section 5.01.

                  "Business Day": Any day other than a Saturday, a Sunday or a
day on which banking or savings and loan institutions in the State of
California, the State of Maryland or the State of New York, or in the city in
which the Corporate Trust Office of the Trustee is located, are authorized or
obligated by law or executive order to be closed.

                  "Certificate": Any one of the Depositor's Floating Rate
Mortgage Pass-Through Certificates, Series 2000-LB1, Class A, Class M-1, Class
M-2, Class M-3, Class CE, Class P, Class R-I, Class R-II or Class R-III, issued
under this Agreement.

                  "Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (and in the case of the Class CE Certificates, the Notional
Amount) of such Class of Certificates on such Distribution Date (after giving
effect to any distributions of principal and allocations of Realized Losses in
reduction of the Certificate Principal Balance (and in the case of the Class CE
Certificates, the Notional Amount) of such Class of Certificates to be made on
such Distribution Date), and the denominator of which is the initial aggregate
Certificate Principal Balance (and in the case of the Class CE Certificates, the
Notional Amount) of such Class of Certificates as of the Closing Date.

<PAGE>

                                       -7-

                  "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person shall not be a Holder of
a Residual Certificate for any purposes hereof and, solely for the purposes of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or the Master Servicer or any Affiliate thereof shall be
deemed not to be outstanding and the Voting Rights to which it is entitled shall
not be taken into account in determining whether the requisite percentage of
Voting Rights necessary to effect any such consent has been obtained, except as
otherwise provided in Section 11.01. The Trustee may conclusively rely upon a
certificate of the Depositor or the Master Servicer in determining whether a
Certificate is held by an Affiliate thereof.
All references herein to "Holders" or "Certificateholders" shall reflect the
rights of Certificate Owners as they may indirectly exercise such rights through
the Depository and participating members thereof, except as otherwise specified
herein; provided, however, that the Trustee shall be required to recognize as a
"Holder" or "Certificateholder" only the Person in whose name a Certificate is
registered in the Certificate Register.

                  "Certificate Owner": With respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Certificate as reflected on the
books of the Depository or on the books of a Depository Participant or on the
books of an indirect participating brokerage firm for which a Depository
Participant acts as agent.

                  "Certificate Principal Balance": With respect to each Class A
Certificate, Mezzanine Certificate or Class P Certificate as of any date of
determination, the Certificate Principal Balance of such Certificate on the
Distribution Date immediately prior to such date of determination, minus all
distributions allocable to principal made thereon and Realized Losses allocated
thereto on such immediately prior Distribution Date (or, in the case of any date
of determination up to and including the first Distribution Date, the initial
Certificate Principal Balance of such Certificate, as stated on the face
thereof). With respect to each Class CE Certificate as of any date of
determination, an amount equal to the Percentage Interest evidenced by such
Certificate times the excess, if any, of (A) the then aggregate Uncertificated
Balances of the REMIC II Regular Interests over (B) the then aggregate
Certificate Principal Balances of the Class A Certificates, the Mezzanine
Certificates and the Class P Certificates then outstanding.

                  "Certificate Register" and "Certificate Registrar": The
register maintained and the registrar appointed pursuant to Section 5.02.

                  "Class": Collectively, all of the Certificates bearing the
same class designation.

                  "Class A Certificate": Any one of the Class A Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-1 and
evidencing a Regular Interest in REMIC III for purposes of the REMIC Provisions.

                  "Class A Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the Certificate Principal Balance of the
Class A Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) 64.00% and (ii) the aggregate Stated

<PAGE>

                                       -8-

Principal Balance of the Mortgage Loans as of the last day of the related Due
Period and (B) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period minus $5,900,388.

                  "Class CE Certificate": Any one of the Class CE Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-5 and
evidencing a Regular Interest in REMIC III for purposes of the REMIC Provisions.

                  "Class Exemption": A class exemption granted by the DOL, which
provides relief from certain of the prohibited transaction provisions of ERISA
and the related excise tax provisions of the Code.

                  "Class M-1 Certificate": Any one of the Class M-1 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-2 and
evidencing a Regular Interest in REMIC III for purposes of the REMIC Provisions.

                  "Class M-1 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
76.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$5,900,388.

                  "Class M-2 Certificate": Any one of the Class M-2 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-3 and
evidencing a Regular Interest in REMIC III for purposes of the REMIC Provisions.

                  "Class M-2 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 86.50% and (ii) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $5,900,388.

                  "Class M-3 Certificate": Any one of the Class M-3 Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form

<PAGE>

                                       -9-

annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-3 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (iv) the Certificate
Principal Balance of the Class M-3 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 94.50% and (ii)
the aggregate Stated Principal Balance of the Mortgage Loans as of the last day
of the related Due Period and (B) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period minus $5,900,388.

                  "Class P Certificate": Any one of the Class P Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-6 and
evidencing a Regular Interest in REMIC III for purposes of the REMIC Provisions.

                  "Class R-I Certificate": Any one of the Class R-I Certificates
executed by the Trustee, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit A-7 and
evidencing the Residual Interest in REMIC I for purposes of the REMIC
Provisions.

                  "Class R-II Certificate": Any one of the Class R-II
Certificates executed by the Trustee, and authenticated and delivered by the
Certificate Registrar, substantially in the form annexed hereto as Exhibit A-8
and evidencing the Residual Interest in REMIC II for purposes of the REMIC
Provisions.

                  "Class R-III Certificates": Any one of the Class R-III
Certificates executed by the Trustee, and authenticated and delivered by the
Certificate Registrar, substantially in the form annexed hereto as Exhibit A-9
and evidencing the Residual Interest in REMIC III for purposes of the REMIC
Provisions.

                  "Closing Date": February 25, 2000.

                  "Code":  The Internal Revenue Code of 1986.

                  "Collection Account": The account or accounts created and
maintained by the Master Servicer pursuant to Section 3.10(a), which shall be
entitled "Long Beach Mortgage Company, as Master Servicer for Norwest Bank
Minnesota, National Association, as Trustee, in trust for the registered holders
of Salomon Brothers Mortgage Securities VII, Inc., Floating Rate Mortgage Pass-
Through Certificates, Series 2000-LB1". The Collection Account must be an
Eligible Account.

<PAGE>

                                      -10-

                  "Commission": The Securities and Exchange Commission.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479, or at such other address as the Trustee
may designate from time to time by notice to the Certificateholders, the
Depositor and the Master Servicer.

                  "Corresponding Certificate": With respect to REMIC I Regular
Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4,
REMIC I Regular Interest I-LT5 and REMIC I Regular Interest I-LTP, the Class A
Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates and Class P Certificates, respectively. With respect to REMIC II
Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular
Interest II-LT4, REMIC II Regular Interest II-LT5 and REMIC II Regular Interest
II-LTP, the Class A Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates and Class P Certificates, respectively.

                  "Credit Enhancement Percentage": For any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the sum of
the aggregate Certificate Principal Balances of the Mezzanine Certificates and
the Class CE Certificates, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans, calculated after taking into account
distributions of principal on the Mortgage Loans and distribution of the
Principal Distribution Amount to the Certificates then entitled to distributions
of principal on such Distribution Date.

                  "Cumulative Loss Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Realized Losses incurred from the Cut-off Date to the last
day of the preceding calendar month and the denominator of which is the
aggregate Stated Principal Balance of the Mortgage Loans as of the Cut-off Date.

                  "Custodial Agreement": An agreement that may be entered into
in the form of Exhibit H annexed hereto or an agreement assigned to the Trustee
with respect to the Mortgage Loans.

                  "Custodian": A Custodian, which shall not be the Depositor,
the Master Servicer, the Seller or any affiliate of any of them, appointed
pursuant to a Custodial Agreement.

                  "Cut-off Date": With respect to each Original Mortgage Loan,
February 1, 2000. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.

                  "DCR": Duff & Phelps Credit Rating Co., or its successor in
interest.

<PAGE>

                                      -11-

                  "Debt Service Reduction": With respect to any Mortgage Loan, a
reduction in the scheduled Monthly Payment for such Mortgage Loan by a court of
competent jurisdiction in a proceeding under the Bankruptcy Code, except such a
reduction resulting from a Deficient Valuation.

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

                  "Definitive Certificates":  As defined in Section 5.01(b).

                  "Deleted Mortgage Loan": A Mortgage Loan replaced or to be
replaced by a Qualified Substitute Mortgage Loan.

                  "Delinquency Percentage": As of the last day of the related
Due Period, the percentage equivalent of a fraction, the numerator of which is
the aggregate Stated Principal Balance of all Mortgage Loans that, as of the
last day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
the previous calendar month.

                  "Depositor": Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation, or its successor in interest.

                  "Depository": The Depository Trust Company, or any successor
Depository hereafter named. The nominee of the initial Depository, for purposes
of registering those Certificates that are to be Book-Entry Certificates, is
CEDE & Co. The Depository shall at all times be a "clearing corporation" as
defined in Section 8-102(3) of the Uniform Commercial Code of the State of New
York and a "clearing agency" registered pursuant to the provisions of Section
17A of the Securities Exchange Act of 1934, as amended.

                  "Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations that
are rated D-1+(if rated by DCR) and P-1 by Moody's (or comparable ratings if DCR
and Moody's are not the Rating Agencies).

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

<PAGE>

                                      -12-

                  "Determination Date": With respect to each Distribution Date,
the 15th day of the calendar month in which such Distribution Date occurs or, if
such 15th day is not a Business Day, the Business Day immediately preceding such
15th day.

                  "Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than
through an Independent Contractor; provided, however, that the Trustee (or the
Master Servicer on behalf of the Trustee) shall not be considered to Directly
Operate an REO Property solely because the Trustee (or the Master Servicer on
behalf of the Trustee) establishes rental terms, chooses tenants, enters into or
renews leases, deals with taxes and insurance, or makes decisions as to repairs
or capital expenditures with respect to such REO Property.

                  "Disqualified Organization": Any of the following: (i) the
United States, any State or political subdivision thereof, any possession of the
United States, or any agency or instrumentality of any of the foregoing (other
than an instrumentality which is a corporation if all of its activities are
subject to tax and, except for Freddie Mac, a majority of its board of directors
is not selected by such governmental unit), (ii) any foreign government, any
international organization, or any agency or instrumentality of any of the
foregoing, (iii) any organization (other than certain farmers' cooperatives
described in Section 521 of the Code) which is exempt from the tax imposed by
Chapter 1 of the Code (including the tax imposed by Section 511 of the Code on
unrelated business taxable income), (iv) rural electric and telephone
cooperatives described in Section 1381(a)(2)(C) of the Code, (v) an "electing
large partnership" and (vi) any other Person so designated by the Trustee based
upon an Opinion of Counsel that the holding of an Ownership Interest in a
Residual Certificate by such Person may cause any of REMIC I, REMIC II or REMIC
III or any Person having an Ownership Interest in any Class of Certificates
(other than such Person) to incur a liability for any federal tax imposed under
the Code that would not otherwise be imposed but for the Transfer of an
Ownership Interest in a Residual Certificate to such Person. The terms "United
States," "State" and "international organization" shall have the meanings set
forth in Section 7701 of the Code or successor provisions.

                  "Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b) which shall be
entitled "Norwest Bank Minnesota, National Association, as Trustee, in trust for
the registered holders of Salomon Brothers Mortgage Securities VII, Inc.,
Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1". The
Distribution Account must be an Eligible Account.

                  "Distribution Date": The 25th day of any month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in March 2000.

                  "Due Date": With respect to each Distribution Date, the first
day of the calendar month in which such Distribution Date occurs, which is
generally the day of the month on which the Monthly Payment is due on a Mortgage
Loan, exclusive of any days of grace.

<PAGE>

                                      -13-

                  "Due Period": With respect to any Distribution Date, the
period commencing on the second day of the month immediately preceding the month
in which such Distribution Date occurs and ending on the related Due Date.

                  "Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a trust account or
accounts maintained with the corporate trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity. Eligible Accounts may bear interest.

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

                  "Estate in Real Property": A fee simple estate in a parcel of
land.

                  "Excess Overcollateralized Amount": With respect to the Class
A Certificates and the Mezzanine Certificates and any Distribution Date, the
excess, if any, of (i) the Overcollateralized Amount for such Distribution Date
over (ii) the Required Overcollateralized Amount for such Distribution Date.

                  "Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan or REO Property, the then applicable Mortgage Rate thereon minus the sum of
(i) the Trustee's Fee Rate and (ii) the Servicing Fee Rate.

                  "Extraordinary Trust Fund Expense": Any amounts reimbursable
to the Trustee, or any director, officer, employee or agent of the Trustee, from
the Trust Fund pursuant to Section 8.05, any amounts payable from the
Distribution Account in respect of taxes pursuant to Section 10.01(g)(iii) and
any amounts payable by the Trustee for the recording of the assignments of
mortgage pursuant to Section 2.01.

                  "Fannie Mae": Fannie Mae, formally known as the Federal
National Mortgage Association, or any successor thereto.

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

                  "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by the Seller, the Depositor, the Majority Class CE Certificateholder
or the Master Servicer pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01), a determination made by the Master Servicer that all
Insurance Proceeds, Liquidation Proceeds and other payments or recoveries which
the Master Servicer, in its reasonable good faith judgment, expects to be
finally recoverable in respect thereof have been so recovered. The Master
Servicer shall maintain records, prepared by a Servicing Officer, of each Final
Recovery Determination made thereby.

                  "Freddie Mac": Freddie Mac, formally known as the Federal Home
Loan Mortgage Corporation, or any successor thereto.

<PAGE>

                                      -14-

                  "Gross Margin": With respect to each Adjustable-Rate Mortgage
Loan, the fixed percentage set forth in the related Mortgage Note that is added
to the Index on each Adjustment Date in accordance with the terms of the related
Mortgage Note used to determine the Mortgage Rate for such Mortgage Loan.

                  "Independent": When used with respect to any specified Person,
any such Person who (a) is in fact independent of the Depositor, the Master
Servicer and their respective Affiliates, (b) does not have any direct financial
interest in or any material indirect financial interest in the Depositor, the
Master Servicer or any Affiliate thereof, and (c) is not connected with the
Depositor, the Master Servicer or any Affiliate thereof as an officer, employee,
promoter, underwriter, trustee, partner, director or Person performing similar
functions; provided, however, that a Person shall not fail to be Independent of
the Depositor, the Master Servicer or any Affiliate thereof merely because such
Person is the beneficial owner of 1% or less of any class of securities issued
by the Depositor or the Master Servicer or any Affiliate thereof, as the case
may be.

                  "Independent Contractor": Either (i) any Person (other than
the Master Servicer) that would be an "independent contractor" with respect to
REMIC I within the meaning of Section 856(d)(3) of the Code if REMIC I were a
real estate investment trust (except that the ownership tests set forth in that
section shall be considered to be met by any Person that owns, directly or
indirectly, 35% or more of any Class of Certificates), so long as REMIC I does
not receive or derive any income from such Person and provided that the
relationship between such Person and REMIC I is at arm's length, all within the
meaning of Treasury Regulation Section 1.856-4(b)(5), or (ii) any other Person
(including the Master Servicer) if the Trustee has received an Opinion of
Counsel to the effect that the taking of any action in respect of any REO
Property by such Person, subject to any conditions therein specified, that is
otherwise herein contemplated to be taken by an Independent Contractor will not
cause such REO Property to cease to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code (determined without regard to the
exception applicable for purposes of Section 860D(a) of the Code), or cause any
income realized in respect of such REO Property to fail to qualify as Rents from
Real Property.

                  "Index": With respect to each Adjustable-Rate Mortgage Loan
and each related Adjustment Date, the average of the interbank offered rates for
six-month United States dollar deposits in the London market as published in THE
WALL STREET JOURNAL and as most recently available as of a date as specified in
the related Mortgage Note.

                  "Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are not to be applied to the restoration of the related Mortgaged
Property or released to the Mortgagor in accordance with the procedures that the
Master Servicer would follow in servicing mortgage loans held for its own
account, subject to the terms and conditions of the related Mortgage Note and
Mortgage.

                  "Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates, the Mezzanine Certificates (other than the
Class M-3 Certificates), REMIC II Regular Interest II-LT2, REMIC II Regular
Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest
II-LT2S, REMIC II Regular Interest II-LT3S and REMIC II Regular Interest II-

<PAGE>

                                      -15-

LT4S, the period commencing on the Distribution Date of the month immediately
preceding the month in which such Distribution Date occurs (or, in the case of
the first Distribution Date, commencing on the Closing Date) and ending on the
day preceding such Distribution Date. With respect to any Distribution Date and
the Class M-3 Certificates, REMIC II Regular Interest II-LT1, REMIC II Regular
Interest II-LT5, REMIC II Regular Interest II-LT5S, REMIC II Regular Interest
II-LT6 and the REMIC I Regular Interests, the one-month period ending on the
last day of the calendar month preceding the month in which such Distribution
Date occurs.

                  "Interest Carry Forward Amount": With respect to any
Distribution Date and any Class of Class A Certificates or Mezzanine
Certificates, the sum of (i) the amount, if any, by which (a) the Interest
Distribution Amount for such Class of Certificates as of the immediately
preceding Distribution Date exceeded (b) the actual amount distributed on such
Class of Certificates in respect of interest on such immediately preceding
Distribution Date and (ii) the amount of any Interest Carry Forward Amount for
such Class of Certificates remaining unpaid from the previous Distribution Date,
plus accrued interest on such sum calculated at the related Pass-Through Rate
for the most recently ended Interest Accrual Period such amount remained
outstanding.

                  "Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates (other than the Class M-3
Certificates), REMIC II Regular Interest II-LT2, REMIC II Regular Interest
II-LT2S, REMIC II Regular Interest II-LT3, REMIC II Regular Interest II-LT3S,
REMIC II Regular Interest II-LT4 and REMIC II Regular Interest II-LT4S and any
Interest Accrual Period therefor, the second London Business Day preceding the
commencement of such Interest Accrual Period.

                  "Interest Distribution Amount": With respect to any
Distribution Date and any Class A Certificates, any Mezzanine Certificates and
any Class CE Certificates, the aggregate Accrued Certificate Interest on the
Certificates of such Class for such Distribution Date.

                  "Interest Remittance Amount": With respect to any Distribution
Date, that portion of the Available Distribution Amount for such Distribution
Date allocable to interest.

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

                  "Liquidation Event": With respect to any Mortgage Loan, any of
the following events: (i) such Mortgage Loan is paid in full; (ii) a Final
Recovery Determination is made as to such Mortgage Loan; or (iii) such Mortgage
Loan is removed from REMIC I by reason of its being purchased, sold or replaced
pursuant to or as contemplated by Section 2.03, Section 3.16(c) or Section 9.01.
With respect to any REO Property, either of the following events: (i) a Final
Recovery Determination is made as to such REO Property; or (ii) such REO
Property is removed from REMIC I by reason of its being purchased pursuant to
Section 9.01.

<PAGE>

                                      -16-

                  "Liquidation Proceeds": The amount (other than Insurance
Proceeds or amounts received in respect of the rental of any REO Property prior
to REO Disposition) received by the Master Servicer in connection with (i) the
taking of all or a part of a Mortgaged Property by exercise of the power of
eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage
Loan through a trustee's sale, foreclosure sale or otherwise, or (iii) the
repurchase, substitution or sale of a Mortgage Loan or an REO Property pursuant
to or as contemplated by Section 2.03, Section 3.16(c), Section 3.23 or Section
9.01.

                  "Loan-to-Value Ratio": As of any date of determination, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of the related Mortgage Loan at such date and the denominator of which
is the Value of the related Mortgaged Property.

                  "London Business Day": Any day on which banks in the City of
London are open and conducting transactions in United States dollars.

                  "Loss Severity Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
amount of Realized Losses incurred on a Mortgage Loan and the denominator of
which is the principal balance of such Mortgage Loan immediately prior to the
liquidation of such Mortgage Loan.

                  "Majority Class CE Certificateholder": Any single Holder or
group of Holders of Class CE Certificates representing a greater than 50%
Percentage Interest in such Class.

                  "Master Servicer": Long Beach Mortgage Company or any
successor master servicer appointed as herein provided, in its capacity as
Master Servicer hereunder.

                  "Master Servicer Event of Default": One or more of the events
described in Section 7.01.

                  "Master Servicer Prepayment Charge Payment Amount": The
amounts payable by the Master Servicer in respect of any waived Prepayment
Charges pursuant to Section 2.05.

                  "Master Servicer Remittance Date": With respect to any
Distribution Date, 3:00 p.m. New York time on the 18th day of the calendar month
in which such Distribution Date occurs or, if such 18th day is not a Business
Day, the Business Day immediately preceding such 18th day; provided, however,
that if such immediately preceding Business Day is the Determination Date, the
Master Servicer Remittance Date shall be the next succeeding Business Day.

                  "Master Servicer Termination Test": With respect to any
Distribution Date, the Master Servicer Termination Test will be failed with
respect to the Master Servicer if the Cumulative Loss Percentage exceeds 6.125%.

                  "Maximum I-LT6 Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to REMIC I Regular Interest I-LT6 for such
Distribution Date on a balance equal to the Uncertificated

<PAGE>

                                      -17-

Balance of REMIC I Regular Interest I-LT6 minus the REMIC I Overcollateralized
Amount, in each case for such Distribution Date, over (ii) Uncertificated
Interest on REMIC II Regular Interest II- LT2, REMIC II Regular Interest II-LT3,
REMIC II Regular Interest II-LT4 and REMIC II Regular Interest II-LT5 for such
Distribution Date.

                  "Maximum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
maximum Mortgage Rate thereunder.

                  "Mezzanine Certificate": Any Class M-1 Certificate, Class M-2
Certificate or Class M-3 Certificate.

                  "Minimum Mortgage Rate": With respect to each Adjustable Rate
Mortgage Loan, the percentage set forth in the related Mortgage Note as the
minimum Mortgage Rate thereunder.

                  "Monthly Payment": With respect to any Mortgage Loan, the
scheduled monthly payment of principal and interest on such Mortgage Loan which
is payable by the related Mortgagor from time to time under the related Mortgage
Note, determined: (a) after giving effect to (i) any Deficient Valuation and/or
Debt Service Reduction with respect to such Mortgage Loan and (ii) any reduction
in the amount of interest collectible from the related Mortgagor pursuant to the
Relief Act; (b) without giving effect to any extension granted or agreed to by
the Master Servicer pursuant to Section 3.07; and (c) on the assumption that all
other amounts, if any, due under such Mortgage Loan are paid when due.

                  "Moody's": Moody's Investors Service, Inc., or its successor
in interest.

                  "Mortgage": The mortgage, deed of trust or other instrument
creating a first lien on, or first priority security interest in, a Mortgaged
Property securing a Mortgage Note.

                  "Mortgage File": The mortgage documents listed in Section 2.01
pertaining to a particular Mortgage Loan and any additional documents required
to be added to the Mortgage File pursuant to this Agreement.

                  "Mortgage Loan": Each mortgage loan transferred and assigned
to the Trustee pursuant to Section 2.01 or Section 2.03(d) of this Agreement, as
held from time to time as a part of REMIC I, the Mortgage Loans so held being
identified in the Mortgage Loan Schedule, including each REO Property unless the
context otherwise requires.

                  "Mortgage Loan Purchase Agreement": The agreement between the
Seller and the Depositor, regarding the sale of the Mortgage Loans by the Seller
to the Depositor substantially in the form of Exhibit D annexed hereto.

                  "Mortgage Loan Schedule": As of any date, the list of Mortgage
Loans included in REMIC I on such date, attached hereto as Schedule 1. The
Mortgage Loan Schedule shall set forth the following information with respect to
each Mortgage Loan:

<PAGE>

                                      -18-

              (i)     the Master Servicer's Mortgage Loan identifying number;

              (ii)    the Mortgagor's name;

              (iii)   the street address of the Mortgaged Property including the
                      state and zip code;

              (iv)    a code indicating whether the Mortgaged Property is
                      owner-occupied;

              (v)     the type of Residential Dwelling constituting the
                      Mortgaged Property;

              (vi)    the original months to maturity;

              (vii)   the Loan-to-Value Ratio at origination;

              (viii)  the Mortgage Rate in effect immediately following the
                      Cut-off Date;

              (ix)    the date on which the first Monthly Payment was due on the
                      Mortgage Loan;

              (x)     the stated maturity date;

              (xi)    the amount of the Monthly Payment due on the first Due
                      Date after the Cut- off Date;

              (xii)   the last Due Date on which a Monthly Payment was actually
                      applied to the unpaid Stated Principal Balance;

              (xiii)  the original principal amount of the Mortgage Loan;

              (xiv)   the Scheduled Principal Balance of the Mortgage Loan as of
                      the close of business on the Cut-off Date;

              (xv)    with respect to each Adjustable Rate Mortgage Loan, the
                      Gross Margin;

              (xvi)   a code indicating the purpose of the Mortgage Loan (I.E.,
                      purchase financing, rate/term refinancing, cash-out
                      refinancing);

              (xvii)  with respect to each Adjustable Rate Mortgage Loan, the
                      Maximum Mortgage Rate;

              (xviii) with respect to each Adjustable Rate Mortgage Loan, the
                      Minimum Mortgage Rate;

              (xix)   the Mortgage Rate at origination;

<PAGE>

                                      -19-

              (xx)    with respect to each Adjustable Rate Mortgage Loan, the
                      Periodic Rate Cap and the maximum first Adjustment Date
                      Mortgage Rate adjustment;

              (xxi)   a code indicating the documentation program;

              (xxii)  with respect to each Adjustable Rate Mortgage Loan, the
                      first Adjustment Date immediately following the Cut-off
                      Date;

              (xxiii) the risk grade;

              (xxithe Value of the Mortgaged Property; and

              (xxv)   the sale price of the Mortgaged Property, if applicable.

                  The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans; and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage Loan Schedule shall be amended from time to time by the Depositor in
accordance with the provisions of this Agreement. With respect to any Qualified
Substitute Mortgage Loan, the Cut-off Date shall refer to the related Cut-off
Date for such Mortgage Loan, determined in accordance with the definition of
Cut-off Date herein.

                  "Mortgage Note": The original executed note or other evidence
of the indebtedness of a Mortgagor under a Mortgage Loan.

                  "Mortgage Pool": The pool of Mortgage Loans, identified on
Schedule 1 from time to time, and any REO Properties acquired in respect
thereof.

                  "Mortgage Rate": With respect to each Mortgage Loan, the
annual rate at which interest accrues on such Mortgage Loan from time to time in
accordance with the provisions of the related Mortgage Note, which rate with
respect to each Adjustable Rate Mortgage Loan (A) as of any date of
determination until the first Adjustment Date following the Cut-off Date shall
be the rate set forth in the Mortgage Loan Schedule as the Mortgage Rate in
effect immediately following the Cut- off Date and (B) as of any date of
determination thereafter shall be the rate as adjusted on the most recent
Adjustment Date equal to the sum, rounded to the nearest 0.125% as provided in
the Mortgage Note, of the Index, as most recently available as of a date prior
to the Adjustment Date as set forth in the related Mortgage Note, plus the
related Gross Margin; provided that the Mortgage Rate on such Mortgage Loan on
any Adjustment Date shall never be more than the lesser of (i) the sum of the
Mortgage Rate in effect immediately prior to the Adjustment Date plus the
related Periodic Rate Cap, if any, and (ii) the related Maximum Mortgage Rate,
and shall never be less than the greater of (i) the Mortgage Rate in effect
immediately prior to the Adjustment Date less the Periodic Rate Cap, if any, and
(ii) the related Minimum Mortgage Rate. With respect to each Mortgage Loan that
becomes an REO Property, as of any date of determination, the annual rate
determined in accordance

<PAGE>

                                      -20-

with the immediately preceding sentence as of the date such Mortgage Loan became
an REO Property.

                  "Mortgaged Property": The underlying property securing a
Mortgage Loan, including any REO Property, consisting of an Estate in Real
Property improved by a Residential Dwelling.

                  "Mortgagor":  The obligor on a Mortgage Note.

                  "Net Monthly Excess Cashflow": With respect to any
Distribution Date, the sum of (i) any Overcollateralization Reduction Amount for
such Distribution Date and (ii) the excess of (x) the Available Distribution
Amount for such Distribution Date over (y) the sum for such Distribution Date of
(A) the Senior Interest Distribution Amount payable to the holders of the Class
A Certificates and the Interest Distribution Amount payable to the holders of
the Mezzanine Certificates and (B) the sum of the amounts described in clauses
(b)(i) through (iii) of the definition of Principal Distribution Amount.

                  "Net Mortgage Rate": With respect to any Mortgage Loan (or the
related REO Property) as of any date of determination, a per annum rate of
interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus
the Servicing Fee Rate.

                  "Net WAC Pass-Through Rate": With respect to REMIC II Regular
Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular Interest
II-LT4, the Class A Certificates and the Mezzanine Certificates (other than the
Class M-3 Certificates) and any Distribution Date, a rate per annum equal to the
weighted average of the Expense Adjusted Mortgage Rates on the then outstanding
Mortgage Loans, weighted based on their Scheduled Principal Balances as of the
first day of the calendar month preceding the month in which the Distribution
Date occurs multiplied by a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days elapsed in the related
Interest Accrual Period.

                  "New Lease": Any lease of REO Property entered into on behalf
of REMIC I, including any lease renewed or extended on behalf of REMIC I, if
REMIC I has the right to renegotiate the terms of such lease.

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

                  "Nonrecoverable Servicing Advance": Any Servicing Advance
previously made or proposed to be made in respect of a Mortgage Loan or REO
Property that, in the good faith business judgment of the Master Servicer, will
not or, in the case of a proposed Servicing Advance, would not be ultimately
recoverable from related Late Collections, Insurance Proceeds or Liquidation
Proceeds on such Mortgage Loan or REO Property as provided herein.

<PAGE>

                                      -21-

                  "Non-United States Person": Any Person other than a United
States Person.

                  "Notional Amount": With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Balance of the REMIC II Regular
Interests (other than the Uncertificated Balance of REMIC II Regular Interest
II-LTP) for such Distribution Date.

                  "Officers' Certificate": With respect to the Depositor and the
Seller, a certificate signed by the Chairman of the Board, the Vice Chairman of
the Board, the President, a vice president (however denominated) or an
authorized agent, and by the Treasurer, the Secretary, or one of the assistant
treasurers or assistant secretaries of the Depositor or Seller, as applicable.
With respect to the Master Servicer, any officer who is authorized to act for
the Master Servicer in matters relating to this Agreement, and whose action is
binding upon the Master Servicer, initially including those individuals whose
names appear on the list of authorized officers delivered at the closing.

                  "One-Month LIBOR": With respect to the Class A Certificates,
the Mezzanine Certificates (other than the Class M-3 Certificates), REMIC II
Regular Interest II-LT2, REMIC II Regular Interest II-LT3 and REMIC II Regular
Interest II-LT4 and any Interest Accrual Period therefor, the rate determined by
the Trustee on the related Interest Determination Date (or with respect to the
initial Interest Accrual Period, on the Closing Date based on information
available on the related Interest Determination Date) on the basis of the
offered rate for one-month U.S. dollar deposits, as such rate appears on
Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest Determination
Date; provided that if such rate does not appear on Telerate Page 3750, the rate
for such date will be determined on the basis of the offered rates of the
Reference Banks for one-month U.S. dollar deposits, as of 11:00 a.m. (London
time) on such Interest Determination Date. In such event, the Trustee will
request the principal London office of each of the Reference Banks to provide a
quotation of its rate. If on such Interest Determination Date, two or more
Reference Banks provide such offered quotations, One-Month LIBOR for the related
Interest Accrual Period shall be the arithmetic mean of such offered quotations
(rounded upwards if necessary to the nearest whole multiple of 1/16%). If on
such Interest Determination Date, fewer than two Reference Banks provide such
offered quotations, One-Month LIBOR for the related Interest Accrual Period
shall be the higher of (i) LIBOR as determined on the previous Interest
Determination Date and (ii) the Reserve Interest Rate. Notwithstanding the
foregoing, if, under the priorities described above, LIBOR for an Interest
Determination Date would be based on LIBOR for the previous Interest
Determination Date for the third consecutive Interest Determination Date, the
Trustee shall select an alternative comparable index (over which the Trustee has
no control), used for determining one-month Eurodollar lending rates that is
calculated and published (or otherwise made available) by an independent party.

                  "One-Month LIBOR Pass-Through Rate": With respect to the Class
A Certificates and REMIC II Regular Interest II-LT2 and any Distribution Date, a
per annum rate equal to One- Month LIBOR plus 0.34%, in the case of each
Distribution Date through and including the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans and REO Properties
remaining in the Trust Fund is reduced to less than 10% of the aggregate Stated
Principal Balance of the Mortgage Loans as of the Cut-off Date, or One-Month
LIBOR plus 0.68%, in the case of any Distribution Date thereafter.

<PAGE>

                                      -22-

                  With respect to the Class M-1 Certificates and REMIC II
Regular Interest II-LT3 and any Distribution Date, a per annum rate equal to
One-Month LIBOR plus 0.60%, in the case of each Distribution Date through and
including the Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans and REO Properties remaining in the Trust Fund is reduced
to less than 10% of the aggregate Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date, or One-Month LIBOR plus 0.90%, in the case of any
Distribution Date thereafter.

                  With respect to the Class M-2 Certificates and REMIC II
Regular Interest II-LT4 and any Distribution Date, a per annum rate equal to
One-Month LIBOR plus 1.15%, in the case of each Distribution Date through and
including the Distribution Date on which the aggregate Stated Principal Balance
of the Mortgage Loans and REO Properties remaining in the Trust Fund is reduced
to less than 10% of the aggregate Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date, or One-Month LIBOR plus 1.725%, in the case of any
Distribution Date thereafter.

                  "Opinion of Counsel": A written opinion of counsel, who may,
without limitation, be salaried counsel for the Depositor or the Master Servicer
acceptable to the Trustee (which acceptance shall not be unreasonably withheld),
except that any opinion of counsel relating to (a) the qualification of any of
REMIC I, REMIC II or REMIC III as a REMIC or (b) compliance with the REMIC
Provisions must be an opinion of Independent counsel.

                  "Original Mortgage Loan": Any of the Mortgage Loans included
in REMIC I as of the Closing Date.

                  "Overcollateralized Amount": With respect to any Distribution
Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties immediately following such Distribution Date
over (b) the sum of the aggregate Certificate Principal Balances of the Class A
Certificates, the Mezzanine Certificates and the Class P Certificates as of such
Distribution Date (after taking into account the payment of the amounts
described in clauses (b)(i) through (iv) of the definition of Principal
Distribution Amount on such Distribution Date).

                  "Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Required Overcollateralized
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date prior to taking into account the
payment of any Overcollateralization Increase Amount on such Distribution Date.

                  "Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking into account the payment of the
Principal Distribution Amount on such Distribution Date, exclusive of the
payment of any Overcollateralization Increase Amount) and (b) the amount of
Accrued Certificate Interest payable on the Class CE Certificates on such
Distribution Date as reduced by Realized Losses allocated thereto with respect
to such Distribution Date pursuant to Section 4.04.

                  "Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Excess
Overcollateralized Amount and (b) the sum of the

<PAGE>

                                      -23-

amounts available for distribution specified in clauses (b)(i) through (iii) of
the definition of Principal Distribution Amount.

                  "Ownership Interest": As to any Certificate, any ownership or
security interest in such Certificate, including any interest in such
Certificate as the Holder thereof and any other interest therein, whether direct
or indirect, legal or beneficial, as owner or as pledgee.

                  "Pass-Through Rate": With respect to the Class A Certificates
and the Mezzanine Certificates (other than the Class M-3 Certificates) and any
Distribution Date, a rate per annum equal to the lesser of (i) the related
One-Month LIBOR Pass-Through Rate for such Distribution Date and (ii) the Net
WAC Pass-Through Rate for such Distribution Date. With respect to the Class M-3
Certificates, for any Distribution Date, a fixed rate equal to 7.000% per annum.
With respect to the Class CE Certificates and any Distribution Date, a rate per
annum equal to the percentage equivalent of a fraction, the numerator of which
is the sum of the amounts calculated pursuant to clauses (i) through (vii)
below, and the denominator of which is the Uncertificated Balance of the REMIC
II Regular Interests (other than the Uncertificated Balance of REMIC II Regular
Interest II-LTP). For purposes of calculating the Pass-Through Rate for the
Class CE Certificates, the numerator is equal to the sum of the following
components:

                  (i) the REMIC II Remittance Rate for REMIC II Regular Interest
         II-LT1 minus two (2) times the weighted average of the REMIC II
         Remittance Rates for REMIC II Regular Interest II-LT2, REMIC II Regular
         Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular
         Interest II-LT5 and REMIC II Regular Interest II-LT6, with the rate on
         REMIC II Regular Interest II-LT6 subject to a cap of zero for the
         purpose of this calculation, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II- LT1;

                  (ii) the weighted average of the REMIC II Remittance Rates for
         REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3,
         REMIC II Regular Interest II-LT4 and REMIC II Regular Interest II-LT5
         minus two (2) times the weighted average of the REMIC II Remittance
         Rates for REMIC II Regular Interest II-LT2, REMIC II Regular Interest
         II-LT3, REMIC II Regular Interest II-LT4, REMIC II Regular Interest
         II-LT5 and REMIC II Regular Interest II-LT6, with the rate on REMIC II
         Regular Interest II-LT6 subject to a cap of zero for the purpose of
         this calculation, applied to an amount equal to the sum of the
         Uncertificated Balances of REMIC II Regular Interest II-LT2, REMIC II
         Regular Interest II-LT3, REMIC II Regular Interest II-LT4 and REMIC II
         Regular Interest II-LT5;

                  (iii) the REMIC II Remittance Rate for REMIC II Regular
         Interest II-LT6 minus two (2) times the weighted average of the REMIC
         II Remittance Rates for REMIC II Regular Interest II-LT2, REMIC II
         Regular Interest II-LT3, REMIC II Regular Interest II-LT4, REMIC II
         Regular Interest II-LT5 and REMIC II Regular Interest II-LT6, with the
         rate on REMIC II Regular Interest II-LT6 subject to a cap of zero for
         the purpose of this calculation, applied to an amount equal to the
         Uncertificated Balance of REMIC II Regular Interest II- LT6;

<PAGE>

                                      -24-

                  (iv)     100% of the interest on REMIC II Regular Interest
                           II-LT2S;

                  (v)      100% of the interest on REMIC II Regular Interest
                           II-LT3S;

                  (vi)     100% of the interest on REMIC II Regular Interest
                           II-LT4S; and

                  (vii)    100% of the interest on REMIC II Regular Interest
                           II-LT5S.

                  "Percentage Interest": With respect to any Class of
Certificates (other than the Residual Certificates), the undivided percentage
ownership in such Class evidenced by such Certificate, expressed as a
percentage, the numerator of which is the initial Certificate Principal Balance
represented by such Certificate and the denominator of which is the aggregate
initial Certificate Principal Balance of all of the Certificates of such Class.
The Class A Certificates and the Mezzanine Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $10,000 and integral multiples of $1.00 in excess thereof.
The Class P Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $20 and
integral multiples thereof. The Class CE Certificates are issuable only in
minimum Percentage Interests corresponding to minimum initial Certificate
Principal Balances of $10,000 and integral multiples of $1.00 in excess thereof;
provided, however, that a single Certificate of such Class of Certificates may
be issued having a Percentage Interest corresponding to the remainder of the
aggregate initial Certificate Principal Balance of such Class or to an otherwise
authorized denomination for such Class plus such remainder. With respect to any
Residual Certificate, the undivided percentage ownership in such Class evidenced
by such Certificate, as set forth on the face of such Certificate. The Residual
Certificates are issuable in Percentage Interests of 20% and multiples thereof.

                  "Periodic Rate Cap": With respect to each Adjustable Rate
Mortgage Loan and any Adjustment Date therefor, the fixed percentage set forth
in the related Mortgage Note, which is the maximum amount by which the Mortgage
Rate for such Mortgage Loan may increase or decrease (without regard to the
Maximum Mortgage Rate or the Minimum Mortgage Rate) on such Adjustment Date from
the Mortgage Rate in effect immediately prior to such Adjustment Date.

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

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

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

<PAGE>

                                      -25-

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

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

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

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

                           (viii) if previously confirmed in writing to the
         Trustee, any other demand, money market or time deposit, or any other
         obligation, security or investment, as may be acceptable to the Rating
         Agencies as a permitted investment of funds backing securities having
         ratings equivalent to its highest initial rating of the Class A
         Certificates;

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

                  "Permitted Transferee": Any Transferee of a Residual
Certificate other than a Disqualified Organization or Non-United States Person.

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

                  "P&I Advance": As to any Mortgage Loan or REO Property, any
advance made by the Master Servicer in respect of any Distribution Date
representing the aggregate of all payments of principal and interest, net of the
Servicing Fee, that were due during the related Due Period on the Mortgage Loans
and that were delinquent on the related Determination Date, plus certain amounts
representing assumed payments not covered by any current net income on the
Mortgaged Properties acquired by foreclosure or deed in lieu of foreclosure as
determined pursuant to Section 4.03.

<PAGE>

                                      -26-

                  "Plan": Any employee benefit plan or certain other retirement
plans and arrangements, including individual retirement accounts and annuities,
Keogh plans and bank collective investment funds and insurance company general
or separate accounts in which such plans, accounts or arrangements are invested,
that are subject to ERISA and Section 4975 of the Code.

                  "Prepayment Assumption": A prepayment rate for the Mortgage
Loans of 28% CPR. The Prepayment Assumption is used solely for determining the
accrual of original issue discount on the Certificates for federal income tax
purposes. A CPR (or Constant Prepayment Rate) represents an annualized constant
assumed rate of prepayment each month of a pool of mortgage loans relative to
its outstanding principal balance for the life of such pool.

                  "Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge collected by the Master Servicer from
a Mortgagor in connection with any voluntary Principal Prepayment in full
pursuant to the terms of the related Mortgage Note and held from time to time as
a part of the Trust Fund.

                  "Prepayment Charge Schedule": As of any date, the list of
Prepayment Charges included in the Trust Fund on such date, attached hereto as
Schedule 2 (including the prepayment charge summary attached thereto). The
Prepayment Charge Schedule may be part of the Mortgage Loan Schedule, and shall
set forth the following information with respect to each related Mortgage Loan:

              (i)     the Master Servicer's Mortgage Loan identifying number;

              (ii)    a code indicating the type of Prepayment Charge;

              (iii)   the state of origination of the related Mortgage Loan;

              (iv)    the date on which the first Monthly Payment was due on the
                      related Mortgage Loan;

              (v)     the term of the related Mortgage Loan; and

              (vi)    the principal balance of the related Mortgage Loan as of
                      the Cut-off Date.

                  The Prepayment Charge Schedule shall be amended from time to
time by the Depositor in accordance with the provisions of this Agreement.

              "Prepayment Interest Shortfall": With respect to any Distribution
Date, for each Mortgage Loan that was during the related Prepayment Period the
subject of a Principal Prepayment in full or in part that was applied by the
Master Servicer to reduce the outstanding principal balance of such loan on a
date preceding the Due Date in the succeeding Prepayment Period, an amount equal
to interest at the applicable Net Mortgage Rate on the amount of such Principal
Prepayment

<PAGE>

                                      -27-

for the number of days commencing on the date on which the prepayment is applied
and ending on the last day of the related Prepayment Period. The obligations of
the Master Servicer in respect of any Prepayment Interest Shortfall are set
forth in Section 3.24.

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

              "Principal Distribution Amount": With respect to any Distribution
Date, the lesser of:

              (a)     the excess of the Available Distribution Amount over the
                      amount payable on the Class A Certificates and the
                      Mezzanine Certificates pursuant to Section 4.01(a)(2); and

              (b)     the sum of:

                  (i) the principal portion of each Monthly Payment on the
                  Mortgage Loans due during the related Due Period, whether or
                  not received on or prior to the related Determination Date;

                  (ii) the Stated Principal Balance of any Mortgage Loan that
                  was purchased during the related Prepayment Period pursuant to
                  or as contemplated by Section 2.03, Section 3.16(c) or Section
                  9.01 and the amount of any shortfall deposited in the
                  Collection Account in connection with the substitution of a
                  Deleted Mortgage Loan pursuant to Section 2.03 during the
                  related Prepayment Period;

                  (iii) the principal portion of all other unscheduled
                  collections (including, without limitation, Principal
                  Prepayments, Insurance Proceeds, Liquidation Proceeds and REO
                  Principal Amortization) received during the related Prepayment
                  Period, net of any portion thereof that represents a recovery
                  of principal for which an advance was made by the Master
                  Servicer pursuant to Section 4.03 in respect of a preceding
                  Distribution Date;

                  (iv) the principal portion of any Realized Losses incurred on
                  the Mortgage Loans in the calendar month preceding such
                  Distribution Date; and

                  (v) the amount of any Overcollateralization Increase Amount
                  for such Distribution Date;

                  minus:

                  (vi) the amount of any Overcollateralization Reduction Amount
                  for such Distribution Date.

              "Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not

<PAGE>

                                      -28-

accompanied by an amount of interest (without regard to any Prepayment Charge
that may have been collected by the Master Servicer in connection with such
payment of principal) representing the full amount of scheduled interest due on
any Due Date in any month or months subsequent to the month of prepayment.

              "PTCE": A Prohibited Transaction Class Exemption.

              "Purchase Price": With respect to any Mortgage Loan or REO
Property to be purchased pursuant to or as contemplated by Section 2.03, Section
3.16(c) or Section 9.01, and as confirmed by an Officers' Certificate from the
Master Servicer to the Trustee, an amount equal to the sum of (i) 100% of the
Stated Principal Balance thereof as of the date of purchase (or such other price
as provided in Section 9.01), (ii) in the case of (x) a Mortgage Loan, accrued
interest on such Stated Principal Balance at the applicable Net Mortgage Rate in
effect from time to time from the Due Date as to which interest was last covered
by a payment by the Mortgagor or an advance by the Master Servicer, which
payment or advance had as of the date of purchase been distributed pursuant to
Section 4.01, through the end of the calendar month in which the purchase is to
be effected and (y) an REO Property, the sum of (1) accrued interest on such
Stated Principal Balance at the applicable Net Mortgage Rate in effect from time
to time from the Due Date as to which interest was last covered by a payment by
the Mortgagor or an advance by the Master Servicer through the end of the
calendar month immediately preceding the calendar month in which such REO
Property was acquired, plus (2) REO Imputed Interest for such REO Property for
each calendar month commencing with the calendar month in which such REO
Property was acquired and ending with the calendar month in which such purchase
is to be effected, net of the total of all net rental income, Insurance
Proceeds, Liquidation Proceeds and P&I Advances that as of the date of purchase
had been distributed as or to cover REO Imputed Interest pursuant to Section
4.01, (iii) any unreimbursed Servicing Advances and P&I Advances and any unpaid
Servicing Fees allocable to such Mortgage Loan or REO Property, (iv) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan or REO Property pursuant to Section 3.11(a)(ix) and Section 3.16(b), and
(v) in the case of a Mortgage Loan required to be purchased pursuant to Section
2.03, expenses reasonably incurred or to be incurred by the Master Servicer or
the Trustee in respect of the breach or defect giving rise to the purchase
obligation.

              "Qualified Substitute Mortgage Loan": A mortgage loan substituted
for a Deleted Mortgage Loan pursuant to the terms of this Agreement which must,
on the date of such substitution, (i) have an outstanding principal balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Scheduled Principal
Balance of the Deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs, (ii) have a Mortgage Rate not less than
(and not more than one percentage point in excess of) the Mortgage Rate of the
Deleted Mortgage Loan, (iii) with respect to each Adjustable Rate Mortgage Loan
have a Maximum Mortgage Rate not less than the Maximum Mortgage Rate on the
Deleted Mortgage Loan, (iv) with respect to each Adjustable Rate Mortgage Loan
have a Minimum Mortgage Rate not less than the Minimum Mortgage Rate of the
Deleted Mortgage Loan, (v) with respect to each Adjustable Rate Mortgage Loan
have a Gross Margin equal to the Gross Margin of the Deleted Mortgage Loan, (vi)
with respect to each Adjustable Rate Mortgage Loan have a next Adjustment Date
not more than two months later than the next Adjustment Date on the

<PAGE>

                                      -29-

Deleted Mortgage Loan, (vii) have a remaining term to maturity not greater than
(and not more than one year less than) that of the Deleted Mortgage Loan, (viii)
have the same Due Date as the Due Date on the Deleted Mortgage Loan, (ix) have a
Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Deleted Mortgage Loan as of such date, (x) have a
risk grading determined by the Master Servicer at least equal to the risk
grading assigned on the Deleted Mortgage Loan and (xi) conform to each
representation and warranty set forth in Section 6 of the Mortgage Loan Purchase
Agreement. In the event that one or more mortgage loans are substituted for one
or more Deleted Mortgage Loans, the amounts described in clause (i) hereof shall
be determined on the basis of aggregate principal balances, the Mortgage Rates
described in clause (ii) hereof shall be determined on the basis of weighted
average Mortgage Rates, the terms described in clause (vii) hereof shall be
determined on the basis of weighted average remaining term to maturity, the
Loan-to-Value Ratios described in clause (ix) hereof shall be satisfied as to
each such Mortgage Loan, the risk gradings described in clause (x) hereof shall
be satisfied as to each such Mortgage Loan and, except to the extent otherwise
provided in this sentence, the representations and warranties described in
clause (xi) hereof must be satisfied as to each Qualified Substitute Mortgage
Loan or in the aggregate, as the case may be.

              "Rating Agency or Rating Agencies": DCR and Moody's or their
successors. If such agencies or their successors are no longer in existence,
"Rating Agencies" shall be such nationally recognized statistical rating
agencies, or other comparable Persons, designated by the Depositor, notice of
which designation shall be given to the Trustee and the Master Servicer.

              "Realized Loss": With respect to each Mortgage Loan as to which a
Final Recovery Determination has been made, an amount (not less than zero) equal
to (i) the unpaid principal balance of such Mortgage Loan as of the commencement
of the calendar month in which the Final Recovery Determination was made, plus
(ii) accrued interest from the Due Date as to which interest was last paid by
the Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) any amounts
previously withdrawn from the Collection Account in respect of such Mortgage
Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus (iv) the
proceeds, if any, received in respect of such Mortgage Loan during the calendar
month in which such Final Recovery Determination was made, net of amounts that
are payable therefrom to the Master Servicer with respect to such Mortgage Loan
pursuant to Section 3.11(a)(iii).

              With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance

<PAGE>

                                      -30-

of the related Mortgage Loan as of the close of business on the Distribution
Date during such calendar month, plus (iii) REO Imputed Interest for such REO
Property for each calendar month commencing with the calendar month in which
such REO Property was acquired and ending with the calendar month in which such
Final Recovery Determination was made, plus (iv) any amounts previously
withdrawn from the Collection Account in respect of the related Mortgage Loan
pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus (v) the aggregate of
all P&I Advances made by the Master Servicer in respect of such REO Property or
the related Mortgage Loan for which the Master Servicer has been or, in
connection with such Final Recovery Determination, will be reimbursed pursuant
to Section 3.23 out of rental income, Insurance Proceeds and Liquidation
Proceeds received in respect of such REO Property, minus (vi) the total of all
net rental income, Insurance Proceeds and Liquidation Proceeds received in
respect of such REO Property that has been, or in connection with such Final
Recovery Determination, will be transferred to the Distribution Account pursuant
to Section 3.23.

              With respect to each Mortgage Loan which has become the subject of
a Deficient Valuation, the difference between the principal balance of the
Mortgage Loan outstanding immediately prior to such Deficient Valuation and the
principal balance of the Mortgage Loan as reduced by the Deficient Valuation.

              With respect to each Mortgage Loan which has become the subject of
a Debt Service Reduction, the portion, if any, of the reduction in each affected
Monthly Payment attributable to a reduction in the Mortgage Rate imposed by a
court of competent jurisdiction. Each such Realized Loss shall be deemed to have
been incurred on the Due Date for each affected Monthly Payment.

              "Record Date": With respect to each Distribution Date and any
Book-Entry Certificate (other than the Class M-3 Certificates), the Business Day
immediately preceding such Distribution Date. With respect to each Distribution
Date and any other Certificates, including any Definitive Certificates, the last
Business Day of the month immediately preceding the month in which such
Distribution Date occurs.

              "Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The
Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if any of the foregoing banks are not suitable
to serve as a Reference Bank, then any leading banks selected by the Trustee
which are engaged in transactions in Eurodollar deposits in the international
Eurocurrency market (i) with an established place of business in London, (ii)
not controlling, under the control of or under common control with the Depositor
or any Affiliate thereof and (iii) which have been designated as such by the
Trustee.

              "Refinanced Mortgage Loan": A Mortgage Loan the proceeds of which
were not used to purchase the related Mortgaged Property.

              "Regular Certificate": Any Class A Certificate, Mezzanine
Certificate, Class P Certificate or Class CE Certificate.

<PAGE>

                                      -31-

              "Regular Interest": A "regular interest" in a REMIC within the
meaning of Section 860G(a)(1) of the Code.

              "Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940,
as amended.

              "Relief Act Interest Shortfall": With respect to any Distribution
Date and any Mortgage Loan, any reduction in the amount of interest collectible
on such Mortgage Loan for the most recently ended calendar month as a result of
the application of the Relief Act.

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

              "REMIC I": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to which a REMIC election is to be made, consisting of: (i) such
Mortgage Loans and Prepayment Charges as from time to time are subject to this
Agreement, together with the Mortgage Files relating thereto, and together with
all collections thereon and proceeds thereof, (ii) any REO Property, together
with all collections thereon and proceeds thereof, (iii) the Trustee's rights
with respect to the Mortgage Loans under all insurance policies required to be
maintained pursuant to this Agreement and any proceeds thereof, (iv) the
Depositor's rights under the Mortgage Loan Purchase Agreement (including any
security interest created thereby) to the extent conveyed pursuant to Section
2.01 and (v) the Collection Account (other than any amounts representing any
Master Servicer Prepayment Charge Payment Amount), the Distribution Account
(other than any amounts representing any Master Servicer Prepayment Charge
Payment Amount) and any REO Account and such assets that are deposited therein
from time to time and any investments thereof, together with any and all income,
proceeds and payments with respect thereto. Notwithstanding the foregoing,
however, REMIC I specifically excludes all payments and other collections of
principal and interest due on the Mortgage Loans on or before the Cut-off Date
and all Prepayment Charges payable in connection with Principal Prepayments made
on or before the Cut-off Date.

              "REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular Interest
I-LT1 minus two (2) times the weighted average of the REMIC II Remittance Rates
for REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II- LT4, REMIC II Regular Interest II-LT5 and REMIC II Regular
Interest II-LT6, with the rate on REMIC II Regular Interest II-LT6 equal to zero
for purposes of this calculation, divided by (b) 12.

              "REMIC I Overcollateralized Amount": With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Balances of the REMIC I
Regular Interests minus (ii) the aggregate of the Uncertificated Balances of
REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular
Interest I-LT4 and REMIC I Regular Interest I-LT5, in each case as of such date
of determination.

<PAGE>

                                      -32-

              "REMIC I Principal Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to the product of (i) the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties then outstanding and
(ii) 1 minus a fraction, the numerator of which is two times the aggregate of
the Uncertificated Balances of REMIC I Regular Interest I-LT2, REMIC I Regular
Interest I-LT3, REMIC I Regular Interest I-LT4 and REMIC I Regular Interest
I-LT5 and the denominator of which is the aggregate of the Uncertificated
Balances of REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3,
REMIC I Regular Interest I-LT4, REMIC I Regular Interest I-LT5 and REMIC I
Regular Interest I-LT6.

              "REMIC I Regular Interest": Any of the seven separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a "regular interest" in REMIC I. Each REMIC I Regular Interest
(other than REMIC I Regular Interest I-LTP, with respect to interest) shall
accrue interest at the related REMIC I Remittance Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC I Regular Interests are set forth in the
Preliminary Statement hereto.

              "REMIC I Regular Interest I-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Regular Interest I-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Regular Interest I-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Regular Interest I-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT4
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

<PAGE>

                                      -33-

              "REMIC I Regular Interest I-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT5
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Regular Interest I-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LT6
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Regular Interest I-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTP
shall be entitled to any Prepayment Charges listed on the Prepayment Charge
Schedule and collected by the Master Servicer in respect of Principal
Prepayments made after the Cut-off Date and to a distribution of principal,
subject to the terms and conditions hereof, in an aggregate amount equal to its
initial Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC I Remittance Rate": With respect to each REMIC I Regular
Interest, the weighted average of the Expense Adjusted Mortgage Rates on the
then outstanding Mortgage Loans and REO Properties.

              "REMIC I Required Overcollateralized Amount":  1% of the Required
Overcollateralization Amount.

              "REMIC II": The segregated pool of assets consisting of all of the
REMIC I Regular Interests conveyed in trust to the Trustee for the benefit of
REMIC III, as holder of the REMIC II Regular Interests, and the Class R-II
Certificateholders pursuant to Section 2.07, and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

              "REMIC II Regular Interest": Any of the eleven separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a "regular interest" in REMIC II. Each REMIC II Regular Interest
(other than REMIC II Regular Interest II-LTP, with respect to interest) shall
accrue interest at the related REMIC II Remittance Rate in effect from time to
time, and shall be entitled to distributions of principal, subject to the terms
and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto. The
designations for the respective REMIC II Regular Interests are set forth in the
Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT1": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC

<PAGE>

                                      -34-

II. REMIC II Regular Interest II-LT1 shall accrue interest at the related REMIC
II Remittance Rate in effect from time to time, and shall be entitled to
distributions of principal, subject to the terms and conditions hereof, in an
aggregate amount equal to its initial Uncertificated Balance as set forth in the
Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT2": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT3": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT4": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT5": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT6": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT6
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LTP": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LTP
shall be entitled to any Prepayment Charges listed on the Prepayment Charge
Schedule and collected by the Master Servicer in respect of Principal
Prepayments made after the Cut-off Date and to a distribution of principal,
subject to the terms and

<PAGE>

                                      -35-

conditions hereof, in an aggregate amount equal to its initial Uncertificated
Balance as set forth in the Preliminary Statement hereto.

              "REMIC II Regular Interest II-LT2S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT2S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

              "REMIC II Regular Interest II-LT3S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT3S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

              "REMIC II Regular Interest II-LT4S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT4S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

              "REMIC II Regular Interest II-LT5S": One of the separate
non-certificated beneficial ownership interests in REMIC II issued hereunder and
designated as a Regular Interest in REMIC II. REMIC II Regular Interest II-LT5S
shall accrue interest at the related REMIC II Remittance Rate in effect from
time to time on its related Uncertificated Notional Amount.

              "REMIC II Remittance Rate": With respect to REMIC II Regular
Interest II-LT1 and REMIC II Regular Interest II-LT6, the weighted average of
the Expense Adjusted Mortgage Rates on the then outstanding Mortgage Loans and
REO Properties. With respect to REMIC II Regular Interest II-LT2, REMIC II
Regular Interest II-LT3 and REMIC II Regular Interest II-LT4, the lesser of (i)
the related One-Month LIBOR Pass-Through Rate (based on the actual number of
days elapsed in the applicable Interest Accrual Period and a 360-day year) and
(ii) the Net WAC Pass-Through Rate, multiplied by the actual number of days
elapsed in the related Interest Accrual Period divided by 360. With respect to
REMIC II Regular Interest II-LT5, a fixed rate per annum equal to the related
REMIC II Remittance Rate as set forth in the Preliminary Statement hereto. With
respect to REMIC II Regular Interest II-LT2S, REMIC II Regular Interest II-LT3S,
REMIC II Regular Interest II-LT4S and REMIC II Regular Interest II-LT5S, a rate
per annum equal to excess of the REMIC I Remittance Rate for the related
Uncertificated Corresponding Component over the REMIC II Remittance Rate for
REMIC II Regular Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II
Regular Interest II-LT4 and REMIC II Regular Interest II-LT5, respectively.

              "REMIC III": The segregated pool of assets consisting of all of
the REMIC II Regular Interests conveyed in trust to the Trustee for the benefit
of the REMIC III Certificateholders pursuant to Section 2.09, and all amounts
deposited therein, with respect to which a separate REMIC election is to be
made.

              "REMIC III Certificate": Any Regular Certificate or Class R-III
Certificate.

<PAGE>

                                      -36-

              "REMIC III Certificateholder": The Holder of any REMIC III
Certificate.

              "REMIC Provisions": Provisions of the federal income tax law
relating to real estate mortgage investment conduits, which appear at Section
860A through 860G of the Code, and related provisions, and proposed, temporary
and final regulations and published rulings, notices and announcements
promulgated thereunder, as the foregoing may be in effect from time to time.

              "Remittance Report": A report in form mutually agreed to between
the Trustee and the Master Servicer on a magnetic disk or tape prepared by the
Master Servicer pursuant to Section 4.03 with such additions, deletions and
modifications as agreed to by the Trustee and the Master Servicer.

              "Rents from Real Property": With respect to any REO Property,
gross income of the character described in Section 856(d) of the Code as being
included in the term "rents from real property."

              "REO Account": Each of the accounts maintained, or caused to be
maintained, by the Master Servicer in respect of an REO Property pursuant to
Section 3.23.

              "REO Disposition": The sale or other disposition of an REO
Property on behalf of REMIC I.

              "REO Imputed Interest": As to any REO Property, for any calendar
month during which such REO Property was at any time part of REMIC I, one
month's interest at the applicable Net Mortgage Rate on the Stated Principal
Balance of such REO Property (or, in the case of the first such calendar month,
of the related Mortgage Loan, if appropriate) as of the close of business on the
Distribution Date in such calendar month.

              "REO Principal Amortization": With respect to any REO Property,
for any calendar month, the excess, if any, of (a) the aggregate of all amounts
received in respect of such REO Property during such calendar month, whether in
the form of rental income, sale proceeds (including, without limitation, that
portion of the Termination Price paid in connection with a purchase of all of
the Mortgage Loans and REO Properties pursuant to Section 9.01 that is allocable
to such REO Property) or otherwise, net of any portion of such amounts (i)
payable pursuant to Section 3.23(c) in respect of the proper operation,
management and maintenance of such REO Property or (ii) payable or reimbursable
to the Master Servicer pursuant to Section 3.23(d) for unpaid Servicing Fees in
respect of the related Mortgage Loan and unreimbursed Servicing Advances and P&I
Advances in respect of such REO Property or the related Mortgage Loan, over (b)
the REO Imputed Interest in respect of such REO Property for such calendar
month.

              "REO Property": A Mortgaged Property acquired by the Master
Servicer on behalf of REMIC I through foreclosure or deed-in-lieu of
foreclosure, as described in Section 3.23.

              "Request for Release": A release signed by a Servicing Officer, or
in a mutually agreeable electronic format which will, in lieu of a signature on
its face, originate from a Servicing Officer, in the form of Exhibit E-1 or
Exhibit E-2 attached hereto.

<PAGE>

                                      -37-

              "Required Overcollateralized Amount": With respect to any
Distribution Date (i) prior to the Stepdown Date, $21,636,242.75, (ii) on or
after the Stepdown Date provided a Trigger Event is not in effect, the greater
of (x) 5.50% of the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (y) $5,900,388 and (iii) on or
after the Stepdown Date and if a Trigger Event is in effect, the Required
Overcollateralized Amount for the immediately preceding Distribution Date.

              "Reserve Interest Rate": With respect to any Interest
Determination Date, the rate per annum that the Trustee determines to be either
(i) the arithmetic mean (rounded upwards if necessary to the nearest whole
multiple of 1/16%) of the one-month U.S. dollar lending rates which New York
City banks selected by the Trustee are quoting on the relevant Interest
Determination Date to the principal London offices of leading banks in the
London interbank market or (ii) in the event that the Trustee can determine no
such arithmetic mean, the lowest one-month U.S. dollar lending rate which New
York City banks selected by the Trustee are quoting on such Interest
Determination Date to leading European banks.

              "Residential Dwelling": Any one of the following: (i) an attached
or detached one- family dwelling, (ii) a detached two- to four-family dwelling,
(iii) a one-family dwelling unit in a condominium project or (iv) a detached
one-family dwelling in a planned unit development, none of which is a
co-operative, mobile or manufactured home (unless such mobile or manufactured
home is treated as real property under applicable state law).

              "Residual Certificate": Any one of the Class R-I Certificates,
Class R-II Certificates or Class R-III Certificates.

              "Residual Interest": The sole class of "residual interests" in a
REMIC within the meaning of Section 860G(a)(2) of the Code.

              "Responsible Officer": When used with respect to the Trustee, the
President, any vice president, any assistant vice president, the Secretary, any
assistant secretary, the Treasurer, any assistant treasurer, any trust officer
or assistant trust officer, the Controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and, with respect to a
particular matter, to whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.

              "Scheduled Principal Balance": With respect to any Mortgage Loan:
(a) as of the Cut- off Date, the outstanding principal balance of such Mortgage
Loan as of such date, net of the principal portion of all unpaid Monthly
Payments, if any, due on or before such date; (b) as of any Due Date subsequent
to the Cut-off Date up to and including the Due Date in the calendar month in
which a Liquidation Event occurs with respect to such Mortgage Loan, the
Scheduled Principal Balance of such Mortgage Loan as of the Cut-off Date, minus
the sum of (i) the principal portion of each Monthly Payment due on or before
such Due Date but subsequent to the Cut-off Date, whether or not received, (ii)
all Principal Prepayments received before such Due Date but after the Cut-off
Date, (iii) the principal portion of all Liquidation Proceeds and Insurance
Proceeds received before

<PAGE>

                                      -38-

such Due Date but after the Cut-off Date, net of any portion thereof that
represents principal due (without regard to any acceleration of payments under
the related Mortgage and Mortgage Note) on a Due Date occurring on or before the
date on which such proceeds were received and (iv) any Realized Loss incurred
with respect thereto as a result of a Deficient Valuation occurring before such
Due Date, but only to the extent such Realized Loss represents a reduction in
the portion of principal of such Mortgage Loan not yet due (without regard to
any acceleration of payments under the related Mortgage and Mortgage Note) as of
the date of such Deficient Valuation; and (c) as of any Due Date subsequent to
the occurrence of a Liquidation Event with respect to such Mortgage Loan, zero.
With respect to any REO Property: (a) as of any Due Date subsequent to the date
of its acquisition on behalf of the Trust Fund up to and including the Due Date
in the calendar month in which a Liquidation Event occurs with respect to such
REO Property, an amount (not less than zero) equal to the Scheduled Principal
Balance of the related Mortgage Loan as of the Due Date in the calendar month in
which such REO Property was acquired, minus the aggregate amount of REO
Principal Amortization, if any, in respect of such REO Property for all
previously ended calendar months; and (b) as of any Due Date subsequent to the
occurrence of a Liquidation Event with respect to such REO Property, zero.

              "Seller": Long Beach Mortgage Company, or its successor in
interest, in its capacity as seller under the Mortgage Loan Purchase Agreement..

              "Senior Interest Distribution Amount": With respect to any
Distribution Date, an amount equal to the sum of (i) the Interest Distribution
Amount for such Distribution Date for the Class A Certificates and (ii) the
Interest Carry Forward Amount with respect to the Class A Certificates.

              "Servicing Account": The account or accounts created and
maintained pursuant to Section 3.09.

              "Servicing Advances": The reasonable "out-of-pocket" costs and
expenses incurred by the Master Servicer in the performance of its servicing
obligations in connection with a default, delinquency or other unanticipated
event, including, but not limited to, the cost of (i) the preservation,
restoration and protection of a Mortgaged Property, (ii) any enforcement or
judicial proceedings, including foreclosures, in respect of a particular
Mortgage Loan, (iii) the management (including reasonable fees in connection
therewith) and liquidation of any REO Property and (iv) the performance of its
obligations under Section 3.01, Section 3.09, Section 3.14, Section 3.16 and
Section 3.23. The Master Servicer shall not be required to make any
Nonrecoverable Servicing Advances.

              "Servicing Fee": With respect to each Mortgage Loan and for any
calendar month, an amount equal to one month's interest (or in the event of any
payment of interest which accompanies a Principal Prepayment in full made by the
Mortgagor during such calendar month, interest for the number of days covered by
such payment of interest) at the applicable Servicing Fee Rate on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation. Notwithstanding the foregoing, in
the event the weighted average of the Mortgage Rates on the

<PAGE>

                                      -39-

Mortgage Loans is less than 7.5035% per annum, the Servicing Fee shall be
subordinated to the payment of interest on the Certificates, to the extent
necessary to pay the Class M-3 Certificates the related Interest Distribution
Amount.

              "Servicing Fee Rate": 0.50% per annum.

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

              "Single Certificate": With respect to any Class of Certificates
(other than the Class P Certificates and the Residual Certificates), a
hypothetical Certificate of such Class evidencing a Percentage Interest for such
Class corresponding to an initial Certificate Principal Balance or Notional
Amount of $1,000. With respect to the Class P Certificates and the Residual
Certificates, a hypothetical Certificate of such Class evidencing a 20%
Percentage Interest in such Class.

              "Startup Day": With respect to each of REMIC I, REMIC II and REMIC
III, the day designated as such pursuant to Section 10.01(b) hereof.

              "Stated Principal Balance": With respect to any Mortgage Loan: (a)
as of any date of determination up to but not including the Distribution Date on
which the proceeds, if any, of a Liquidation Event with respect to such Mortgage
Loan would be distributed, the Scheduled Principal Balance of such Mortgage Loan
as of the Cut-off Date, as shown in the Mortgage Loan Schedule, minus the sum of
(i) the principal portion of each Monthly Payment due on a Due Date subsequent
to the Cut-off Date, to the extent received from the Mortgagor or advanced by
the Master Servicer and distributed pursuant to Section 4.01 on or before such
date of determination, (ii) all Principal Prepayments received after the Cut-off
Date, to the extent distributed pursuant to Section 4.01 on or before such date
of determination, (iii) all Liquidation Proceeds and Insurance Proceeds applied
by the Master Servicer as recoveries of principal in accordance with the
provisions of Section 3.16, to the extent distributed pursuant to Section 4.01
on or before such date of determination and (iv) any Realized Loss incurred with
respect thereto as a result of a Deficient Valuation made during or prior to the
Prepayment Period for the most recent Distribution Date coinciding with or
preceding such date of determination; and (b) as of any date of determination
coinciding with or subsequent to the Distribution Date on which the proceeds, if
any, of a Liquidation Event with respect to such Mortgage Loan would be
distributed, zero. With respect to any REO Property: (a) as of any date of
determination up to but not including the Distribution Date on which the
proceeds, if any, of a Liquidation Event with respect to such REO Property would
be distributed, an amount (not less than zero) equal to the Stated Principal
Balance of the related Mortgage Loan as of the date on which such REO Property
was acquired on behalf of REMIC I, minus the sum of (i) if such REO Property was
acquired before the Distribution Date in any calendar month, the principal
portion of the Monthly Payment due on the Due Date in the calendar month of
acquisition, to the extent advanced by the Master Servicer and distributed
pursuant to Section 4.01 on or before such date of determination, and (ii) the
aggregate amount of REO Principal Amortization in respect of such REO Property
for all previously ended calendar months, to the extent distributed pursuant to
Section 4.01 on or before

<PAGE>

                                      -40-

such date of determination; and (b) as of any date of determination coinciding
with or subsequent to the Distribution Date on which the proceeds, if any, of a
Liquidation Event with respect to such REO Property would be distributed, zero.

              "Stayed Funds": If the Master Servicer is the subject of a
proceeding under the federal Bankruptcy Code and the making of a Remittance (as
defined in Section 7.02(b)) is prohibited by Section 362 of the federal
Bankruptcy Code, funds that are in the custody of the Master Servicer, a trustee
in bankruptcy or a federal bankruptcy court and should have been the subject of
such Remittance absent such prohibition.

              "Stepdown Date": The later to occur of (i) the Distribution Date
occurring in March 2003 and (ii) the first Distribution Date on which the Credit
Enhancement Percentage (calculated for this purpose only after taking into
account distributions of principal on the Mortgage Loans but prior to any
distribution of the Principal Distribution Amount to the Certificates then
entitled to distributions of principal on such Distribution Date) is equal to or
greater than 36.00%.

              "Sub-Servicer": Any Person with which the Master Servicer has
entered into a Sub- Servicing Agreement and which meets the qualifications of a
Sub-Servicer pursuant to Section 3.02.

              "Sub-Servicing Account": An account established by a Sub-Servicer
which meets the requirements set forth in Section 3.08 and is otherwise
acceptable to the Master Servicer.

              "Sub-Servicing Agreement": The written contract between the Master
Servicer and a Sub-Servicer relating to servicing and administration of certain
Mortgage Loans as provided in Section 3.02.

              "Substitution Shortfall Amount":  As defined in Section 2.03(d).

              "Tax Returns": The federal income tax return on Internal Revenue
Service Form 1066, U.S. Real Estate Mortgage Investment Conduit Income Tax
Return, including Schedule Q thereto, Quarterly Notice to Residual Interest
Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms,
to be filed on behalf of the Trust Fund due to its classification as a REMIC
under the REMIC Provisions, together with any and all other information reports
or returns that may be required to be furnished to the Certificateholders or
filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws.

              "Telerate Page 3750": The display designated as page "3750" on the
Dow Jones Telerate Capital Markets Report (or such other page as may replace
page 3750 on that report for the purpose of displaying London interbank offered
rates of major banks).

              "Termination Price":  As defined in Section 9.01.

              "Terminator":  As defined in Section 9.01.

<PAGE>

                                      -41-

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

              "Transferee": Any Person who is acquiring by Transfer any
Ownership Interest in a Certificate.

              "Transferor": Any Person who is disposing by Transfer of any
Ownership Interest in a Certificate.

              "Trigger Event": A Trigger Event has occurred with respect to a
Distribution Date if the Delinquency Percentage exceeds the lesser of (i) 40% of
the Credit Enhancement Percentage and (ii) 14.40%.

              "Trust Fund": Collectively, all of the assets of REMIC I, REMIC II
and REMIC III.

              "Trustee": Norwest Bank Minnesota, National Association, a
national banking association, or its successor in interest, or any successor
trustee appointed as herein provided.

              "Trustee's Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal one twelfth of the product of (i) the Trustee's Fee Rate,
multiplied by (ii) the aggregate Scheduled Principal Balance of the Mortgage
Loans and any REO Properties as of the second preceding Due Date (or, in the
case of the initial Distribution Date, as of the Cut-off Date).

              "Trustee's Fee Rate":   0.0035% per annum.

              "Uncertificated Balance": The amount of any REMIC I Regular
Interest or REMIC II Regular Interest outstanding as of any date of
determination. As of the Closing Date, the Uncertificated Balance of each REMIC
I Regular Interest and each REMIC II Regular Interest shall equal the amount set
forth in the Preliminary Statement hereto as its initial uncertificated balance.
On each Distribution Date, the Uncertificated Balance of each REMIC I Regular
Interest and each REMIC II Regular Interest shall be reduced by all
distributions of principal made on such REMIC I Regular Interest or such REMIC
II Regular Interest, as applicable, on such Distribution Date pursuant to
Section 4.01 and, if and to the extent necessary and appropriate, shall be
further reduced on such Distribution Date by Realized Losses as provided in
Section 4.04 and the Uncertificated Balances of the REMIC I Regular Interest
I-LT6 and REMIC II Regular Interest II-LT6 shall be increased by interest
deferrals as provided in Section 4.01(a)(1)(A)(i) and Section 4.01(a)(1)(B)(i),
respectively. The Uncertificated Balance of each REMIC I Regular Interest and
each REMIC II Regular Interest shall never be less than zero.

              "Uncertificated Corresponding Component": With respect to: REMIC
II Regular Interest II-LT1, REMIC I Regular Interest I-LT1; REMIC II Regular
Interest II-LT2 and REMIC II Regular Interest II-LT2S, REMIC I Regular Interest
I-LT2; REMIC II Regular Interest II-LT3 and

<PAGE>

                                      -42-

REMIC II Regular Interest II-LT3S, REMIC I Regular Interest I-LT3; REMIC II
Regular Interest II- LT4 and REMIC II Regular Interest II-LT4S, REMIC I Regular
Interest I-LT4; REMIC II Regular Interest II-LT5 and REMIC II Regular Interest
II-LT5S, REMIC I Regular Interest I-LT5; REMIC II Regular Interest II-LT6, REMIC
I Regular Interest I-LT6; and REMIC II Regular Interest II-LTP, REMIC I Regular
Interest I-LTP.

              "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. With respect to any REMIC II Regular Interest
for any Distribution Date, one month's interest at the REMIC II Remittance Rate
applicable to such REMIC II Regular Interest for such Distribution Date, accrued
on the Uncertificated Balance thereof immediately prior to such Distribution
Date. Uncertificated Interest in respect of any REMIC I Regular Interest (other
than REMIC I Regular Interest I-LTP), REMIC II Regular Interest II-LT1, REMIC II
Regular Interest II-LT6, REMIC II Regular Interest II-LT2S, REMIC II Regular
Interest II-LT3S, REMIC II Regular Interest II-LT4S and REMIC II Regular
Interest II-LT5S shall accrue on the basis of a 360-day year consisting of
twelve 30-day months; Uncertificated Interest in respect of REMIC II Regular
Interest II-LT2, REMIC II Regular Interest II-LT3, REMIC II Regular Interest
II-LT4 and REMIC II Regular Interest II-LT5, shall accrue on the basis of a
360-day year and the actual number of days in the applicable Interest Accrual
Period. Uncertificated Interest with respect to each Distribution Date, as to
any REMIC I Regular Interest or REMIC II Regular Interest, shall be reduced by
an amount equal to the sum of (a) the aggregate Prepayment Interest Shortfall,
if any, for such Distribution Date to the extent not covered by payments
pursuant to Section 3.24 and (b) the aggregate amount of any Relief Act Interest
Shortfall, if any allocated, in each case, to such REMIC I Regular Interest or
REMIC II Regular Interest pursuant to Section 1.02. In addition, Uncertificated
Interest with respect to each Distribution Date, as to any REMIC I Regular
Interest or REMIC II Regular Interest, shall be reduced by Realized Losses, if
any, allocated to such REMIC I Regular Interest or REMIC II Regular Interest
pursuant to Section 1.02 and Section 4.04.

              "Uncertificated Notional Amount": With respect to REMIC II Regular
Interest II-LT2S, REMIC II Regular Interest II-LT3S, REMIC II Regular Interest
II-LT4S and REMIC II Regular Interest II-LT5S, the Uncertificated Balance of
REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I Regular
Interest I-LT4 and REMIC I Regular Interest I-LT5, respectively.

              "Uninsured Cause": Any cause of damage to a Mortgaged Property
such that the complete restoration of such property is not fully reimbursable by
the hazard insurance policies required to be maintained pursuant to Section
3.14.

              "United States Person": A citizen or resident of the United
States, a corporation, partnership or other entity created or organized in, or
under the laws of, the United States or any political subdivision thereof
(except, in the case of a partnership, to the extent provided in regulations) or
an estate whose income is subject to United States federal income tax regardless
of its source, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. To the extent prescribed in regulations by the Secretary
of the

<PAGE>

                                      -43-

Treasury, which have not yet been issued, a trust which was in existence on
August 20, 1996 (other than a trust treated as owned by the grantor under
subpart E of part I of subchapter J of chapter 1 of the Code), and which was
treated as a United States person on August 20, 1996 may elect to continue to be
treated as a United States person notwithstanding the previous sentence. The
term "United States" shall have the meaning set forth in Section 7701 of the
Code.

              "Value": With respect to any Mortgaged Property, the lesser of (i)
the value thereof as determined by an appraisal made for the originator of the
Mortgage Loan at the time of origination of the Mortgage Loan by an appraiser
who met the minimum requirements of Fannie Mae, and (ii) the purchase price paid
for the related Mortgaged Property by the Mortgagor with the proceeds of the
Mortgage Loan, provided, however, in the case of a Refinanced Mortgage Loan,
such value of the Mortgaged Property is based solely upon the value determined
by an appraisal made for the originator of such Refinanced Mortgage Loan at the
time of origination of such Refinanced Mortgage Loan by an appraiser who met the
minimum requirements of Fannie Mae.

              "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. With respect to any date of
determination, 98% of all Voting Rights will be allocated among the holders of
the Class A Certificates, the Mezzanine Certificates and the Class CE
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates, 1% of all Voting Rights will be
allocated to the holders of the Class P Certificates and 1/3 of 1% of all Voting
Rights will be allocated among the holders of each Class of Residual
Certificates. The Voting Rights allocated to each Class of Certificate shall be
allocated among Holders of each such Class in accordance with their respective
Percentage Interests as of the most recent Record Date.

              SECTION 1.02. Allocation of Certain Interest Shortfalls.

              For purposes of calculating the amount of Accrued Certificate
Interest and the amount of the Interest Distribution Amount for the Class A
Certificates, the Mezzanine Certificates and the Class CE Certificates for any
Distribution Date, (1) the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Master Servicer
pursuant to Section 3.24) and any Relief Act Interest Shortfall incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, among the Class CE Certificates on a PRO RATA basis based on, and to the
extent of, one month's interest at the then applicable respective Pass-Through
Rate on the respective Notional Amount of each such Certificate and thereafter,
among the Class A Certificates and the Mezzanine Certificates on a PRO RATA
basis based on, and to the extent of, one month's interest at the then
applicable respective Pass-Through Rate on the respective Certificate Principal
Balance of each such Certificate and (2) the aggregate amount of any Realized
Losses incurred for any Distribution Date shall be allocated among the Class CE
Certificates on a PRO RATA basis based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the respective
Notional Amount of each such Certificate.

              For purposes of calculating the amount of Uncertificated Interest
for the REMIC I Regular Interests for any Distribution Date, the aggregate
amount of any Prepayment Interest Shortfalls (to the extent not covered by
payments by the Master Servicer pursuant to Section 3.24)

<PAGE>

                                      -44-

and Relief Act Interest Shortfalls incurred in respect of the Mortgage Loans for
any Distribution Date shall be allocated first, to Uncertificated Interest
payable to REMIC I Regular Interest I-LT1 and REMIC I Regular Interest I-LT6 up
to an aggregate amount equal to the REMIC I Interest Loss Allocation Amount, 98%
and 2%, respectively, and thereafter among REMIC I Regular Interest
I-
LT1, REMIC I Regular Interest I-LT2, REMIC I Regular Interest I-LT3, REMIC I
Regular Interest I-LT4, REMIC I Regular Interest I-LT5 and REMIC I Regular
Interest I-LT6 PRO RATA based on, and to the extent of, one month's interest at
the then applicable respective Pass-Through Rate on the respective
Uncertificated Balance of each such REMIC I Regular Interest.

         All Prepayment Interest Shortfalls and Relief Act Interest Shortfalls
on the REMIC II Regular Interests shall be allocated by the Trustee on each
Distribution Date among the REMIC II Regular Interests in the proportion that
Prepayment Interest Shortfalls and Relief Act Interest Shortfalls are allocated
to the related Uncertificated Corresponding Component.

<PAGE>

                                      -45-

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

              SECTION 2.01. Conveyance of Mortgage Loans.

              The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse for the benefit of the Certificateholders all the
right, title and interest of the Depositor, including any security interest
therein for the benefit of the Depositor, in and to the Mortgage Loans
identified on the Mortgage Loan Schedule, the rights of the Depositor under the
Mortgage Loan Purchase Agreement, and all other assets included or to be
included in REMIC I. Such assignment includes all interest and principal
received by the Depositor or the Master Servicer on or with respect to the
Mortgage Loans (other than payments of principal and interest due on such
Mortgage Loans on or before the Cut-off Date). The Depositor herewith delivers
to the Trustee an executed copy of the Mortgage Loan Purchase Agreement.

              In connection with such transfer and assignment, the Depositor
does hereby deliver to, and deposit with, the Trustee, or to one or more
Custodians as the agent or agents of the Trustee, the following documents or
instruments with respect to each Mortgage Loan so transferred and assigned (a
"Mortgage File"):

                (a) the original Mortgage Note, endorsed in blank or in the
              following form: "Pay to the order of Norwest Bank Minnesota,
              National Association, as Trustee under the applicable agreement,
              without recourse," with all prior and intervening endorsements
              showing a complete chain of endorsement from the originator to the
              Person so endorsing to the Trustee;

                (b) the original Mortgage with evidence of recording thereon,
              and a copy, certified by the appropriate recording office, of the
              recorded power of attorney, if the Mortgage was executed pursuant
              to a power of attorney, with evidence of recording thereon;

                (c)   an original Assignment of the Mortgage in blank;

                (d) the original recorded Assignment or Assignments of the
              Mortgage showing a complete chain of assignment from the
              originator to the Person assigning the Mortgage to the Trustee or
              as contemplated by the immediately preceding clause (c);

                (e) the original or copies of each assumption, modification,
              written assurance or substitution agreement, if any; and

                (f) the original lender's title insurance policy, together with
              all endorsements or riders which were issued with or subsequent to
              the issuance of such policy, insuring the

<PAGE>

                                      -46-

              priority of the Mortgage as a first lien on the Mortgaged Property
              represented therein as a fee interest vested in the Mortgagor, or
              in the event such original title policy is unavailable, a written
              commitment or uniform binder or preliminary report of title issued
              by the title insurance or escrow company.

              The Master Servicer, in its capacity as Seller, shall promptly
(and in no event later than thirty (30) Business Days, subject to extension upon
a mutual agreement between the Master Servicer and the Trustee, following the
later of the Closing Date and the date of receipt by the Master Servicer of the
recording information for a Mortgage) submit or cause to be submitted for
recording, at no expense to the Trust Fund, the Trustee or the Depositor, in the
appropriate public office for real property records, each Assignment referred to
in Sections 2.01(c) and (d) above and shall execute each original Assignment in
the following form: "Norwest Bank Minnesota, National Association, as Trustee
under the applicable agreement." In the event that any such Assignment is lost
or returned unrecorded because of a defect therein, the Master Servicer, in its
capacity as Seller, shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded. Notwithstanding the
foregoing, however, for administrative convenience and facilitation of servicing
and to reduce closing costs, the Assignments shall not be required to be
completed and submitted for recording with respect to any Mortgage Loan if the
Trustee and each Rating Agency has received an opinion of counsel, satisfactory
in form and substance to the Trustee and each Rating Agency, to the effect that
the recordation of such Assignments in any specific jurisdiction is not
necessary to protect the Trustee's interest in the related Mortgage Note;
provided further, however, notwithstanding the delivery of any opinion of
counsel, each assignment of Mortgage shall be submitted for recording by the
Seller in the manner described above, at no expense to the Trust Fund or
Trustee, upon the earliest to occur of: (i) reasonable direction by Holders of
Certificates entitled to at least 25% of the Voting Rights, (ii) failure of the
Master Servicer Termination Test, (iii) the occurrence of a bankruptcy,
insolvency or foreclosure relating to the Seller, (iv) the occurrence of a
servicing transfer as described in Section 7.02 hereof and (iv) if the Seller is
not the Master Servicer and with respect to any one assignment of Mortgage, the
occurrence of a bankruptcy, insolvency or foreclosure relating to the Mortgagor
under the related Mortgage. Notwithstanding the foregoing, if the Master
Servicer is unable to pay the cost of recording the Assignments of Mortgage,
such expense will be paid by the Trustee and shall be reimbursable to the
Trustee as an Extraordinary Trust Fund Expense.

              If any of the documents referred to in Sections 2.01(b), (c) or
(d) above has as of the Closing Date been submitted for recording but either (x)
has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Depositor to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Trustee, or to the appropriate
Custodian on behalf of the Trustee, of a copy of each such document certified by
the Seller in the case of (x) above or the applicable public recording office in
the case of (y) above to be a true and complete copy of the original that was
submitted for recording and (2) if such copy is certified by the Seller,
delivery to the Trustee, or to the appropriate Custodian on behalf of the
Trustee, promptly upon receipt thereof of either the original or a copy of such
document certified by the applicable public recording office to be a true and
complete copy of the original. If the original lender's title insurance policy
was not delivered pursuant to Section 2.01(f) above, the Depositor shall deliver
or cause to be delivered to the Trustee,

<PAGE>

                                      -47-

or to the appropriate Custodian on behalf of the Trustee, promptly after receipt
thereof, the original lender's title insurance policy. The Depositor shall
deliver or cause to be delivered to the Trustee, or to the appropriate Custodian
on behalf of the Trustee, promptly upon receipt thereof any other original
documents constituting a part of a Mortgage File received with respect to any
Mortgage Loan, including, but not limited to, any original documents evidencing
an assumption or modification of any Mortgage Loan.

              All original documents relating to the Mortgage Loans that are not
delivered to the Trustee, or to the appropriate Custodian on behalf of the
Trustee, are and shall be held by or on behalf of the Seller, the Depositor or
the Master Servicer, as the case may be, in trust for the benefit of the Trustee
on behalf of the Certificateholders. In the event that any such original
document is required pursuant to the terms of this Section to be a part of a
Mortgage File, such document shall be delivered promptly to the Trustee, or to
the appropriate Custodian on behalf of the Trustee. Any such original document
delivered to or held by the Depositor that is not required pursuant to the terms
of this Section to be a part of a Mortgage File, shall be delivered promptly to
the Master Servicer.

              SECTION 2.02. Acceptance of REMIC I by the Trustee.

              Subject to the provisions of Section 2.01 and subject to any
exceptions noted on the exception report described in the next paragraph below,
the Trustee acknowledges receipt (or, with respect to Mortgage Loans subject to
a Custodial Agreement, receipt by the respective Custodian as the duly appointed
agent of the Trustee) of the documents referred to in Section 2.01 (other than
such documents described in Section 2.01(e)) above and all other assets included
in the definition of "REMIC I" under clauses (i), (iii), (iv) and (v) (to the
extent of amounts deposited into the Distribution Account) and declares that it,
or such Custodian as its agent, holds and will hold such documents and the other
documents delivered to it constituting the Mortgage File, and that it holds or
will hold all such assets and such other assets included in the definition of
"REMIC I" in trust for the exclusive use and benefit of all present and future
Certificateholders.

              The Trustee agrees, for the benefit of the Certificateholders, to
review (or cause a Custodian on its behalf to review) each Mortgage File on or
before the Closing Date and to certify in substantially the form attached hereto
as Exhibit C-1 (or cause the Custodian to certify in the form of the Initial
Certification attached to the Custodial Agreement) that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(e)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it or such
Custodian and are not mutilated, torn or defaced unless initialed by the related
borrower and relate to such Mortgage Loan and (iii) based on its or the
Custodian's examination and only as to the foregoing, the information set forth
in the Mortgage Loan Schedule that corresponds to items (i) through (iii), (vi),
(ix), (x), (xiii), (xv) and (xvii) through (xx) of the definition of "Mortgage
Loan Schedule" accurately reflects information set forth in the Mortgage File.
It is herein acknowledged that, in conducting such review, the Trustee or such
Custodian was under no duty or obligation (i) to inspect, review or

<PAGE>

                                      -48-

examine any such documents, instruments, certificates or other papers to
determine whether they are genuine, enforceable, or appropriate for the
represented purpose (including with respect to Section 2.01(f), whether such
title insurance policy insures the priority of the Mortgage as a first lien) or
whether they have actually been recorded or that they are other than what they
purport to be on their face or (ii) to determine whether any Mortgage File
should include any of the documents specified in clause (e) of Section 2.01.

              Prior to the first anniversary date of this Agreement the Trustee
shall deliver to the Depositor and the Master Servicer a final certification in
the form annexed hereto as Exhibit C-2 (or shall cause the Custodian to deliver
to the Trustee, the Depositor and the Master Servicer a final certification in
the form attached to the Custodial Agreement) evidencing the completeness of the
Mortgage Files, with any applicable exceptions noted thereon.

              If in the process of reviewing the Mortgage Files and making or
preparing, as the case may be, the certifications referred to above, the Trustee
or any Custodian finds any document or documents constituting a part of a
Mortgage File to be missing or defective in any material respect, at the
conclusion of its review the Trustee (or a Custodian on behalf of the Trustee)
shall so notify the Depositor and the Master Servicer. In addition, upon the
discovery by the Depositor, the Master Servicer or the Trustee of a breach of
any of the representations and warranties made by the Seller in the Mortgage
Loan Purchase Agreement in respect of any Mortgage Loan which materially
adversely affects such Mortgage Loan or the interests of the related
Certificateholders in such Mortgage Loan, the party discovering such breach
shall give prompt written notice to the other parties.

              The Trustee (or a Custodian on behalf of the Trustee) shall, at
the written request and expense of any Certificateholder, provide a written
report to such Certificateholder, of all Mortgage Files released to the Master
Servicer for servicing purposes.

              SECTION 2.03. Repurchase or Substitution of Mortgage Loans by the
                            Seller or the Depositor; Payment of Prepayment
                            Charges in the event of breach.

              (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, the Mortgage File or
of the breach by the Seller of any representation, warranty or covenant under
the Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which
materially adversely affects the value of such Mortgage Loan or the interest
therein of the Certificateholders (in the case of any such representation or
warranty made to the knowledge or the best of knowledge of the Seller, as to
which the Seller has no knowledge, without regard to the Seller's lack of
knowledge with respect to the substance of such representation or warranty being
inaccurate at the time it was made), the Trustee (or a Custodian on behalf of
the Trustee) shall promptly notify the Seller and the Master Servicer of such
defect, missing document or breach and request that the Seller deliver such
missing document or cure such defect or breach within 90 days from the date the
Seller was notified of such missing document, defect or breach, and if the
Seller does not deliver such missing document or cure such defect or breach in
all material respects during such period, the Master Servicer (or, in accordance
with Section 3.02(b), the Trustee) shall enforce the obligations of the Seller
under the Mortgage Loan Purchase Agreement to

<PAGE>

                                      -49-

repurchase such Mortgage Loan from REMIC I at the Purchase Price within 90 days
after the date on which the Seller was notified (subject to Section 2.03(e)) of
such missing document, defect or breach, if and to the extent that the Seller,
as the case may be, is obligated to do so under the Mortgage Loan Purchase
Agreement. The Purchase Price for the repurchased Mortgage Loan shall be
deposited in the Collection Account, and the Trustee, upon receipt of written
certification from the Master Servicer of such deposit, shall release to the
Seller the related Mortgage File and shall execute and deliver such instruments
of transfer or assignment, in each case without recourse, as the Seller shall
furnish to it and as shall be necessary to vest in the Seller any Mortgage Loan
released pursuant hereto, and the Trustee shall have no further responsibility
with regard to such Mortgage File. In lieu of repurchasing any such Mortgage
Loan as provided above, if so provided in the Mortgage Loan Purchase Agreement,
the Seller may cause such Mortgage Loan to be removed from REMIC I (in which
case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.03(d). It is understood and agreed that the obligation of
the Seller to cure or to repurchase (or to substitute for) any Mortgage Loan as
to which a document is missing, a material defect in a constituent document
exists or as to which such a breach has occurred and is continuing shall
constitute the sole remedy respecting such omission, defect or breach available
to the Trustee on behalf of the Certificateholders.

              (b) Subject to Section 2.03(e), within 90 days of the earlier of
discovery by the Depositor or receipt of notice by the Depositor of the breach
of any representation or warranty of the Depositor set forth in Section 2.04
with respect to any Mortgage Loan, which materially adversely affects the value
of such Mortgage Loan or the interest therein of the Certificateholders, the
Depositor shall (i) cure such breach in all material respects, (ii) repurchase
the Mortgage Loan from REMIC I at the Purchase Price or (iii) remove such
Mortgage Loan from REMIC I (in which case it shall become a Deleted Mortgage
Loan) and substitute one or more Qualified Substitute Mortgage Loans in the
manner and subject to the limitations set forth in Section 2.03(d). If any such
breach is a breach of any of the representations and warranties included in
Section 2.04(a)(iv), and the Depositor is unable to cure such breach, the
Depositor shall repurchase or substitute the smallest number of Mortgage Loans
as shall be required to make such representation or warranty true and correct.
The Purchase Price for any repurchased Mortgage Loan shall be delivered to the
Master Servicer for deposit in the Collection Account, and the Trustee, upon
receipt of written certification from the Master Servicer of such deposit, shall
at the Depositor's direction release to the Depositor the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment
furnished by the Depositor, in each case without recourse, as the Depositor
shall furnish to it and as shall be necessary to vest in the Depositor any
Mortgage Loan released pursuant hereto.

              (c) (i) As promptly as practicable (and no later than 90 days)
after the earlier of discovery by the Master Servicer or receipt of notice by
the Master Servicer of the breach of any representation, warranty or covenant of
the Master Servicer set forth in Section 2.05 which materially and adversely
affects the interests of the Certificateholders in any Mortgage Loan, the Master
Servicer shall cure such breach in all material respects.

                      (ii) Within 90 days of the earlier of discovery by the
Master Servicer or receipt of notice by the Master Servicer of the breach of any
representation, warranty or covenant of the

<PAGE>

                                      -50-

Master Servicer set forth in Section 2.05 which materially and adversely affects
the interests of the Holders of the Class P Certificates to any Prepayment
Charge, the Master Servicer shall cure such breach in all material respects. If
the representation made by the Master Servicer in Section 2.05(vii) is breached,
the Master Servicer 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; and if the covenant made by the
Master Servicer in Section 2.05(viii) is breached, the Master Servicer must pay
into the Collection Account the amount of the waived Prepayment Charge.

              (d) Any substitution of Qualified Substitute Mortgage Loans for
Deleted Mortgage Loans made pursuant to Section 2.03(a), in the case of the
Seller, or Section 2.03(b), in the case of the Depositor, must be effected prior
to the date which is two years after the Startup Day for REMIC I.

              As to any Deleted Mortgage Loan for which the Seller or the
Depositor substitutes a Qualified Substitute Mortgage Loan or Loans, such
substitution shall be effected by the Seller or the Depositor, as the case may
be, delivering to the Trustee (or a Custodian on behalf of the Trustee), for
such Qualified Substitute Mortgage Loan or Loans, the Mortgage Note, the
Mortgage, the Assignment to the Trustee, and such other documents and
agreements, with all necessary endorsements thereon, as are required by Section
2.01, together with an Officers' Certificate providing that each such Qualified
Substitute Mortgage Loan satisfies the definition thereof and specifying the
Substitution Shortfall Amount (as described below), if any, in connection with
such substitution. The Trustee (or a Custodian on behalf of the Trustee) shall
acknowledge receipt for such Qualified Substitute Mortgage Loan or Loans and,
within ten Business Days thereafter, review such documents as specified in
Section 2.02 and deliver to the Depositor and the Master Servicer, with respect
to such Qualified Substitute Mortgage Loan or Loans, a certification
substantially in the form attached hereto as Exhibit C-1, with any applicable
exceptions noted thereon. Within one year of the date of substitution, the
Trustee shall deliver to the Depositor and the Master Servicer a certification
substantially in the form of Exhibit C-2 hereto with respect to such Qualified
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are not part of REMIC I and will be retained by the
Depositor or the Seller, as the case may be. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the Depositor or the Seller, as the case may be, shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Depositor shall give or cause to be given written notice to
the Certificateholders that such substitution has taken place, 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 and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and, in the case of a
substitution effected by the Seller, the Mortgage Loan Purchase Agreement,
including, in the case of a substitution effected by the Seller, all applicable
representations and warranties thereof included in the Mortgage Loan Purchase

<PAGE>

                                      -51-

Agreement, and in the case of a substitution effected by the Depositor, all
applicable representations and warranties thereof set forth in Section 2.04, in
each case as of the date of substitution.

              For any month in which the Depositor or the Seller substitutes one
or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage
Loans, the Master Servicer will determine the amount (the "Substitution
Shortfall Amount"), if any, by which the aggregate Purchase Price of all such
Deleted Mortgage Loans exceeds the aggregate of, as to each such Qualified
Substitute Mortgage Loan, the Scheduled Principal Balance thereof as of the date
of substitution, together with one month's interest on such Scheduled Principal
Balance at the applicable Net Mortgage Rate, plus all outstanding P&I Advances
and Servicing Advances. On the date of such substitution, the Depositor or the
Seller, as the case may be, will deliver or cause to be delivered to the Master
Servicer for deposit in the Collection Account an amount equal to the
Substitution Shortfall Amount, if any, and the Trustee, upon receipt of the
related Qualified Substitute Mortgage Loan or Loans and certification by the
Master Servicer of such deposit, shall release to the Depositor or the Seller,
as the case may be, the related Mortgage File or Files and shall execute and
deliver such instruments of transfer or assignment, in each case without
recourse, as the Depositor or the Seller, as the case may be, shall deliver to
it and as shall be necessary to vest therein any Deleted Mortgage Loan released
pursuant hereto.

              In addition, the Depositor or the Seller, as the case may be,
shall obtain at its own expense and deliver to the Trustee an Opinion of Counsel
to the effect that such substitution will not cause (a) any federal tax to be
imposed on any of REMIC I, REMIC II or REMIC III, including without limitation,
any federal tax imposed on "prohibited transactions" under Section 860F(a)(1) of
the Code or on "contributions after the startup date" under Section 860G(d)(1)
of the Code, or (b) any of REMIC I, REMIC II or REMIC III to fail to qualify as
a REMIC at any time that any Certificate is outstanding.

              (e) Upon discovery by the Depositor, the Seller, the Master
Servicer or the Trustee that any Mortgage Loan does not constitute a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code, the party
discovering such fact shall within two Business Days give written notice thereof
to the other parties. In connection therewith, the Seller or the Depositor shall
repurchase or, subject to the limitations set forth in Section 2.03(d),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Such repurchase or
substitution shall be made by (i) the Seller, if the affected Mortgage Loan's
status as a non-qualified mortgage is or results from a breach of any
representation, warranty or covenant made by the Seller under the Mortgage Loan
Purchase Agreement or (ii) the Depositor, if the affected Mortgage Loan's status
as a non-qualified mortgage is a breach of any representation or warranty of the
Depositor set forth in Section 2.04, or if its status as a non-qualified
mortgage is a breach of no representation or warranty. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.03(a),
if made by the Seller, or Section 2.03(b), if made by the Depositor. The Trustee
shall reconvey to the Depositor or the Seller, as the case may be, the Mortgage
Loan to be released pursuant hereto in the same manner, and on the same terms
and conditions, as it would a Mortgage Loan repurchased for breach of a
representation or warranty.

<PAGE>

                                      -52-

<PAGE>

                                      -53-

              SECTION 2.04. Representations and Warranties of the Depositor.

              (a) The Depositor hereby represents and warrants to the Trustee
for the benefit of the Certificateholders that as of the Closing Date or as of
such other date specifically provided herein:

                (i) The information set forth in the Mortgage Loan Schedule for
              the Original Mortgage Loans is complete, true and correct in all
              material respects at the date or dates respecting which such
              information is furnished;

               (ii) As of January 31, 2000, the Monthly Payment due under each
              Original Mortgage Loan is not 30 or more days delinquent in
              payment; no Mortgage Loan has been 30 or more days delinquent in
              payment more than once in the twelve month period prior to the
              Cut-off Date (assuming that a "rolling" 30 day delinquency is
              considered to be one time delinquent);

              (iii) Each Original Mortgage Loan had an original term to maturity
              of not greater than 30 years; each Original Mortgage Loan is a
              fixed-rate mortgage loan or an adjustable- rate mortgage loan with
              payments generally due on the first day of each month and, except
              with respect to approximately 0.25% of the Original Mortgage
              Loans, by outstanding principal balance of the Original Mortgage
              Loans as of the Cut-off Date which are Balloon Loans, each such
              Mortgage Loan is fully amortizing; with respect to each Adjustable
              Rate Mortgage Loan, effective with the first payment due after
              each Adjustment Date, the monthly payment amount for each Original
              Mortgage Loan will be adjusted to an amount which would amortize
              fully the outstanding principal balance of such Mortgage Loan over
              its remaining term and pay interest at the Mortgage Rate so
              adjusted; with respect to each Adjustable Rate Mortgage Loan, on
              the first Adjustment Date and on each Adjustment Date thereafter
              the Mortgage Rate on each Original Mortgage Loan will be adjusted
              to equal the sum of the Index and the related Gross Margin,
              rounded to the nearest multiple of 0.125%, subject to the Periodic
              Rate Cap, the Maximum Mortgage Rate and the Minimum Mortgage Rate
              applicable to such Mortgage Loan;

               (iv) (A) No more than approximately 34.07%, approximately 9.43%,
              approximately 6.64%, approximately 4.62%, approximately 4.35%,
              approximately 3.59%, approximately 3.21%, approximately 3.13% and
              approximately 3.11% of the Original Mortgage Loans, by outstanding
              principal balance of the Original Mortgage Loans as of the Cut-off
              Date, will be secured by Mortgaged Properties located in
              California, Colorado, Texas, New York, Michigan, Oregon,
              Washington, Illinois and Massachusetts, respectively, and no more
              than approximately 3.00% of the Original Mortgage Loans, by
              outstanding principal balance of the Original Mortgage Loans as of
              the Cut-off Date, will be secured by Mortgaged Properties located
              in any other single state; (B) as of the Cut-off Date, no more
              than approximately 0.42% of the Original Mortgage Loans, by
              outstanding principal balance of the Original Mortgage Loans as of
              the Cut-off Date, are secured by Mortgaged Properties located in
              any one California zip code area, and no more than approximately
              20.85% of the Original Mortgage Loans,

<PAGE>

                                      -54-

              by outstanding principal balance of the Original Mortgage Loans as
              of the Cut-off Date are secured by units in two- to four-family
              dwellings, condominiums, town houses, planned unit developments or
              manufactured housing; and (C) at least approximately 79.14% of the
              Original Mortgage Loans, by outstanding principal balance of the
              Original Mortgage Loans as of the Cut-off Date, are secured by
              real property with a single family residence erected thereon;

                (v) If the Mortgaged Property securing an Original Mortgage Loan
              is identified in the Federal Register by the Federal Emergency
              Management Agency ("FEMA") as having special flood hazards, a
              flood insurance policy is in effect at the Closing Date which met
              the requirements of FEMA at the time such policy was issued;

               (vi) With respect to each Original Mortgage Loan, the
              Loan-to-Value Ratio was less than or equal to 90.00% at the
              origination of such Original Mortgage Loan; and

              (vii) With respect to at least approximately 92.86% of the
              Original Mortgage Loans by outstanding principal balance as of the
              Cut-off Date, at the time that the Mortgage Loan was made, the
              Mortgagor represented that the Mortgagor would occupy the
              Mortgaged Property as the Mortgagor's primary residence. With
              respect to approximately 7.13% of the Original Mortgage Loans by
              outstanding principal balance as of the Cut-off Date, at the time
              that the Mortgage Loan was made, the Mortgagor represented that
              the Mortgagor would occupy the Mortgaged Property as the
              Mortgagor's secondary residence or that the Mortgaged Property
              would be an investor property.

              (b) It is understood and agreed that the representations and
warranties set forth in this Section 2.04 shall survive delivery of the Mortgage
Files to the Trustee or to a Custodian, as the case may be, and shall inure to
the benefit of the Certificateholders notwithstanding any restrictive or
qualified endorsement or assignment. Upon discovery by any of the Depositor, the
Master Servicer or the Trustee of a breach of any of the foregoing
representations and warranties which materially and adversely affects the value
of any Mortgage Loan, Prepayment Charge or the interests therein of the
Certificateholders, the party discovering such breach shall give prompt written
notice to the other parties, and in no event later than two Business Days from
the date of such discovery. It is understood and agreed that the obligations of
the Depositor set forth in Section 2.03(b) to cure, substitute for or repurchase
a Mortgage Loan constitute the sole remedies available to the Certificateholders
or to the Trustee on their behalf respecting a breach of the representations and
warranties contained in this Section 2.04.

              SECTION 2.05. Representations, Warranties and Covenants of the
                            Master Servicer.

              The Master Servicer hereby represents, warrants and covenants to
the Trustee, for the benefit of each of the Trustee, the Certificateholders and
to the Depositor that as of the Closing Date or as of such date specifically
provided herein:

<PAGE>

                                      -55-

                (i) The Master Servicer is a corporation duly organized, validly
              existing and in good standing under the laws of the state of its
              incorporation and is duly authorized and qualified to transact any
              and all business contemplated by this Agreement to be conducted by
              the Master Servicer in any state in which a Mortgaged Property is
              located or is otherwise not required under applicable law to
              effect such qualification and, in any event, is in compliance with
              the doing business laws of any such State, to the extent necessary
              to ensure its ability to enforce each Mortgage Loan and to service
              the Mortgage Loans in accordance with the terms of this Agreement;

               (ii) The Master Servicer has the full power and authority to
              service each Mortgage Loan, and to execute, deliver and perform,
              and to enter into and consummate the transactions contemplated by
              this Agreement and has duly authorized by all necessary action on
              the part of the Master Servicer the execution, delivery and
              performance of this Agreement; and this Agreement, assuming the
              due authorization, execution and delivery thereof by the Depositor
              and the Trustee, constitutes a legal, valid and binding obligation
              of the Master Servicer, enforceable against the Master Servicer in
              accordance with its terms, except to the extent that (a) the
              enforceability thereof may be limited by bankruptcy, insolvency,
              moratorium, receivership and other similar laws relating to
              creditors' rights generally and (b) the remedy of specific
              performance and injunctive and other forms of equitable relief may
              be subject to the equitable defenses and to the discretion of the
              court before which any proceeding therefor may be brought;

              (iii) The execution and delivery of this Agreement by the Master
              Servicer, the servicing of the Mortgage Loans by the Master
              Servicer hereunder, the consummation by the Master Servicer of any
              other of the transactions herein contemplated, and the fulfillment
              of or compliance with the terms hereof are in the ordinary course
              of business of the Master Servicer and will not (A) result in a
              breach of any term or provision of the charter or by-laws of the
              Master Servicer or (B) conflict with, result in a breach,
              violation or acceleration of, or result in a default under, the
              terms of any other material agreement or instrument to which the
              Master Servicer is a party or by which it may be bound, or any
              statute, order or regulation applicable to the Master Servicer of
              any court, regulatory body, administrative agency or governmental
              body having jurisdiction over the Master Servicer; and the Master
              Servicer is not a party to, bound by, or in breach or violation of
              any indenture or other agreement or instrument, or subject to or
              in violation of any statute, order or regulation of any court,
              regulatory body, administrative agency or governmental body having
              jurisdiction over it, which materially and adversely affects or,
              to the Master Servicer's knowledge, would in the future materially
              and adversely affect, (x) the ability of the Master Servicer to
              perform its obligations under this Agreement or (y) the business,
              operations, financial condition, properties or assets of the
              Master Servicer taken as a whole;

               (iv) The Master Servicer is an approved seller/servicer for
              Fannie Mae or Freddie Mac in good standing and is a HUD approved
              mortgagee pursuant to Section 203 and Section 211 of the National
              Housing Act;

<PAGE>

                                      -56-

                (v) No litigation is pending against the Master Servicer that
              would materially and adversely affect the execution, delivery or
              enforceability of this Agreement or the ability of the Master
              Servicer to service the Mortgage Loans or to perform any of its
              other obligations hereunder in accordance with the terms hereof;

               (vi) No consent, approval, authorization or order of any court or
              governmental agency or body is required for the execution,
              delivery and performance by the Master Servicer of, or compliance
              by the Master Servicer with, this Agreement or the consummation by
              the Master Servicer of the transactions contemplated by this
              Agreement, except for such consents, approvals, authorizations or
              orders, if any, that have been obtained prior to the Closing Date;

              (vii) 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 under applicable law upon the Mortgagor's full and
              voluntary principal prepayment (except to the extent that: (1) the
              enforceability thereof may be limited by bankruptcy, insolvency,
              moratorium, receivership and other similar laws relating to
              creditors' rights generally; (2) the collectability thereof may be
              limited due to acceleration in connection with a foreclosure or
              other involuntary prepayment; or (3) subsequent changes in
              applicable law may limit or prohibit enforceability thereof);

              (viii) The Master Servicer will not waive any Prepayment Charge or
              part of a Prepayment Charge unless such waiver would maximize
              recovery of total proceeds taking into account the value of such
              Prepayment Charge and related Mortgage Loan and doing so is
              standard and customary in servicing mortgage loans similar to the
              Mortgage Loans (including any waiver of a Prepayment Charge in
              connection with a refinancing of a Mortgage Loan that is related
              to a default or a reasonably foreseeable default), and in no event
              will it waive a Prepayment Charge in connection with a refinancing
              of a Mortgage Loan that is not related to a default or a
              reasonably foreseeable default; and

               (ix) The Master Servicer covenants that its computer and other
              systems used in servicing the Mortgage Loans operate in a manner
              such that the Master Servicer can service the Mortgage Loans in
              accordance with the terms of this Agreement.

              It is understood and agreed that the representations, warranties
and covenants set forth in this Section 2.05 shall survive delivery of the
Mortgage Files to the Trustee or to a Custodian, as the case may be, and shall
inure to the benefit of the Trustee, the Depositor and the Certificateholders.
Upon discovery by any of the Depositor, the Master Servicer or the Trustee of a
breach of any of the foregoing representations, warranties and covenants which
materially and adversely affects the value of any Mortgage Loan, Prepayment
Charge or the interests therein of the Certificateholders, the party discovering
such breach shall give prompt written notice (but in no event later than two
Business Days following such discovery) to the Trustee. The obligation of the
Master Servicer set forth in Section 2.03(c) to cure breaches shall constitute
the sole remedy against the Master Servicer available to the Certificateholders,
the Depositor or the Trustee on behalf of the

<PAGE>

                                      -57-

Certificateholders respecting a breach of the representations, warranties and
covenants contained in this Section 2.05. The preceding sentence shall not,
however, limit any remedies available to the Certificateholders, the Depositor
or the Trustee on behalf of the Certificateholders, pursuant to the Mortgage
Loan Purchase Agreement signed by the Master Servicer in its capacity as Seller,
respecting a breach of the representations, warranties and covenants of the
Master Servicer in its capacity as Seller contained in the Mortgage Loan
Purchase Agreement or pursuant to Section 7.01 hereof.

              SECTION 2.06. Issuance of Class R-I Certificates.

              The Trustee acknowledges the assignment to it of the Mortgage
Loans and the delivery to it, or any Custodian on its behalf, of the Mortgage
Files, subject to the provisions of Section 2.01 and Section 2.02, together with
the assignment to it of all other assets included in REMIC I, receipt of which
is hereby acknowledged. Concurrently with such assignment and delivery and in
exchange therefor, the Trustee, pursuant to the written request of the Depositor
executed by an officer of the Depositor, has executed, authenticated and
delivered to or upon the order of the Depositor, the Class R-I Certificates in
authorized denominations. The interests evidenced by the Class R-I Certificates,
together with the REMIC I Regular Interests, constitute the entire beneficial
ownership interest in REMIC I. The rights of the Class R-I Certificateholders
and REMIC II (as holder of the REMIC I Regular Interests) to receive
distributions from the proceeds of REMIC I in respect of the Class R-I
Certificates and the REMIC I Regular Interests, respectively, and all ownership
interests evidenced or constituted by the Class R-I Certificates and the REMIC I
Regular Interests, shall be as set forth in this Agreement.

              SECTION 2.07. Conveyance of REMIC I Regular Interests; Acceptance
                            of REMIC II by the Trustee.

              The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC I Regular Interests for the benefit of the Class R-II and REMIC
III Certificateholders. The Trustee acknowledges receipt of the REMIC I Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future Class R-II
Certificateholders and REMIC III Certificateholders. The rights of the Class
R-II Certificateholders and REMIC III (as holder of the REMIC II Regular
Interests) to receive distributions from the proceeds of REMIC II in respect of
the Class R-II Certificates and REMIC II Regular Interests, respectively, and
all ownership interests evidenced or constituted by the Class R-II Certificates
and the REMIC II Regular Interests, shall be as set forth in this Agreement.

              SECTION 2.08. Issuance of Class R-II Certificates.

              The Trustee acknowledges the assignment to it of the REMIC I
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the Class R-II Certificates in authorized denominations. The

<PAGE>

                                      -58-

interests evidenced by the Class R-II Certificates, together with the REMIC II
Regular Interests, constitute the entire beneficial ownership interest in REMIC
II.

              SECTION 2.09. Conveyance of REMIC II Regular Interests; Acceptance
                            of REMIC III by the Trustee.

              The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee without recourse all the right, title and interest of the Depositor in
and to the REMIC II Regular Interests for the benefit of the REMIC III
Certificateholders. The Trustee acknowledges receipt of the REMIC II Regular
Interests and declares that it holds and will hold the same in trust for the
exclusive use and benefit of all present and future REMIC III
Certificateholders. The rights of the REMIC III Certificateholders to receive
distributions from the proceeds of REMIC III in respect of the REMIC III
Certificates, and all ownership interests evidenced or constituted by the REMIC
III Certificates, shall be as set forth in this Agreement.

              SECTION 2.10. Issuance of REMIC III Certificates.

              The Trustee acknowledges the assignment to it of the REMIC II
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or upon the order of
the Depositor, the REMIC III Certificates in authorized denominations evidencing
the entire beneficial ownership interest in REMIC III.

<PAGE>

                                      -59-

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

              SECTION 3.01. Master Servicer to Act as Master Servicer.

         The Master Servicer shall service and administer the Mortgage Loans on
behalf of the Trustee and in the best interests of and for the benefit of the
Certificateholders (as determined by the Master Servicer in its reasonable
judgment) in accordance with the terms of this Agreement and the respective
Mortgage Loans and, to the extent consistent with such terms, in the same manner
in which it services and administers similar mortgage loans for its own
portfolio, giving due consideration to customary and usual standards of practice
of mortgage lenders and loan servicers administering similar mortgage loans but
without regard to:

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

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

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

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

To the extent consistent with the foregoing, the Master Servicer shall seek to
maximize the timely and complete recovery of principal and interest on the
Mortgage Notes. Subject only to the above- described servicing standards and the
terms of this Agreement and of the respective Mortgage Loans, the Master
Servicer shall have full power and authority, acting alone or through
Sub-Servicers as provided in Section 3.02, to do or cause to be done any and all
things in connection with such servicing and administration which it may deem
necessary or desirable. Without limiting the generality of the foregoing, the
Master Servicer in its own name or in the name of a Sub-Servicer is hereby
authorized and empowered by the Trustee when the Master Servicer believes it
appropriate in its best judgment in accordance with the servicing standards set
forth above, to execute and deliver, on behalf of the Certificateholders and the
Trustee, and upon notice to the Trustee, any and all instruments of satisfaction
or cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Mortgage Loans and the Mortgaged
Properties and to institute foreclosure proceedings or obtain a deed-in-lieu of
foreclosure so as to convert the ownership of such properties, and to hold or
cause to be held title to such properties, on behalf of the Trustee and
Certificateholders. The Master Servicer shall service and administer the
Mortgage Loans in accordance with applicable state and federal law and shall
provide to the Mortgagors any reports required to be provided to them thereby.
The Master Servicer shall also comply in the performance of this Agreement with
all reasonable rules and requirements of each insurer under any

<PAGE>

                                      -60-

standard hazard insurance policy. Subject to Section 3.17, the Trustee shall
execute, at the written request of the Master Servicer, and furnish to the
Master Servicer and any Sub-Servicer such documents as are necessary or
appropriate to enable the Master Servicer or any Sub-Servicer to carry out their
servicing and administrative duties hereunder, and the Trustee hereby grants to
the Master Servicer a power of attorney to carry out such duties including a
power of attorney to take title to Mortgaged Properties after foreclosure on
behalf of the Trustee and the Certificateholders. The Trustee shall execute a
separate power of attorney in favor of the Master Servicer for the purposes
described herein to the extent necessary or desirable to enable the Master
Servicer to perform its duties hereunder. The Trustee shall not be liable for
the actions of the Master Servicer or any Sub- Servicers under such powers of
attorney.

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

              Notwithstanding anything in this Agreement to the contrary, the
Master Servicer may not make any future advances with respect to a Mortgage Loan
(except as provided in Section 4.03) and the Master Servicer shall not (i)
permit any modification with respect to any Mortgage Loan that would change the
Mortgage Rate, reduce or increase the principal balance (except for reductions
resulting from actual payments of principal) or change the final maturity date
on such Mortgage Loan (unless, as provided in Section 3.07, the Mortgagor is in
default with respect to the Mortgage Loan or such default is, in the judgment of
the Master Servicer, reasonably foreseeable) or (ii) permit any modification,
waiver or amendment of any term of any Mortgage Loan that would both (A) effect
an exchange or reissuance of such Mortgage Loan under Section 1001 of the Code
(or final, temporary or proposed Treasury regulations promulgated thereunder)
and (B) cause any of REMIC I, REMIC II or REMIC III to fail to qualify as a
REMIC under the Code or the imposition of any tax on "prohibited transactions"
or "contributions after the startup date" under the REMIC Provisions.

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

              SECTION 3.02. Sub-Servicing Agreements Between the Master Servicer
                            and Sub- Servicers.

              (a) The Master Servicer may enter into Sub-Servicing Agreements
(provided that such agreements would not result in a withdrawal or a downgrading
by any Rating Agency of the ratings on any Class of Certificates, as evidenced
by a letter to that effect delivered by each Rating Agency to the Depositor and
the Trustee) with Sub-Servicers, for the servicing and administration of the

<PAGE>

                                      -61-

Mortgage Loans. The Trustee is hereby authorized to acknowledge, at the request
of the Master Servicer, any Sub-Servicing Agreement that meets the requirements
applicable to Sub-Servicing Agreements set forth in this Agreement and that is
otherwise permitted under this Agreement.

              Each Sub-Servicer shall be (i) authorized to transact business in
the state or states in which the related Mortgaged Properties it is to service
are situated, if and to the extent required by applicable law to enable the
Sub-Servicer to perform its obligations hereunder and under the Sub- Servicing
Agreement, (ii) an institution approved as a mortgage loan originator by the
Federal Housing Administration or an institution the deposit accounts in which
are insured by the FDIC and (iii) a Freddie Mac or Fannie Mae approved mortgage
servicer. Each Sub-Servicing Agreement must impose on the Sub-Servicer
requirements conforming to the provisions set forth in Section 3.08 and provide
for servicing of the Mortgage Loans consistent with the terms of this Agreement.
The Master Servicer will examine each Sub-Servicing Agreement and will be
familiar with the terms thereof. The terms of any Sub-Servicing Agreement will
not be inconsistent with any of the provisions of this Agreement. The Master
Servicer and the Sub-Servicers may enter into and make amendments to the
Sub-Servicing Agreements or enter into different forms of Sub-Servicing
Agreements; provided, however, that any such amendments or different forms shall
be consistent with and not violate the provisions of this Agreement, and that no
such amendment or different form shall be made or entered into which could be
reasonably expected to be materially adverse to the interests of the
Certificateholders, without the consent of the Holders of Certificates entitled
to at least 66% of the Voting Rights. Any variation without the consent of the
Holders of Certificates entitled to at least 66% of the Voting Rights from the
provisions set forth in Section 3.08 relating to insurance or priority
requirements of Sub-Servicing Accounts, or credits and charges to the Sub-
Servicing Accounts or the timing and amount of remittances by the Sub-Servicers
to the Master Servicer, are conclusively deemed to be inconsistent with this
Agreement and therefore prohibited. The Master Servicer shall deliver to the
Trustee copies of all Sub-Servicing Agreements, and any amendments or
modifications thereof, promptly upon the Master Servicer's execution and
delivery of such instruments.

              (b) As part of its servicing activities hereunder, the Master
Servicer (except as otherwise provided in the last sentence of this paragraph),
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Sub-Servicer under the related Sub-Servicing Agreement and
of the Seller under the Mortgage Loan Purchase Agreement, including, without
limitation, any obligation to make advances in respect of delinquent payments as
required by a Sub- Servicing Agreement, or to purchase a Mortgage Loan on
account of missing or defective documentation or on account of a breach of a
representation, warranty or covenant, as described in Section 2.03(a). Such
enforcement, including, without limitation, the legal prosecution of claims,
termination of Sub-Servicing Agreements, and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such
time as the Master Servicer, in its good faith business judgment, would require
were it the owner of the related Mortgage Loans. The Master Servicer shall pay
the costs of such enforcement at its own expense, and shall be reimbursed
therefor only (i) from a general recovery resulting from such enforcement, to
the extent, if any, that such recovery exceeds all amounts due in respect of the
related Mortgage Loans or (ii) from a specific recovery of costs, expenses or
attorneys' fees against the party against whom such enforcement is directed.
Enforcement of the Mortgage Loan Purchase Agreement against the Seller shall be
effected

<PAGE>

                                      -62-

by the Master Servicer to the extent it is not the Seller, and otherwise by the
Trustee, in accordance with the foregoing provisions of this paragraph.

              SECTION 3.03. Successor Sub-Servicers.

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

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

              SECTION 3.04. Liability of the Master Servicer.

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

              SECTION 3.05. No Contractual Relationship Between Sub-Servicers
                            and Trustee or Certificateholders.

              Any Sub-Servicing Agreement that may be entered into and any
transactions or services relating to the Mortgage Loans involving a Sub-Servicer
in its capacity as such shall be deemed to be between the Sub-Servicer and the
Master Servicer alone, and the Trustee and Certificateholders shall not be
deemed parties thereto and shall have no claims, rights, obligations, duties or
liabilities with respect to the Sub-Servicer except as set forth in Section
3.06. The Master Servicer shall be solely liable for all fees owed by it to any
Sub-Servicer, irrespective of whether the Master Servicer's compensation
pursuant to this Agreement is sufficient to pay such fees.

              SECTION 3.06. Assumption or Termination of Sub-Servicing
                            Agreements by Trustee.

<PAGE>

                                      -63-

              In the event the Master Servicer shall for any reason no longer be
the master servicer (including by reason of the occurrence of a Master Servicer
Event of Default), the Trustee or its designee shall thereupon assume all of the
rights and obligations of the Master Servicer under each Sub-Servicing Agreement
that the Master Servicer may have entered into, unless the Trustee elects to
terminate any Sub-Servicing Agreement in accordance with its terms as provided
in Section 3.03. Upon such assumption, the Trustee, its designee or the
successor servicer for the Trustee appointed pursuant to Section 7.02 shall be
deemed, subject to Section 3.03, to have assumed all of the Master Servicer's
interest therein and to have replaced the Master Servicer as a party to each
Sub-Servicing Agreement to the same extent as if each Sub-Servicing Agreement
had been assigned to the assuming party, except that (i) the Master Servicer
shall not thereby be relieved of any liability or obligations under any
Sub-Servicing Agreement that arose before it ceased to be the Master Servicer
and (ii) none of the Trustee, its designee or any successor Master Servicer
shall be deemed to have assumed any liability or obligation of the Master
Servicer that arose before it ceased to be the Master Servicer.

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

              SECTION 3.07. Collection of Certain Mortgage Loan Payments.

              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 and
the terms and provisions of any applicable insurance policies, follow such
collection procedures as it would follow with respect to mortgage loans
comparable to the Mortgage Loans and held for its own account. Consistent with
the foregoing, the Master Servicer may in its discretion (i) waive any late
payment charge or, if applicable, any penalty interest, or (ii) extend the due
dates for the Monthly Payments due on a Mortgage Note for a period of not
greater than 180 days; provided that any extension pursuant to clause (ii) above
shall not affect the amortization schedule of any Mortgage Loan for purposes of
any computation hereunder, except as provided below. In the event of any such
arrangement pursuant to clause (ii) above, the Master Servicer shall make timely
advances on such Mortgage Loan during such extension pursuant to Section 4.03
and in accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements, subject to Section 4.03(d)
pursuant to which the Master Servicer shall not be required to make any such
advances that are Nonrecoverable P&I Advances. Notwithstanding the foregoing, in
the event that any Mortgage Loan is in default or, in the judgment of the Master
Servicer, such default is reasonably foreseeable, the Master Servicer,
consistent with the standards set forth in Section 3.01, may also waive, modify
or vary any term of such Mortgage Loan (including modifications that would
change the Mortgage Rate, forgive the payment of principal or interest or extend
the final maturity date of such Mortgage Loan), accept payment from the related
Mortgagor of an amount less than the Stated Principal Balance in final
satisfaction of such Mortgage Loan (such payment, a "Short Pay-off") or consent
to the

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                                      -64-

postponement of strict compliance with any such term or otherwise grant
indulgence to any Mortgagor.

              SECTION 3.08. Sub-Servicing Accounts.

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

              SECTION 3.09. Collection of Taxes, Assessments and Similar Items;
                            Servicing Accounts.

              The Master Servicer shall establish and maintain, or cause to be
established and maintained, one or more accounts (the "Servicing Accounts").
Servicing Accounts shall be Eligible Accounts. The Master Servicer shall deposit
in the clearing account (which account must be an Eligible Account) in which it
customarily deposits payments and collections on mortgage loans in connection
with its mortgage loan servicing activities on a daily basis, and in no event
more than one Business Day after the Master Servicer's receipt thereof, all
collections from the Mortgagors (or related advances from Sub-Servicers) for the
payment of taxes, assessments, hazard insurance premiums and comparable items
for the account of the Mortgagors ("Escrow Payments") collected on account of
the Mortgage Loans and shall thereafter deposit such Escrow Payments in the
Servicing Accounts, in no event more than two Business Days after the deposit of
such funds in the clearing account, for the purpose of effecting the payment of
any such items as required under the terms of this Agreement. Withdrawals of
amounts from a Servicing Account may be made only to (i) effect payment of
taxes, assessments, hazard insurance premiums, and comparable items; (ii)
reimburse the Master Servicer (or a Sub-Servicer to the extent provided in the
related Sub-Servicing Agreement) out of related collections for any advances
made pursuant to Section 3.01 (with respect to taxes and assessments) and
Section 3.14 (with respect to hazard insurance); (iii) refund to Mortgagors any
sums as may be determined to be overages; (iv) pay interest, if required and as
described below, to Mortgagors on balances in the Servicing Account; (v) clear
and terminate the Servicing Account at the termination of the Master Servicer's
obligations and responsibilities in respect of the Mortgage Loans under this
Agreement in accordance with Article IX or (vi) recover amounts deposited in
error. As part of its servicing duties, the Master Servicer or Sub-Servicers

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                                      -65-

shall pay to the Mortgagors interest on funds in Servicing Accounts, to the
extent required by law and, to the extent that interest earned on funds in the
Servicing Accounts is insufficient, to pay such interest from its or their own
funds, without any reimbursement therefor. To the extent that a Mortgage does
not provide for Escrow Payments, the Master Servicer shall determine whether any
such payments are made by the Mortgagor in a manner and at a time that avoids
the loss of the Mortgaged Property due to a tax sale or the foreclosure of a tax
lien. The Master Servicer assumes full responsibility for the payment of all
such bills within such time and shall effect payments of all such bills
irrespective of the Mortgagor's faithful performance in the payment of same or
the making of the Escrow Payments and shall make advances from its own funds to
effect such payments; provided, however, that such advances are deemed to be
Servicing Advances.

              SECTION 3.10. Collection Account and Distribution Account.

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

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

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

                (iii) all Insurance Proceeds and Liquidation Proceeds (other
              than proceeds collected in respect of any particular REO Property
              and amounts paid by the Master Servicer in connection with a
              purchase of Mortgage Loans and REO Properties pursuant to Section
              9.01);

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

                (v) any amounts required to be deposited by the Master Servicer
              pursuant to the second paragraph of Section 3.14(a) in respect of
              any blanket policy deductibles;

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                                      -66-

                (vi) all proceeds of any Mortgage Loan repurchased or purchased
              in accordance with Section 2.03 or Section 9.01;

                (vii) all Substitution Shortfall Amounts; and

                (viii) all Prepayment Charges collected by the Master Servicer.

For purposes of the immediately preceding sentence, the Cut-off Date with
respect to any Qualified Substitute Mortgage Loan shall be deemed to be the date
of substitution.

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

              (b) On behalf of the Trust Fund, the Trustee shall establish and
maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Certificateholders. On behalf of
the Trust Fund, the Master Servicer shall deliver to the Trustee in immediately
available funds for deposit in the Distribution Account on or before 3:00 p.m.
New York time (i) on the Master Servicer Remittance Date, that portion of the
Available Distribution Amount (calculated without regard to the references in
clause (2) of the definition thereof to amounts that may be withdrawn from the
Distribution Account) for the related Distribution Date then on deposit in the
Collection Account, the amount of all Prepayment Charges on the Prepayment
Charge Schedule collected by the Master Servicer in connection with the
voluntary Principal Prepayment in full of any of the Mortgage Loans then on
deposit in the Collection Account (other than any such Prepayment Charges
received after the related Prepayment Period) and the amount of any funds
reimbursable to an Advancing Person pursuant to Section 3.26, and (ii) on each
Business Day as of the commencement of which the balance on deposit in the
Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance on deposit in the Collection
Account exceeds $75,000 as of the commencement of business on any Business Day
and the Collection Account constitutes an Eligible Account solely pursuant to
clause (ii) of the definition of "Eligible Account," the Master Servicer shall,
on or before 3:00 p.m. New York time on such Business Day, withdraw from the
Collection Account any and all amounts payable or reimbursable to the Depositor,
the Master Servicer, the Trustee, the Seller or any Sub-Servicer pursuant to
Section 3.11 and shall pay such amounts to the Persons entitled thereto.

              (c) Funds in the Collection Account and the Distribution Account
may be invested in Permitted Investments in accordance with the provisions set
forth in Section 3.12. The Master Servicer shall give notice to the Trustee and
the Depositor of the location of the Collection Account

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                                      -67-

maintained by it when established and prior to any change thereof. The Trustee
shall give notice to the Master Servicer and the Depositor of the location of
the Distribution Account when established and prior to any change thereof.

              (d) Funds held in the Collection Account at any time may be
delivered by the Master Servicer to the Trustee for deposit in an account (which
may be the Distribution Account and must satisfy the standards for the
Distribution Account as set forth in the definition thereof) and for all
purposes of this Agreement shall be deemed to be a part of the Collection
Account; provided, however, that the Trustee shall have the sole authority to
withdraw any funds held pursuant to this subsection (d). In the event the Master
Servicer shall deliver to the Trustee for deposit in the Distribution Account
any amount not required to be deposited therein, it may at any time request that
the Trustee withdraw such amount from the Distribution Account and remit to it
any such amount, any provision herein to the contrary notwithstanding. In
addition, the Master Servicer shall deliver to the Trustee from time to time for
deposit, and the Trustee shall so deposit, in the Distribution Account:

                (i) any P&I Advances, as required pursuant to Section 4.03,
              unless delivered directly to the Trustee by an Advancing Person;

                (ii) any amounts required to be deposited pursuant to Section
              3.23(d) or (f) in connection with any REO Property;

                (iii) any amounts to be paid by the Master Servicer in
              connection with a purchase of Mortgage Loans and REO Properties
              pursuant to Section 9.01;

                (iv) any amounts required to be deposited pursuant to Section
              3.24 in connection with any Prepayment Interest Shortfalls; and

                (v) any Stayed Funds, as soon as permitted by the federal
              bankruptcy court having jurisdiction in such matters.

              (e) Promptly upon receipt of any Stayed Funds, whether from the
Master Servicer, a trustee in bankruptcy, federal bankruptcy court or other
source, the Trustee shall deposit such funds in the Distribution Account,
subject to withdrawal thereof pursuant to Section 7.02(b) or as otherwise
permitted hereunder.

              SECTION 3.11. Withdrawals from the Collection Account and
                            Distribution Account.

              (a) The Master Servicer shall, from time to time, make withdrawals
from the Collection Account for any of the following purposes or as described in
Section 4.03:

                (i) to remit to the Trustee for deposit in the Distribution
              Account the amounts required to be so remitted pursuant to Section
              3.10(b) or permitted to be so remitted pursuant to the first
              sentence of Section 3.10(d);

<PAGE>

                                      -68-

               (ii) subject to Section 3.16(d), to reimburse the Master Servicer
              for P&I Advances, but only to the extent of amounts received which
              represent Late Collections (net of the related Servicing Fees) of
              Monthly Payments on Mortgage Loans with respect to which such P&I
              Advances were made in accordance with the provisions of Section
              4.03;

              (iii) subject to Section 3.16(d), to pay the Master Servicer or
              any Sub-Servicer (a) any unpaid Servicing Fees or (b) any
              unreimbursed Servicing Advances with respect to each Mortgage
              Loan, but only to the extent of any Late Collections, Liquidation
              Proceeds, Insurance Proceeds or other amounts as may be collected
              by the Master Servicer from a Mortgagor, or otherwise received
              with respect to such Mortgage Loan;

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

                (v) to pay to the Master Servicer, the Depositor or the Seller,
              as the case may be, with respect to each Mortgage Loan that has
              previously been purchased or replaced pursuant to Section 2.03 or
              Section 3.16(c) all amounts received thereon subsequent to the
              date of purchase or substitution, as the case may be;

               (vi) to reimburse the Master Servicer for any P&I Advance or
              Servicing Advance previously made which the Master Servicer has
              determined to be a Nonrecoverable P&I Advance or Nonrecoverable
              Servicing Advance in accordance with the provisions of Section
              4.03;

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

              (viii) to reimburse the Master Servicer or the Trustee, as the
              case may be, for expenses reasonably incurred in respect of the
              breach or defect giving rise to the purchase obligation under
              Section 2.03 or Section 2.04 of this Agreement that were included
              in the Purchase Price of the Mortgage Loan, including any expenses
              arising out of the enforcement of the purchase obligation;

               (ix) to pay, or to reimburse the Master Servicer for advances in
              respect of, expenses incurred in connection with any Mortgage Loan
              pursuant to Section 3.16(b); and

                (x) to clear and terminate the Collection Account pursuant to
              Section 9.01.

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

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                                      -69-

succeeding Master Servicer Remittance Date, upon making any withdrawals from the
Collection Account pursuant to subclause (vii) above.

              (b) The Trustee shall, from time to time, make withdrawals from
the Distribution Account, for any of the following purposes, without priority:

                (i) to make distributions to Certificateholders in accordance
              with Section 4.01;

                (ii) to pay to itself amounts to which it is entitled (including
              the Trustee's Fee) pursuant to Section 8.05;

                (iii) to pay itself any interest income earned on funds
              deposited in the Distribution Account pursuant to Section 3.12(c);

                (iv) to reimburse itself pursuant to Section 7.02 or pursuant to
              Section 7.01 to the extent such amounts in Section 7.01 were not
              reimbursed by the Master Servicer;

                (v) to pay any amounts in respect of taxes pursuant to Section
              10.01(g)(iii);

                (vi) to remit to the Master Servicer any amount deposited in the
              Distribution Account by the Master Servicer but not required to be
              deposited therein in accordance with Section 3.10(d);

                (vii) to pay to an Advancing Person reimbursements for P&I
              Advances and/or Servicing Advances pursuant to Section 3.26; and

                (viii) to clear and terminate the Distribution Account pursuant
              to Section 9.01.

              SECTION 3.12. Investment of Funds in the Collection Account and
                            the Distribution Account.

              (a) The Master Servicer may direct any depository institution
maintaining the Collection Account (for purposes of this Section 3.12, an
"Investment Account"), and the Trustee, in its individual capacity, may direct
any depository institution maintaining the Distribution Account (for purposes of
this Section 3.12, also an "Investment Account"), to invest the funds in such
Investment Account in one or more Permitted Investments bearing interest or sold
at a discount, and maturing, unless payable on demand, (i) no later than the
Business Day immediately preceding the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement, if a Person other
than the Trustee is the obligor thereon and (ii) no later than the date on which
such funds are required to be withdrawn from such account pursuant to this
Agreement, if the Trustee is the obligor thereon. All such Permitted Investments
shall be held to maturity, unless payable on demand. Any investment of funds in
an Investment Account shall be made in the name of the Trustee (in its capacity
as such) or in the name of a nominee of the Trustee. The Trustee shall be
entitled to sole possession (except with respect to investment direction of
funds held in the Collection Account and any income and gain realized thereon)
over each such investment, and any

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                                      -70-

certificate or other instrument evidencing any such investment shall be
delivered directly to the Trustee or its agent, together with any document of
transfer necessary to transfer title to such investment to the Trustee or its
nominee. In the event amounts on deposit in an Investment Account are at any
time invested in a Permitted Investment payable on demand, the Trustee shall:

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

              (y)     demand payment of all amounts due thereunder promptly upon
                      determination by a Responsible Officer of the Trustee that
                      such Permitted Investment would not constitute a Permitted
                      Investment in respect of funds thereafter on deposit in
                      the Investment Account.

              (b) All income and gain realized from the investment of funds
deposited in the Collection Account and any REO Account held by or on behalf of
the Master Servicer, shall be for the benefit of the Master Servicer and shall
be subject to its withdrawal in accordance with Section 3.11 or Section 3.23, as
applicable or withdrawal by the Trustee in accordance with Section 3.11.
The Master Servicer shall deposit in the Collection Account or any REO Account,
as applicable, the amount of any loss of principal incurred in respect of any
such Permitted Investment made with funds in such accounts immediately upon
realization of such loss.

              (c) All income and gain realized from the investment of funds
deposited in the Distribution Account held by or on behalf of the Trustee, shall
be for the benefit of the Trustee and shall be subject to its withdrawal at any
time. The Trustee shall deposit in the Distribution Account, the amount of any
loss of principal incurred in respect of any such Permitted Investment made with
funds in such accounts immediately upon realization of such loss.

              (d) Except as otherwise expressly provided in this Agreement, if
any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), upon the request of the Holders of Certificates representing more than
50% of the Voting Rights allocated to any Class of Certificates, shall take such
action as may be appropriate to enforce such payment or performance, including
the institution and prosecution of appropriate proceedings.

              SECTION 3.13. [intentionally omitted]

              SECTION 3.14. Maintenance of Hazard Insurance and Errors and
                            Omissions and Fidelity Coverage.

              (a) The Master Servicer shall cause to be maintained for each
Mortgage Loan fire insurance with extended coverage on the related Mortgaged
Property in an amount which is at least equal to the least of (i) the current
principal balance of such Mortgage Loan, (ii) the amount

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                                      -71-

necessary to fully compensate for any damage or loss to the improvements that
are a part of such property on a replacement cost basis and (iii) the maximum
insurable value of the improvements which are a part of such Mortgaged Property,
in each case in an amount not less than such amount as is necessary to avoid the
application of any coinsurance clause contained in the related hazard insurance
policy. The Master Servicer shall also cause to be maintained fire insurance
with extended coverage on each REO Property in an amount which is at least equal
to the lesser of (i) the maximum insurable value of the improvements which are a
part of such property and (ii) the outstanding principal balance of the related
Mortgage Loan at the time it became an REO Property, plus accrued interest at
the Mortgage Rate and related Servicing Advances. The Master Servicer will
comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. Any amounts to be
collected by the Master Servicer under any such policies (other than amounts to
be applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Master Servicer would follow in servicing loans held for its
own account, subject to the terms and conditions of the related Mortgage and
Mortgage Note) shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.11, if received in respect of a Mortgage Loan,
or in the REO Account, subject to withdrawal pursuant to Section 3.23, if
received in respect of an REO Property. Any cost incurred by the Master Servicer
in maintaining any such insurance shall not, for the purpose of calculating
distributions to Certificateholders, be added to the unpaid principal balance of
the related Mortgage Loan, notwithstanding that the terms of such Mortgage Loan
so permit. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor other than pursuant to such
applicable laws and regulations as shall at any time be in force and as shall
require such additional insurance. If the Mortgaged Property or REO Property is
at any time in an area identified in the Federal Register by the Federal
Emergency Management Agency as having special flood hazards and flood insurance
has been made available, the Master Servicer will cause to be maintained a flood
insurance policy in respect thereof. Such flood insurance shall be in an amount
equal to the lesser of (i) the unpaid principal balance of the related Mortgage
Loan and (ii) the maximum amount of such insurance available for the related
Mortgaged Property under the national flood insurance program (assuming that the
area in which such Mortgaged Property is located is participating in such
program).

              In the event that the Master Servicer shall obtain and maintain a
blanket policy with an insurer having a General Policy Rating of A:X or better
in Best's Key Rating Guide (or such other rating that is comparable to such
rating) insuring against hazard losses on all of the Mortgage Loans, it shall
conclusively be deemed to have satisfied its obligations as set forth in the
first two sentences of this Section 3.14, it being understood and agreed that
such 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 or REO Property a policy complying with the first two
sentences of this Section 3.14, and there shall have been one or more losses
which would have been covered by such policy, deposit to the Collection Account
from its own funds the amount not otherwise payable under the blanket policy
because of such deductible clause. In connection with its activities as
administrator and servicer of the Mortgage Loans, the Master Servicer agrees to
prepare and present, on behalf of itself, the Trustee and Certificateholders,
claims under any such blanket policy in a timely fashion in accordance with the
terms of such policy.

<PAGE>

                                      -72-

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

              SECTION 3.15. Enforcement of Due-On-Sale Clauses; Assumption
                            Agreements.

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

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                                      -73-

compensation. In connection with any such assumption, no material term of the
Mortgage Note (including but not limited to the related Mortgage Rate and the
amount of the Monthly Payment) may be amended or modified, except as otherwise
required pursuant to the terms thereof. The Master Servicer shall notify the
Trustee and any respective Custodian that any such substitution, modification or
assumption agreement has been completed by forwarding to the Trustee or to such
Custodian, as the case may be, the executed original of such substitution or
assumption agreement, which document shall be added to the related Mortgage File
and shall, for all purposes, be considered a part of such Mortgage File to the
same extent as all other documents and instruments constituting a part thereof.

              Notwithstanding the foregoing paragraph or any other provision of
this Agreement, the 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 by the terms of the Mortgage Note or
any assumption which the Master Servicer may be restricted by law from
preventing, for any reason whatever. For purposes of this Section 3.15, the term
"assumption" is deemed to also include a sale (of the Mortgaged Property)
subject to the Mortgage that is not accompanied by an assumption or substitution
of liability agreement.

              SECTION 3.16. Realization Upon Defaulted Mortgage Loans.

              (a) The Master Servicer shall use its best efforts consistent with
the servicing standard set forth in Section 3.01, to foreclose upon or otherwise
comparably convert the ownership of properties securing such of the Mortgage
Loans (including selling any such Mortgage Loan rather than converting the
ownership of the related properties if such sale would maximize the timely and
complete recovery of principal and interest on the related Mortgage Note in
accordance with the servicing standard set forth in Section 3.01) as come into
and continue in default and as to which no satisfactory arrangements can be made
for collection of delinquent payments pursuant to Section 3.07. The Master
Servicer shall be responsible for all costs and expenses incurred by it in any
such proceedings; provided, however, that such costs and expenses will be
recoverable as Servicing Advances by the Master Servicer as contemplated in
Section 3.11 and Section 3.23. The foregoing is subject to the provision that,
in any case in which Mortgaged Property shall have suffered damage from an
Uninsured Cause, the Master Servicer shall not be required to expend its own
funds toward the restoration of such property unless it shall determine in its
sole and absolute discretion that such restoration will increase the proceeds of
liquidation of the related Mortgage Loan after reimbursement to itself for such
expenses.

              (b) Notwithstanding the foregoing provisions of this Section 3.16
or any other provision of this Agreement, with respect to any Mortgage Loan as
to which the Master Servicer has received actual notice of, or has actual
knowledge of, the presence of any toxic or hazardous substance on the related
Mortgaged Property, the Master Servicer shall not, on behalf of the Trustee,
either (i) obtain title to such Mortgaged Property as a result of or in lieu of
foreclosure or otherwise or (ii) otherwise acquire possession of, or take any
other action with respect to, such Mortgaged Property, if, as a result of any
such action, the Trustee, the Trust Fund or the Certificateholders would be
considered to hold title to, to be a "mortgagee-in-possession" of, or to be an
"owner" or "operator" of such Mortgaged Property within the meaning of the
Comprehensive Environmental

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                                      -74-

Response, Compensation and Liability Act of 1980, as amended from time to time,
or any comparable law, unless the Master Servicer has also previously
determined, based on its reasonable judgment and a report prepared by a Person
who regularly conducts environmental audits using customary industry standards,
that:

                (1) such Mortgaged Property is in compliance with applicable
              environmental laws or, if not, that it would be in the best
              economic interest of the Trust Fund to take such actions as are
              necessary to bring the Mortgaged Property into compliance
              therewith; and

                (2) there are no circumstances present at such Mortgaged
              Property relating to the use, management or disposal of any
              hazardous substances, hazardous materials, hazardous wastes, or
              petroleum-based materials for which investigation, testing,
              monitoring, containment, clean-up or remediation could be required
              under any federal, state or local law or regulation, or that if
              any such materials are present for which such action could be
              required, that it would be in the best economic interest of the
              Trust Fund to take such actions with respect to the affected
              Mortgaged Property.

              The cost of the environmental audit report contemplated by this
Section 3.16 shall be advanced by the Master Servicer, subject to the Master
Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.11(a)(ix), such right of reimbursement being prior to the
rights of Certificateholders to receive any amount in the Collection Account
received in respect of the affected Mortgage Loan or other Mortgage Loans. It is
understood by the parties hereto that any such advance will be deemed a
Servicing Advance.

              If the Master Servicer determines, as described above, that it is
in the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes or petroleum-based materials affecting any such Mortgaged Property, then
the Master Servicer shall take such action as it deems to be in the best
economic interest of the Trust Fund. The cost of any such compliance,
containment, cleanup or remediation shall be advanced by the Master Servicer,
subject to the Master Servicer's right to be reimbursed therefor from the
Collection Account as provided in Section 3.11(a)(ix), such right of
reimbursement being prior to the rights of Certificateholders to receive any
amount in the Collection Account received in respect of the affected Mortgage
Loan or other Mortgage Loans. It is understood by the parties hereto that any
such advance will be deemed a Servicing Advance.

              (c) The Master Servicer may at its option purchase from REMIC I
any Mortgage Loan or related REO Property that is 90 days or more delinquent,
which the Master Servicer determines in good faith will otherwise become subject
to foreclosure proceedings (evidence of such determination to be delivered in
writing to the Trustee prior to purchase), at a price equal to the Purchase
Price; provided, however, that the Master Servicer shall purchase any such
Mortgage Loans or related REO Properties on the basis of delinquency, purchasing
the most delinquent Mortgage Loans or related REO Properties first. The Purchase
Price for any Mortgage Loan or related REO Property purchased hereunder shall be
deposited in the Collection Account, and the Trustee, upon

<PAGE>

                                      -75-

receipt of written certification from the Master Servicer of such deposit, shall
release or cause to be released to the Master Servicer the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment, in
each case without recourse, as the Master Servicer shall furnish and as shall be
necessary to vest in the Master Servicer title to any Mortgage Loan or related
REO Property released pursuant hereto.

              (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Master Servicer or any Sub-Servicer for any related unreimbursed Servicing
Advances and P&I Advances, pursuant to Section 3.11(a)(ii) or (a)(iii); second,
to accrued and unpaid interest on the Mortgage Loan, to the date of the Final
Recovery Determination, or to the Due Date prior to the Distribution Date on
which such amounts are to be distributed if not in connection with a Final
Recovery Determination; and third, as a recovery of principal of the Mortgage
Loan. If the amount of the recovery so allocated to interest is less than the
full amount of accrued and unpaid interest due on such Mortgage Loan, the amount
of such recovery will be allocated by the Master Servicer as follows: first, to
unpaid Servicing Fees; and second, to the balance of the interest then due and
owing. The portion of the recovery so allocated to unpaid Servicing Fees shall
be reimbursed to the Master Servicer or any Sub-Servicer pursuant to Section
3.11(a)(iii).

              SECTION 3.17. Trustee to Cooperate; Release of Mortgage Files.

              (a) Upon the payment in full of any Mortgage Loan, or the receipt
by the Master Servicer of a notification that payment in full shall be escrowed
in a manner customary for such purposes, the Master Servicer will immediately
notify the Trustee and any related Custodian by a certification in the form of
Exhibit E-2 (which certification shall include a statement to the effect that
all amounts received or to be received in connection with such payment which are
required to be deposited in the Collection Account pursuant to Section 3.10 have
been or will be so deposited) of a Servicing Officer and shall request delivery
to it of the Mortgage File. Upon receipt of such certification and request, the
Trustee or such Custodian, as the case may be, shall promptly release the
related Mortgage File to the Master Servicer. No expenses incurred in connection
with any instrument of satisfaction or deed of reconveyance shall be chargeable
to the Collection Account or the Distribution Account.

              (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any insurance policy relating to the Mortgage Loans, the Trustee and any related
Custodian shall, upon request of the Master Servicer and delivery to the Trustee
or such Custodian, as the case may be, of a Request for Release in the form of
Exhibit E-l, release the related Mortgage File to the Master Servicer, and the
Trustee shall, at the direction of the Master Servicer, execute such documents
as shall be necessary to the prosecution of any such proceedings and the Master
Servicer shall retain such Mortgage File in trust for the benefit of the
Certificateholders. Such Request for Release shall obligate the Master Servicer
to return each and every document previously requested from the Mortgage File to
the Trustee or to such Custodian when the need therefor by the Master Servicer
no longer exists, unless the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been

<PAGE>

                                      -76-

deposited in the Collection Account or the Mortgage File or such document has
been delivered to an attorney, or to a public trustee or other public official
as required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Master Servicer has delivered to the Trustee a
certificate of a Servicing Officer certifying as to the name and address of the
Person to which such Mortgage File or such document was delivered and the
purpose or purposes of such delivery. Upon receipt of a certificate of a
Servicing Officer stating that such Mortgage Loan was liquidated and that all
amounts received or to be received in connection with such liquidation that are
required to be deposited into the Collection Account have been so deposited, or
that such Mortgage Loan has become an REO Property, a copy of the Request for
Release shall be released by the Trustee or such Custodian to the Master
Servicer or its designee.

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

              SECTION 3.18. Servicing Compensation.

              As compensation for the activities of the Master Servicer
hereunder, the Master Servicer shall be entitled to the Servicing Fee with
respect to each Mortgage Loan payable solely from payments of interest in
respect of such Mortgage Loan, subject to Section 3.24. In addition, the Master
Servicer shall be entitled to recover unpaid Servicing Fees out of Late
Collections, Insurance Proceeds or Liquidation Proceeds to the extent permitted
by Section 3.11(a)(iii) and out of amounts derived from the operation and sale
of an REO Property to the extent permitted by Section 3.23. The right to receive
the Servicing Fee may not be transferred in whole or in part except in
connection with the transfer of all of the Master Servicer's responsibilities
and obligations under this Agreement; provided, however, that the Master
Servicer may pay from the Servicing Fee any amounts due to a Sub-Servicer
pursuant to a Sub-Servicing Agreement entered into under Section 3.02.

              Additional servicing compensation in the form of assumption or
modification fees, late payment charges, NSF fees, reconveyance fees and other
similar fees and charges (other than Prepayment Charges) shall be retained by
the Master Servicer (subject to Section 3.24) only to the extent such fees or
charges are received by the Master Servicer. The Master Servicer shall also be

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                                      -77-

entitled pursuant to Section 3.11(a)(iv) to withdraw from the Collection
Account, and pursuant to Section 3.23(b) to withdraw from any REO Account, as
additional servicing compensation, interest or other income earned on deposits
therein, subject to Section 3.12 and Section 3.24. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including premiums for the insurance required by Section
3.14, to the extent such premiums are not paid by the related Mortgagors or by a
Sub-Servicer, it being understood however, that payment of such premiums by the
Master Servicer shall constitute Servicing Advances and servicing compensation
of each Sub-Servicer, and to the extent provided herein in Section 8.05, the
fees and expenses of the Trustee) and shall not be entitled to reimbursement
therefor except as specifically provided herein.

              SECTION 3.19. Reports to the Trustee; Collection Account
                            Statements.

              Not later than fifteen days after each Distribution Date, the
Master Servicer shall forward to the Trustee and the Depositor a statement
prepared by the Master Servicer setting forth the status of the Collection
Account as of the close of business on such Distribution Date and showing, for
the period covered by such statement, the aggregate amount of deposits into and
withdrawals from the Collection Account of each category of deposit specified in
Section 3.10(a) and each category of withdrawal specified in Section 3.11. Such
statement may be in the form of the then current Fannie Mae Monthly Accounting
Report for its Guaranteed Mortgage Pass-Through Program with appropriate
additions and changes, and shall also include information as to the aggregate of
the outstanding principal balances of all of the Mortgage Loans as of the last
day of the calendar month immediately preceding such Distribution Date. Copies
of such statement shall be provided by the Trustee to any Certificateholder and
to any Person identified to the Trustee as a prospective transferee of a
Certificate, upon request at the expense of the requesting party, provided such
statement is delivered by the Master Servicer to the Trustee.

              SECTION 3.20. Statement as to Compliance.

              The Master Servicer will deliver to the Trustee, the Depositor and
each Rating Agency on or before April 15 of each calendar year commencing in
2001, an Officers' Certificate stating, as to each signatory thereof, that (i) a
review of the activities of the Master Servicer during the preceding year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officers' knowledge, based on such review, the
Master Servicer has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof. Copies of any such statement shall be provided by the
Trustee to any Certificateholder and to any Person identified to the Trustee as
a prospective transferee of a Certificate, upon the request and at the expense
of the requesting party, provided that such statement is delivered by the Master
Servicer to the Trustee.

              SECTION 3.21. Independent Public Accountants' Servicing Report.

              Not later than April 15 of each calendar year commencing in 2001,
the Master Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants

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                                      -78-

to furnish to the Master Servicer a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Master Servicer which includes an assertion that the Master Servicer has
complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of residential mortgage loans by Sub-Servicers, upon
comparable reports of firms of independent certified public accountants rendered
on the basis of examinations conducted in accordance with the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
Immediately upon receipt of such report, the Master Servicer shall furnish a
copy of such report to the Trustee and each Rating Agency. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Master Servicer's expense, provided that such statement is delivered by
the Master Servicer to the Trustee.
In the event such firm of independent certified public accountants requires the
Trustee to agree to the procedures performed by such firm, the Master Servicer
shall direct the Trustee in writing to so agree; it being understood and agreed
that the Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Master Servicer, and the Trustee has not made any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.

              SECTION 3.22. Access to Certain Documentation.

              The Master Servicer shall provide to the Office of Thrift
Supervision, the FDIC, and any other federal or state banking or insurance
regulatory authority that may exercise authority over any Certificateholder,
access to the documentation regarding the Mortgage Loans serviced by the Master
Servicer under this Agreement, as may be required by applicable laws and
regulations. Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the Master
Servicer designated by it. In addition, access to the documentation regarding
the Mortgage Loans serviced by the Master Servicer under this Agreement will be
provided to any Certificateholder, the Trustee and to any Person identified to
the Master Servicer as a prospective transferee of a Certificate, upon
reasonable request during normal business hours at the offices of the Master
Servicer designated by it at the expense of the Person requesting such access.

              SECTION 3.23. Title, Management and Disposition of REO Property.

              (a) The deed or certificate of sale of any REO Property shall be
taken in the name of the Trustee, or its nominee, in trust for the benefit of
the Certificateholders. The Master Servicer, on behalf of REMIC I (and on behalf
of the Trustee for the benefit of the Certificateholders), shall either sell any
REO Property before the close of the third taxable year after the year REMIC I
acquires ownership of such REO Property for purposes of Section 860G(a)(8) of
the Code or request from the Internal Revenue Service, no later than 60 days
before the day on which the three-year grace

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                                      -79-

period would otherwise expire, an extension of the three-year grace period,
unless the Master Servicer shall have delivered to the Trustee and the Depositor
an Opinion of Counsel, addressed to the Trustee and the Depositor, to the effect
that the holding by REMIC I of such REO Property subsequent to three years after
its acquisition will not result in the imposition on REMIC I, REMIC II or REMIC
III of taxes on "prohibited transactions" thereof, as defined in Section 860F of
the Code, or cause any of REMIC I, REMIC II or REMIC III to fail to qualify as a
REMIC under Federal law at any time that any Certificates are outstanding. The
Master Servicer shall manage, conserve, protect and operate each REO Property
for the Certificateholders solely for the purpose of its prompt disposition and
sale in a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by REMIC I, REMIC II or REMIC III of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.

              (b) The Master Servicer shall segregate and hold all funds
collected and received in connection with the operation of any REO Property
separate and apart from its own funds and general assets and shall establish and
maintain, or cause to be established and maintained, with respect to REO
Properties an account held in trust for the Trustee for the benefit of the
Certificateholders (the "REO Account"), which shall be an Eligible Account. The
Master Servicer shall be permitted to allow the Collection Account to serve as
the REO Account, subject to separate ledgers for each REO Property. The Master
Servicer shall be entitled to retain or withdraw any interest income paid on
funds deposited in the REO Account.

              (c) The Master Servicer shall have full power and authority,
subject only to the specific requirements and prohibitions of this Agreement, to
do any and all things in connection with any REO Property as are consistent with
the manner in which the Master Servicer manages and operates similar property
owned by the Master Servicer or any of its Affiliates, all on such terms and for
such period as the Master Servicer deems to be in the best interests of
Certificateholders. In connection therewith, the Master Servicer shall deposit,
or cause to be deposited in the clearing account (which account must be an
Eligible Account) in which it customarily deposits payments and collections on
mortgage loans in connection with its mortgage loan servicing activities on a
daily basis, and in no event more than one Business Day after the Master
Servicer's receipt thereof, and shall thereafter deposit in the REO Account, in
no event more than two Business Days after the deposit of such funds into the
clearing account, all revenues received by it with respect to an REO Property
and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:

                (i) all insurance premiums due and payable in respect of such
              REO Property;

               (ii) all real estate taxes and assessments in respect of such REO
              Property that may result in the imposition of a lien thereon; and

                (iii) all costs and expenses necessary to maintain such REO
              Property.

<PAGE>

                                      -80-

To the extent that amounts on deposit in the REO Account with respect to an REO
Property are insufficient for the purposes set forth in clauses (i) through
(iii) above with respect to such REO Property, the Master Servicer shall advance
from its own funds as Servicing Advances such amount as is necessary for such
purposes if, but only if, the Master Servicer would make such advances if the
Master Servicer owned the REO Property and if in the Master Servicer's sole
judgment, the payment of such amounts will be recoverable from the rental or
sale of the REO Property.

              Notwithstanding the foregoing, neither the Master Servicer nor the
Trustee shall:

                (i) authorize the Trust Fund to enter into, renew or extend any
              New Lease with respect to any REO Property, if the New Lease by
              its terms will give rise to any income that does not constitute
              Rents from Real Property;

               (ii) authorize any amount to be received or accrued under any New
              Lease other than amounts that will constitute Rents from Real
              Property;

              (iii) authorize any construction on any REO Property, other than
              the completion of a building or other improvement thereon, and
              then only if more than ten percent of the construction of such
              building or other improvement was completed before default on the
              related Mortgage Loan became imminent, all within the meaning of
              Section 856(e)(4)(B) of the Code; or

               (iv) authorize any Person to Directly Operate any REO Property on
              any date more than 90 days after its date of acquisition by the
              Trust Fund;

unless, in any such case, the Master Servicer has obtained an Opinion of
Counsel, provided to the Trustee, to the effect that such action will not cause
such REO Property to fail to qualify as "foreclosure property" within the
meaning of Section 860G(a)(8) of the Code at any time that it is held by REMIC
I, in which case the Master Servicer may take such actions as are specified in
such Opinion of Counsel.

              The Master Servicer may contract with any Independent Contractor
for the operation and management of any REO Property, provided that:

                (i) the terms and conditions of any such contract shall not be
              inconsistent herewith;

               (ii) any such contract shall require, or shall be administered to
              require, that the Independent Contractor pay all costs and
              expenses incurred in connection with the operation and management
              of such REO Property, including those listed above and remit all
              related revenues (net of such costs and expenses) to the Master
              Servicer as soon as practicable, but in no event later than thirty
              days following the receipt thereof by such Independent Contractor;

              (iii) none of the provisions of this Section 3.23(c) relating to
              any such contract or to actions taken through any such Independent
              Contractor shall be deemed to relieve the

<PAGE>

                                      -81-

              Master Servicer of any of its duties and obligations to the
              Trustee on behalf of the Certificateholders with respect to the
              operation and management of any such REO Property; and

               (iv) the Master Servicer shall be obligated with respect thereto
              to the same extent as if it alone were performing all duties and
              obligations in connection with the operation and management of
              such REO Property.

The Master Servicer shall be entitled to enter into any agreement with any
Independent Contractor performing services for it related to its duties and
obligations hereunder for indemnification of the Master Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Master Servicer shall be solely liable for
all fees owed by it to any such Independent Contractor, irrespective of whether
the Master Servicer's compensation pursuant to Section 3.18 is sufficient to pay
such fees; provided, however, that to the extent that any payments made by such
Independent Contractor would constitute Servicing Advances if made by the Master
Servicer, such amounts shall be reimbursable as Servicing Advances made by the
Master Servicer.

              (d) In addition to the withdrawals permitted under Section
3.23(c), the Master Servicer may from time to time make withdrawals from the REO
Account for any REO Property: (i) to pay itself or any Sub-Servicer unpaid
Servicing Fees in respect of the related Mortgage Loan; and (ii) to reimburse
itself or any Sub-Servicer for unreimbursed Servicing Advances and P&I Advances
made in respect of such REO Property or the related Mortgage Loan. On the Master
Servicer Remittance Date, the Master Servicer shall withdraw from each REO
Account maintained by it and deposit into the Distribution Account in accordance
with Section 3.10(d)(ii), for distribution on the related Distribution Date in
accordance with Section 4.01, the income from the related REO Property received
during the prior calendar month, net of any withdrawals made pursuant to Section
3.23(c) or this Section 3.23(d).

              (e) Subject to the time constraints set forth in Section 3.23(a),
each REO Disposition shall be carried out by the Master Servicer at such price
and upon such terms and conditions as the Master Servicer shall deem necessary
or advisable, as shall be normal and usual in its general servicing activities
for similar properties.

              (f) The proceeds from the REO Disposition, net of any amount
required by law to be remitted to the Mortgagor under the related Mortgage Loan
and net of any payment or reimbursement to the Master Servicer or any
Sub-Servicer as provided above, shall be deposited in the Distribution Account
in accordance with Section 3.10(d)(ii) on the Master Servicer Remittance Date in
the month following the receipt thereof for distribution on the related
Distribution Date in accordance with Section 4.01. Any REO Disposition shall be
for cash only (unless changes in the REMIC Provisions made subsequent to the
Startup Day allow a sale for other consideration).

              (g) The Master Servicer shall file information returns with
respect to the receipt of mortgage interest received in a trade or business,
reports of foreclosures and abandonments of any Mortgaged Property and
cancellation of indebtedness income with respect to any Mortgaged Property

<PAGE>

                                      -82-

as required by Sections 6050H, 6050J and 6050P of the Code, respectively. Such
reports shall be in form and substance sufficient to meet the reporting
requirements imposed by such Sections 6050H, 6050J and 6050P of the Code.

              SECTION 3.24. Obligations of the Master Servicer in Respect of
                            Prepayment Interest Shortfalls.

              The Master Servicer shall deliver to the Trustee for deposit into
the Distribution Account on or before 3:00 p.m. New York time on the Master
Servicer Remittance Date from its own funds an amount equal to the lesser of (i)
the aggregate of the Prepayment Interest Shortfalls for the related Distribution
Date resulting solely from Principal Prepayments during the related Prepayment
Period and (ii) the amount of its aggregate Servicing Fee for the most recently
ended calendar month.

              SECTION 3.25. Obligations of the Master Servicer in Respect of
                            Mortgage Rates and Monthly Payments.

              In the event that a shortfall in any collection on or liability
with respect to any Mortgage Loan results from or is attributable to adjustments
to Mortgage Rates, Monthly Payments or Stated Principal Balances that were made
by the Master Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the Master Servicer, upon discovery or receipt
of notice thereof, immediately shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any such shortfall and
shall indemnify and hold harmless the Trust Fund, the Trustee, the Depositor and
any successor master servicer in respect of any such liability.
Such indemnities shall survive the termination or discharge of this Agreement.
Notwithstanding the foregoing, this Section 3.25 shall not limit the ability of
the Master Servicer to seek recovery of any such amounts from the related
Mortgagor under the terms of the related Mortgage Note, as permitted by law.

              SECTION 3.26. Advance Facility.

              (a) The Master Servicer is hereby authorized to enter into a
facility with any Person which provides that such Person (an "Advancing Person")
may fund P&I Advances and/or Servicing Advances under this Agreement, although
no such facility shall reduce or otherwise affect the Master Servicer's
obligation to fund such P&I Advances and/or Servicing Advances. To the extent
that an Advancing Person funds any P&I Advance or any Servicing Advance and
provides the Trustee with notice acknowledged by the Master Servicer that such
Advancing Person is entitled to reimbursement, such Advancing Person shall be
entitled to receive reimbursement pursuant to this Agreement for such amount to
the extent provided in Section 3.26(b). Such notice from the Advancing Person
must specify the amount of the reimbursement and must specify which Section of
this Agreement permits the applicable P&I Advance or Servicing Advance to be
reimbursed. The Trustee shall have no duty or liability with respect to any
calculation of any reimbursement to be paid to an Advancing Person and shall be
entitled to rely without independent investigation on the Advancing Person's
notice provided pursuant to this Section 3.26. An Advancing Person whose
obligations hereunder are limited to the funding of P&I Advances and/or
Servicing Advances shall not be required to meet the qualifications of a
Sub-Servicer pursuant to Section 3.02 hereof.

<PAGE>

                                      -83-

              (b) If an Advancing Person is entitled to reimbursement for any
particular P&I Advance or Servicing Advance, then the Master Servicer shall not
be permitted to reimburse itself therefor under Section 3.11(a)(ii), Section
3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), but instead the Master
Servicer shall include such amounts in the applicable remittance to the Trustee
made pursuant to Section 3.10(b) to the extent of amounts on deposit in the
Collection Account on the related Master Servicer Remittance Date. The Trustee
is hereby authorized to pay to an Advancing Person, reimbursements for P&I
Advances and Servicing Advances from the Distribution Account to the same extent
the Master Servicer would have been permitted to reimburse itself for such P&I
Advances and/or Servicing Advances in accordance with Section 3.11(a)(ii),
Section 3.11(a)(iii), Section 3.11(a)(vi) or Section 3.11(a)(ix), as the case
may be, had the Master Servicer made such Advance or Servicing Advance.

<PAGE>

                                      -84-

                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

              SECTION 4.01. Distributions.

              (a)(1)(A) On each Distribution Date, the Trustee shall cause the
following amounts, in the following order of priority, to be distributed by
REMIC I to REMIC II on account of the REMIC I Regular Interests or withdrawn
from the Distribution Account and distributed to the holders of the Class R-I
Certificates, as the case may be:

                (i) to the Holders of REMIC I Regular Interests (other than
              REMIC I Regular Interest I-LTP), in an amount equal to (A) the
              Uncertificated Interest for such Distribution Date, plus (B) any
              amounts in respect thereof remaining unpaid from previous
              Distribution Dates. Amounts payable as Uncertificated Interest in
              respect of REMIC I Regular Interest I-LT6 shall be reduced when
              the REMIC I Overcollateralized Amount is less than the REMIC I
              Required Overcollateralized Amount, by the lesser of (x) the
              amount of such difference and (y) the Maximum I-LT6 Uncertificated
              Interest Deferral Amount; and

               (ii) on each Distribution Date, to the Holders of REMIC I Regular
              Interests, in an amount equal to the remainder of the Available
              Distribution Amount for such Distribution Date after the
              distributions made pursuant to clause (i) above, allocated as
              follows (except as provided below):

                      (a) to the Holders of the REMIC I Regular Interest I-LTP,
                  on the Distribution Date immediately following the expiration
                  of the latest Prepayment Charge term as identified on the
                  Mortgage Loan Schedule or any Distribution Date thereafter
                  until $100 has been distributed pursuant to this clause;

                      (b) to the Holders of the REMIC I Regular Interest I-LT1,
                  98.00% of the amount remaining after application of clause
                  (a), until the Uncertificated Balance of such REMIC I Regular
                  Interest is reduced to zero and any remaining amount to the
                  Holders of the Class R-I Certificates;

                      (c) to the Holders of the REMIC I Regular Interest I-LT2,
                  REMIC I Regular Interest I-LT3, REMIC I Regular Interest I-LT4
                  and REMIC I Regular Interest I-LT5, 1.00% of the amount
                  remaining after application of clause (a), in the same
                  proportion as principal payments are allocated to the related
                  Corresponding Certificates, until the Uncertificated Balances
                  of such REMIC I Regular Interests are reduced to zero and any
                  remaining amount to the Holders of the Class R-I Certificates;
                  and

                      (d) to the Holders of the REMIC I Regular Interest I-LT6,
                  1.00% of the amount remaining after application of clause (a),
                  until the Uncertificated Balance of such

<PAGE>

                                      -85-

                  REMIC I Regular Interest is reduced to zero and any remaining
                  amount to the Holders of the Class R-I Certificates;

provided, however, that 98.00% and 2.00% of any principal payments that are
attributable to an Overcollateralization Reduction Amount shall be allocated to
Holders of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT6, respectively.

              (B) On each Distribution Date, the Trustee shall cause the
following amounts to be distributed by REMIC II to REMIC III on account of the
REMIC II Regular Interests or withdrawn from the Distribution Account and
distributed to the holders of the Class R-II Certificates as the case may be:

                (i) any amounts paid as either Uncertificated Interest paid or
              accrued to the REMIC I Regular Interests (other than REMIC I
              Regular Interest I-LTP) shall be deemed to have been paid to the
              related Uncertificated Corresponding Component in REMIC II in
              accordance with the REMIC II Remittance Rates and any amounts
              deferred on REMIC I Regular Interest I-LT6 pursuant to Section
              4.01(a)(1)(A) shall be deemed to have been deferred with respect
              to REMIC II Regular Interest II-LT6;

                (ii) any amounts paid as principal on the REMIC I Regular
              Interests shall be deemed to have been paid to the related
              Uncertificated Corresponding Component in REMIC II in accordance
              with the same priorities and conditions; and

                (iii) any remaining amounts to the Holders of the Class R-II
              Certificates.

              (2) On each Distribution Date, the Trustee shall withdraw from the
Distribution Account an amount equal to the Interest Remittance Amount and
distribute to the Certificateholders the following amounts, in the following
order of priority:

                (i) to the Holders of the Class A Certificates, an amount equal
              to the Senior Interest Distribution Amount;

                (ii) to the extent of the Interest Remittance Amount remaining
              after distribution of the Senior Interest Distribution Amount, to
              the Holders of the Class M-1 Certificates, an amount equal to the
              Interest Distribution Amount allocable to the Class M-1
              Certificates;

                (iii) to the extent of the Interest Remittance Amount remaining
              after distribution of the Senior Interest Distribution Amount and
              the Interest Distribution Amount allocable to the Class M-1
              Certificates, to the Holders of the Class M-2 Certificates, an
              amount equal to the Interest Distribution Amount allocable to the
              Class M-2 Certificates; and

                (iv) to the extent of the Interest Remittance Amount remaining
              after distribution of the Senior Interest Distribution Amount and
              the Interest Distribution Amounts allocable to the Class M-1
              Certificates and the Class M-2 Certificates, to the Holders of the
              Class

<PAGE>

                                      -86-

              M-3 Certificates, an amount equal to the Interest Distribution
              Amount allocable to the Class M-3 Certificates.

              (3) On each Distribution Date, the Trustee shall withdraw from the
Distribution Account an amount equal to the Principal Distribution Amount and
distribute to the Certificateholders the following amounts, in the following
order of priority:

                (i) On each Distribution Date (a) prior to the Stepdown Date or
              (b) on which a Trigger Event is in effect, the Principal
              Distribution Amount shall be distributed in the following order of
              priority;

                  FIRST, to the Holders of the Class A Certificates, until the
                  Certificate Principal Balance of such Class has been reduced
                  to zero;

                  SECOND, to the Holders of the Class M-1 Certificates, until
                  the Certificate Principal Balance of such Class has been
                  reduced to zero;

                  THIRD, to the Holders of the Class M-2 Certificates, until the
                  Certificate Principal Balance of such Class has been reduced
                  to zero; and

                  FOURTH, to the Holders of the Class M-3 Certificates, until
                  the Certificate Principal Balance of such Class has been
                  reduced to zero.

               (ii) On each Distribution Date (a) on or after the Stepdown Date
              and (b) on which a Trigger Event is not in effect, the Principal
              Distribution Amount shall be distributed in the following order of
              priority;

                  FIRST, the lesser of (x) the Principal Distribution Amount and
                  (y) the Class A Principal Distribution Amount shall be
                  distributed to the Holders of the Class A Certificates, until
                  the Certificate Principal Balance of such Class has been
                  reduced to zero;

                  SECOND, the lesser of (x) the excess of (i) the Principal
                  Distribution Amount over (ii) the amount distributed to the
                  Holders of the Class A Certificates pursuant to clause first
                  above and (y) the Class M-1 Principal Distribution Amount
                  shall be distributed to the Holders of the Class M-1
                  Certificates, until the Certificate Principal Balance of such
                  Class has been reduced to zero;

                  THIRD, the lesser of (x) the excess of (i) the Principal
                  Distribution Amount over (ii) the sum of the amounts
                  distributed to the Holders of the Class A Certificates
                  pursuant to clause first above and to the Holders of the Class
                  M-1 Certificates pursuant to clause second above and (y) the
                  Class M-2 Principal Distribution Amount shall be distributed
                  to the Holders of the Class M-2 Certificates, until the
                  Certificate Principal Balance of such Class has been reduced
                  to zero; and

<PAGE>

                                      -87-

                  FOURTH, the lesser of (x) the excess of (i) the Principal
                  Distribution Amount over (ii) the sum of the amounts
                  distributed to the Holders of the Class A Certificates
                  pursuant to clause first above, to the Holders of the Class
                  M-1 Certificates pursuant to clause second above and to the
                  Holders of the Class M-2 Certificates pursuant to clause third
                  above and (y) the Class M-3 Principal Distribution Amount
                  shall be distributed to the Holders of the Class M-3
                  Certificates, until the Certificate Principal Balance of such
                  Class has been reduced to zero.

              (4) On each Distribution Date, the Net Monthly Excess Cashflow
(or, in the case of clause (i) below, the Net Monthly Excess Cashflow exclusive
of any Overcollateralization Reduction Amount) shall be distributed as follows:

                  (i) to the Holders of the Class or Classes of Certificates
                  then entitled to receive distributions in respect of
                  principal, in an amount equal to the principal portion of any
                  Realized Losses incurred or deemed to have been incurred on
                  the Mortgage Loans, applied to reduce the Certificate
                  Principal Balance of such Certificates until the aggregate
                  Certificate Principal Balance of such Certificates is reduced
                  to zero;

                  (ii) to the Holders of the Class or Classes of Certificates
                  then entitled to receive distributions in respect of
                  principal, in an amount equal to the Overcollateralization
                  Increase Amount, applied to reduce the Certificate Principal
                  Balance of such Certificates until the aggregate Certificate
                  Principal Balance of such Certificates is reduced to zero;

                  (iii) to the Holders of the Class M-1 Certificates, in an
                  amount equal to the Interest Carry Forward Amount allocable to
                  such Class of Certificates;

                  (iv) to the Holders of the Class M-2 Certificates, in an
                  amount equal to the Interest Carry Forward Amount allocable to
                  such Class of Certificates;

                  (v) to the Holders of the Class M-3 Certificates, in an amount
                  equal to the Interest Carry Forward Amount allocable to such
                  Class of Certificates;

                  (vi) to the Holders of the Class A Certificates, in an amount
                  equal to the aggregate of any Prepayment Interest Shortfalls
                  (to the extent not covered by payments pursuant to Section
                  3.24) and any Relief Act Interest Shortfall allocated to such
                  Certificates;

                  (vii) to the Holders of the Class M-1 Certificates, in an
                  amount equal to the aggregate of any Prepayment Interest
                  Shortfalls (to the extent not covered by payments pursuant to
                  Section 3.24) and any Relief Act Interest Shortfall allocated
                  to such Certificates;

                  (viii) to the Holders of the Class M-2 Certificates, in an
                  amount equal to the aggregate of any Prepayment Interest
                  Shortfalls (to the extent not covered by payments pursuant to
                  Section 3.24) and any Relief Act Interest Shortfall allocated
                  to such Certificates;

<PAGE>

                                      -88-

                  (ix) to the Holders of the Class M-3 Certificates, in an
                  amount equal to the aggregate of any Prepayment Interest
                  Shortfalls (to the extent not covered by payments pursuant to
                  Section 3.24) and any Relief Act Interest Shortfall allocated
                  to such Certificates;

                  (x) to the Holders of the Class CE Certificates, the Interest
                  Distribution Amount and any Overcollateralization Reduction
                  Amount for such Distribution Date; and

                  (xi) to the Holders of the Class R-III Certificates, any
                  remaining amounts; provided that if such Distribution Date is
                  the Distribution Date immediately following the expiration of
                  the latest Prepayment Charge term as identified on the
                  Mortgage Loan Schedule or any Distribution Date thereafter,
                  then any such remaining amounts will be distributed FIRST, to
                  the Holders of the Class P Certificates, until the Certificate
                  Principal Balance thereof has been reduced to zero; and
                  SECOND, to the Holders of the Class R-III Certificates.

              (b) On each Distribution Date, the Trustee shall withdraw any
amounts then on deposit in the Distribution Account that represent Prepayment
Charges collected by the Master Servicer in connection with the Principal
Prepayment of any of the Mortgage Loans or any Master Servicer Prepayment Charge
Payment Amount and shall distribute such amounts to the Holders of the Class P
Certificates. Such distributions shall not be applied to reduce the Certificate
Principal Balance of the Class P Certificates.

              (c) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date will be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(e) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Certificates having an initial
aggregate Certificate Principal Balance that is in excess of the lesser of (i)
$5,000,000 or (ii) two-thirds of the initial Certificate Principal Balance of
such Class of Certificates, or otherwise by check mailed by first class mail to
the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate will be made in like manner, but only upon
presentment and surrender of such Certificate at the Corporate Trust Office or
such other location specified in the notice to Certificateholders of such final
distribution.

              Each distribution with respect to a Book-Entry Certificate shall
be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage

<PAGE>

                                      -89-

firm" or "indirect participating firm") for which it acts as agent. Each
brokerage firm shall be responsible for disbursing funds to the Certificate
Owners that it represents. None of the Trustee, the Certificate Registrar, the
Depositor or the Master Servicer shall have any responsibility therefor except
as otherwise provided by this Agreement or applicable law.

              (d) The rights of the Certificateholders to receive distributions
in respect of the Certificates, and all interests of the Certificateholders in
such distributions, shall be as set forth in this Agreement. None of the Holders
of any Class of Certificates, the Trustee or the Master Servicer shall in any
way be responsible or liable to the Holders of any other Class of Certificates
in respect of amounts properly previously distributed on the Certificates.

              (e) Except as otherwise provided in Section 9.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than five (5) days after the related Determination Date, mail to each
Holder on such date of such Class of Certificates a notice to the effect that:

            (i) the Trustee expects that the final distribution with respect to
         such Class of Certificates will be made on such Distribution Date, but
         only upon presentation and surrender of such Certificates at the office
         of the Trustee therein specified, and

           (ii) no interest shall accrue on such Certificates from and after the
         end of the related Interest Accrual Period.

Any funds not distributed to any Holder or Holders of Certificates of such Class
on such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non- tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 4.01(e) shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, mail a final notice to remaining
non-tendering Certificateholders concerning surrender of their Certificates but
shall continue to hold any remaining funds for the benefit of non-tendering
Certificateholders.
The costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in such trust fund.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trustee shall pay to Salomon Smith Barney
Inc. all such amounts, and all rights of non-tendering Certificateholders in or
to such amounts shall thereupon cease. No interest shall accrue or be payable to
any Certificateholder on any amount held in trust by the Trustee as a result of
such Certificateholder's failure to surrender its Certificate(s) for final
payment thereof in accordance with this Section 4.01(e).

<PAGE>

                                      -90-

              (f) Notwithstanding anything to the contrary herein, (i) in no
event shall the Certificate Principal Balance of a Class A Certificate or a
Mezzanine Certificate be reduced more than once in respect of any particular
amount both (a) allocated to such Certificate in respect of Realized Losses
pursuant to Section 4.04 and (b) distributed to the Holder of such Certificate
in reduction of the Certificate Principal Balance thereof pursuant to this
Section 4.01 from Net Monthly Excess Cashflow and (ii) in no event shall the
Uncertificated Balance of a REMIC I Regular Interest be reduced more than once
in respect of any particular amount both (a) allocated to such REMIC I Regular
Interest in respect of Realized Losses pursuant to Section 4.04 and (b)
distributed on such REMIC I Regular Interest in reduction of the Uncertificated
Balance thereof pursuant to this Section 4.01.

              SECTION 4.02. Statements to Certificateholders.

              On each Distribution Date, the Trustee shall prepare and forward
by mail to each Holder of the Regular Certificates, a statement as to the
distributions made on such Distribution Date setting forth:

                (i) the amount of the distribution made on such Distribution
              Date to the Holders of the Certificates of each Class allocable to
              principal, and the amount of distribution made on such
              Distribution Date to the Holders of the Class P Certificates
              allocable to Prepayment Charges;

                (ii) the amount of the distribution made on such Distribution
              Date to the Holders of the Certificates of each Class allocable to
              interest;

                (iii) the aggregate Servicing Fee received by the Master
              Servicer during the related Due Period and such other customary
              information as the Trustee deems necessary or desirable, or which
              a Certificateholder reasonably requests, to enable
              Certificateholders to prepare their tax returns;

                (iv) the aggregate amount of P&I Advances for such Distribution
              Date;

                (v) the aggregate Stated Principal Balance of the Mortgage Loans
              and any REO Properties as of the close of business on such
              Distribution Date;

                (vi) the number, aggregate principal balance, weighted average
              remaining term to maturity and weighted average Mortgage Rate of
              the Mortgage Loans as of the related Due Date;

                (vii) the number and aggregate unpaid principal balance of
              Mortgage Loans (a) delinquent 30-59 days, (b) delinquent 60-89
              days, (c) delinquent 90 or more days in each case, as of the last
              day of the preceding calendar month, (d) as to which foreclosure
              proceedings have been commenced and (e) with respect to which the
              related Mortgagor has filed for protection under applicable
              bankruptcy laws, with respect to whom

<PAGE>

                                      -91-

              bankruptcy proceedings are pending or with respect to whom
              bankruptcy protection is in force;

              (viii) with respect to any Mortgage Loan that became an REO
              Property during the preceding calendar month, the loan number of
              such Mortgage Loan, the unpaid principal balance and the Stated
              Principal Balance of such Mortgage Loan as of the date it became
              an REO Property;

               (ix) the book value and the Stated Principal Balance of any REO
              Property as of the close of business on the last Business Day of
              the calendar month preceding the Distribution Date;

                (x) the aggregate amount of Principal Prepayments made during
              the related Prepayment Period;

               (xi) the aggregate amount of Realized Losses incurred during the
              related Prepayment Period (or, in the case of Bankruptcy Losses
              allocable to interest, during the related Due Period), separately
              identifying whether such Realized Losses constituted Bankruptcy
              Losses and the aggregate amount of Realized Losses incurred since
              the Closing Date;

                (xii) the aggregate amount of Extraordinary Trust Fund Expenses
              withdrawn from the Collection Account or the Distribution Account
              for such Distribution Date;

                (xiii) the aggregate Certificate Principal Balance of the each
              Class of Certificates, after giving effect to the distributions,
              and allocations of Realized Losses, made on such Distribution
              Date, separately identifying any reduction thereof due to
              allocations of Realized Losses;

                (xiv) the Certificate Factor for each such Class of Certificates
              applicable to such Distribution Date;

                (xv) the Interest Distribution Amount in respect of the Class A
              Certificates, the Mezzanine Certificates and the Class CE
              Certificates for such Distribution Date and the Interest Carry
              Forward Amount, if any, with respect to the Class A Certificates
              and the Mezzanine Certificates on such Distribution Date, and in
              the case of the Class A Certificates, the Mezzanine Certificates
              and the Class CE Certificates, separately identifying any
              reduction thereof due to allocations of Realized Losses,
              Prepayment Interest Shortfalls and Relief Act Interest Shortfalls;

                (xvi) the aggregate amount of any Prepayment Interest Shortfall
              for such Distribution Date, to the extent not covered by payments
              by the Master Servicer pursuant to Section 3.24;

                (xvii) the aggregate amount of Relief Act Interest Shortfalls
              for such Distribution Date;

<PAGE>

                                      -92-

                (xviii) the Required Overcollateralized Amount and the Credit
              Enhancement Percentage for such Distribution Date;

                (xix) the Overcollateralization Increase Amount, if any, for
              such Distribution Date;

                (xx) the Overcollateralization Reduction Amount, if any, for
              such Distribution Date;

                (xxi) with respect to any Mortgage Loan as to which foreclosure
              proceedings have been concluded, the loan number and unpaid
              principal balance of such Mortgage Loan as of the date of such
              conclusion of foreclosure proceedings;

                (xxii) with respect to Mortgage Loans as to which a Final
              Liquidation has occurred, the number of Mortgage Loans, the unpaid
              principal balance of such Mortgage Loans as of the date of such
              Final Liquidation and the amount of proceeds (including
              Liquidation Proceeds and Insurance Proceeds) collected in respect
              of such Mortgage Loans;

                (xxiii) the respective Pass-Through Rates applicable to the
              Class A Certificates, the Mezzanine Certificates and the Class CE
              Certificates for such Distribution Date and the Pass-Through Rate
              applicable to the Class A Certificates and the Mezzanine
              Certificates for the immediately succeeding Distribution Date;

                (xxiv) the Loss Severity Percentage with respect to each
              Mortgage Loan; and

                (xxv) the Aggregate Loss Severity Percentage.

              The Trustee will make such statement (and, at its option, any
additional files containing the same information in an alternative format)
available each month to Certificateholders, the Master Servicer and the Rating
Agencies via the Trustee's internet website and its fax-on-demand service. The
Trustee's fax-on-demand service may be accessed by calling (301) 815-6610. The
Trustee's internet website shall initially be located at "www.ctslink.com".
Assistance in using the website or the fax-on-demand service can be obtained by
calling the Trustee's customer service desk at (301) 815-6600. Parties that are
unable to use the above distribution options are entitled to have a paper copy
mailed to them via first class mail by calling the customer service desk and
indicating such. The Trustee shall have the right to change the way such
statements are distributed in order to make such distribution more convenient
and/or more accessible to the above parties and the Trustee shall provide timely
and adequate notification to all above parties regarding any such changes.

              In the case of information furnished pursuant to subclauses (i)
through (iii) above, the amounts shall be expressed as a dollar amount per
Single Certificate of the relevant Class.

              Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Regular Certificate a statement containing the
information set forth in subclauses (i) through (iii) above, aggregated for such
calendar year or applicable portion thereof during which such person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent

<PAGE>

                                      -93-

that substantially comparable information shall be provided by the Trustee
pursuant to any requirements of the Code as from time to time are in force.

              On each Distribution Date, the Trustee shall forward to the
Depositor, each Holder of a Residual Certificate and the Master Servicer, a copy
of the reports forwarded to the Regular Certificateholders on such Distribution
Date and a statement setting forth the amounts, if any, actually distributed
with respect to the Residual Certificates, respectively, on such Distribution
Date.

              Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to each Person who at any time during the
calendar year was a Holder of a Residual Certificate a statement setting forth
the amount, if any, actually distributed with respect to the Residual
Certificates, as appropriate, aggregated for such calendar year or applicable
portion thereof during which such Person was a Certificateholder. Such
obligation of the Trustee shall be deemed to have been satisfied to the extent
that substantially comparable information shall be prepared by the Trustee and
furnished to such Holders pursuant to the rules and regulations of the Code as
are in force from time to time.

              The Trustee shall, upon request, furnish to each
Certificateholder, during the term of this Agreement, such periodic, special, or
other reports or information, whether or not provided for herein, as shall be
reasonable with respect to the Certificateholder, or otherwise with respect to
the purposes of this Agreement, all such reports or information to be provided
at the expense of the Certificateholder in accordance with such reasonable and
explicit instructions and directions as the Certificateholder may provide. For
purposes of this Section 4.02, the Trustee's duties are limited to the extent
that the Trustee receives timely reports as required from the Master Servicer.

              On each Distribution Date the Trustee shall provide Bloomberg
Financial Markets, L.P. ("Bloomberg") CUSIP level factors for each class of
Certificates as of such Distribution Date, using a format and media mutually
acceptable to the Trustee and Bloomberg.

              SECTION 4.03. Remittance Reports; P&I Advances.

              (a) On the Master Servicer Remittance Date, the Master Servicer
shall deliver to the Trustee by telecopy (or by such other means as the Master
Servicer and the Trustee may agree from time to time) a Remittance Report with
respect to the related Distribution Date. Such Remittance Report will include
(i) the amount of P&I Advances to be made by the Master Servicer in respect of
the related Distribution Date, the aggregate amount of P&I Advances outstanding
after giving effect to such P&I Advances, and the aggregate amount of
Nonrecoverable P&I Advances in respect of such Distribution Date and (ii) such
other information with respect to the Mortgage Loans as the Trustee may
reasonably require to perform the calculations necessary to make the
distributions contemplated by Section 4.01 and to prepare the statements to
Certificateholders contemplated by Section 4.02. The Trustee shall not be
responsible to recompute, recalculate or verify any information provided to it
by the Master Servicer.

              On or prior to each Master Servicer Remittance Date, the Master
Servicer shall provide in an electronic format mutually agreed upon by the
Master Servicer and the Trustee the data

<PAGE>

                                      -94-

necessary for the Trustee to perform its verification duties set forth in this
Section 4.03(a). The Trustee or a third party reasonably acceptable to the
Trustee and the Depositor (the "Verification Agent") will perform such
verification duties and will use its best efforts to issue its findings in a
report (the "Verification Report") within ten (10) Business Days following the
Master Servicer Remittance Date; provided, however, that if the Verification
Agent is unable to issue the Verification Report within ten (10) Business Days
following the Master Servicer Remittance Date, the Verification Agent may issue
the Verification Report upon the completion of its verification duties.
The Trustee shall forward the Verification Report to the Master Servicer and
shall notify the Master Servicer if the Trustee has determined that the Master
Servicer did not deliver the appropriate Prepayment Charges to the Trustee in
accordance with Section 3.10 and Schedule 2 hereof. Such written notification
from the Trustee shall include the Master Servicer Mortgage Loan identifying
number, Prepayment Charge code and Prepayment Charge amount as calculated by the
Trustee or the Verification Agent, as applicable, for each Mortgage Loan for
which there is a discrepancy. If the Master Servicer agrees with the verified
amounts, the Master Servicer shall adjust the immediately succeeding Remittance
Report and the amount remitted to the Trustee with respect to Principal
Prepayments accordingly. If the Master Servicer disagrees with the determination
of the Trustee, the Master Servicer shall, within five (5) Business Days of its
receipt of the Verification Report, notify the Trustee of such disagreement and
provide the Trustee with information to support the Master Servicer's position.
The Master Servicer and the Trustee shall cooperate to resolve any discrepancy
on or prior to the immediately succeeding Master Servicer Remittance Date, and
the Master Servicer will indicate the effect of such resolution on the related
Remittance Report and shall adjust the amount remitted with respect to Principal
Prepayments on such Master Servicer Remittance Date accordingly. During such
time as the Master Servicer and the Trustee are resolving discrepancies with
respect to the Prepayment Charges, no payments in respect of any disputed
Prepayment Charges will be remitted to the Collection Account and the Trustee
shall not be obligated to remit such payments, unless otherwise required
pursuant to Section 7.02 hereof.

              In connection with such duties, the Trustee shall be able to rely
solely on the information provided to it by the Master Servicer and any
Verification Agent in accordance with this Section. The Trustee shall not be
responsible for verifying the accuracy of any of the information provided to it
by the Master Servicer or the Verification Agent. The costs of such
verification, whether performed by the Trustee or any third party on behalf of
the Trustee, shall be paid by the Trustee. Anything to the contrary herein
notwithstanding, the verification procedures set forth in this Section shall not
be performed after the securities relating to any resecuritization of the Class
P Certificates have been paid in full.

              (b) The amount of P&I Advances to be made by the Master Servicer
for any Distribution Date shall equal, subject to Section 4.03(d), the sum of
(i) the aggregate amount of Monthly Payments (with each interest portion thereof
net of the related Servicing Fee), due on the related Due Date in respect of the
Mortgage Loans (other than with respect to any Balloon Loan with a delinquent
Balloon Payment as described in clause (iii) below), which Monthly Payments were
delinquent as of the close of business on the related Determination Date, plus
(ii) with respect to each REO Property (other than with respect to any REO
Property relating to a Balloon Loan with a delinquent Balloon Payment as
described in clause (iv) below), which REO Property was acquired during or prior
to the related Prepayment Period and as to which such REO Property an REO

<PAGE>

                                      -95-

Disposition did not occur during the related Prepayment Period, an amount equal
to the excess, if any, of the Monthly Payments (with each interest portion
thereof net of the related Servicing Fee) that would have been due on the
related Due Date in respect of the related Mortgage Loans, over the net income
from such REO Property transferred to the Distribution Account pursuant to
Section 3.23 for distribution on such Distribution Date, plus (iii) with respect
to each Balloon Loan with a delinquent Balloon Payment, an amount equal to the
assumed monthly principal and interest payment (with each interest portion
thereof net of the related Servicing Fee) that would have been due on the
related Due Date based on the original principal amortization schedule for such
Balloon Loan assuming such Mortgage Loan was not a Balloon Loan, plus (iv) with
respect to each REO Property relating to a Balloon Loan with a delinquent
Balloon Payment, which REO Property was acquired during or prior to the related
Prepayment Period and as to which REO Property an REO Disposition did not occur
during the related Prepayment Period, an amount equal to the excess, if any, of
the assumed monthly principal and interest payment (with each interest portion
thereof net of the related Servicing Fee) that would have been due on the
related Due Date based on the original principal amortization schedule for the
related Balloon Loan assuming such Mortgage Loan was not a Balloon Loan, over
the net income from such REO Property transferred to the Distribution Account
pursuant to Section 3.23 for distribution on such Distribution Date.

              On or before 3:00 p.m. New York time on the Master Servicer
Remittance Date, the Master Servicer shall remit in immediately available funds
to the Trustee for deposit in the Distribution Account an amount equal to the
aggregate amount of P&I Advances, if any, to be made in respect of the Mortgage
Loans and REO Properties for the related Distribution Date either (i) from its
own funds or (ii) from the Collection Account, to the extent of funds held
therein for future distribution (in which case, it will cause to be made an
appropriate entry in the records of Collection Account that amounts held for
future distribution have been, as permitted by this Section 4.03, used by the
Master Servicer in discharge of any such P&I Advance) or (iii) in the form of
any combination of (i) and (ii) aggregating the total amount of P&I Advances to
be made by the Master Servicer with respect to the Mortgage Loans and REO
Properties. Any amounts held for future distribution and so used shall be
appropriately reflected in the Master Servicer's records and replaced by the
Master Servicer by deposit in the Collection Account on or before any future
Master Servicer Remittance Date to the extent that the Available Distribution
Amount for the related Distribution Date (determined without regard to P&I
Advances to be made on the Master Servicer Remittance Date) shall be less than
the total amount that would be distributed to the Classes of Certificateholders
pursuant to Section 4.01 on such Distribution Date if such amounts held for
future distributions had not been so used to make P&I Advances. The Trustee will
provide notice to the Master Servicer by telecopy by the close of business on
any Master Servicer Remittance Date in the event that the amount remitted by the
Master Servicer to the Trustee on such date is less than the P&I Advances
required to be made by the Master Servicer for the related Distribution Date.

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

<PAGE>

                                      -96-

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

              SECTION 4.04. Allocation of Realized Losses.

              (a) Prior to each Determination Date, the Master Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses and (iii) the
respective portions of such Realized Losses allocable to interest and allocable
to principal. Prior to each Determination Date, the Master Servicer shall also
determine as to each Mortgage Loan: (A) the total amount of Realized Losses, if
any, incurred in connection with any Deficient Valuations made during the
related Prepayment Period and (B) the total amount of Realized Losses, if any,
incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Master Servicer shall be
evidenced by an Officers' Certificate delivered to the Trustee by the Master
Servicer prior to the Determination Date immediately following the end of (x) in
the case of Bankruptcy Losses allocable to interest, the Due Period during which
any such Realized Loss was incurred, and (y) in the case of all other Realized
Losses, the Prepayment Period during which any such Realized Loss was incurred.

              (b) All Realized Losses on the Mortgage Loans allocated to any
REMIC II Regular Interest pursuant to Section 4.04(d), shall be allocated by the
Trustee on each Distribution Date as follows: first, to Net Monthly Excess
Cashflow; second, to the Class CE Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; third, to the Class M-3 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero;
fourth, to the Class M-2 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; and fifth, to the Class M-1 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero. All
Realized Losses to be allocated to the Certificate Principal Balances of all
Classes on any Distribution Date shall be so allocated after the actual
distributions to be made on such date as provided above. All references above to
the Certificate Principal Balance of any Class of Certificates shall be to the
Certificate Principal Balance of such Class immediately prior to the relevant
Distribution Date, before reduction thereof by any Realized Losses, in each case
to be allocated to such Class of Certificates, on such Distribution Date.

              Any allocation of Realized Losses to a Mezzanine Certificate on
any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated, or in the case of a Class CE
Certificate, by reducing the amount otherwise payable in respect thereof

<PAGE>

                                      -97-

pursuant to Section 4.01(a)(4)(x). No allocations of any Realized Losses shall
be made to the Certificate Principal Balances of the Class A Certificates or the
Class P Certificates.

              As used herein, an allocation of a Realized Loss on a "PRO RATA
basis" among two or more specified Classes of Certificates means an allocation
on a PRO RATA basis, among the various Classes so specified, to each such Class
of Certificates on the basis of their then outstanding Certificate Principal
Balances prior to giving effect to distributions to be made on such Distribution
Date. All Realized Losses and all other losses allocated to a Class of
Certificates hereunder will be allocated among the Certificates of such Class in
proportion to the Percentage Interests evidenced thereby.

              (c) All Realized Losses on the Mortgage Loans shall be allocated
by the Trustee on each Distribution Date to the following REMIC I Regular
Interests in the specified percentages, as follows: first, to Uncertificated
Interest payable to the REMIC I Regular Interest I-LT1 and REMIC I Regular
Interest I-LT6 up to an aggregate amount equal to the REMIC I Interest Loss
Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC I Regular Interest I-LT1 and REMIC I Regular Interest
I-LT6 up to an aggregate amount equal to the REMIC I Principal Loss Allocation
Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of REMIC
I Regular Interest I-LT1, REMIC I Regular Interest I-LT5 and REMIC I Regular
Interest I-LT6, 98%, 1% and 1%, respectively, until the Uncertificated Balance
of REMIC I Regular Interest I-LT5 has been reduced to zero; fourth, to the
Uncertificated Balances of REMIC I Regular Interest I-LT1, REMIC I Regular
Interest I-LT4 and REMIC I Regular Interest I-LT6, 98%, 1% and 1%, respectively,
until the Uncertificated Balance of REMIC I Regular Interest I-LT4 has been
reduced to zero; and fifth, to the Uncertificated Balances of REMIC I Regular
Interest I-LT1, REMIC I Regular Interest I-LT3 and REMIC I Regular Interest
I-LT6, 98%, 1% and 1%, respectively, until the Uncertificated Balance of REMIC I
Regular Interest I-LT3 has been reduced to zero.

              (d) All Realized Losses on the REMIC II Regular Interests shall be
allocated by the Trustee on each Distribution Date among the REMIC II Regular
Interests in the proportion that Realized Losses are allocated to the related
Uncertificated Corresponding Component.

              As used herein, an allocation of a Realized Loss on a "PRO RATA
basis" among the REMIC I Regular Interests (other than REMIC I Regular Interest
I-LTP) means an allocation on a PRO RATA basis among the REMIC I Regular
Interests (other than REMIC I Regular Interest I-LTP) on the basis of their then
outstanding Uncertificated Balances, in each case prior to giving effect to
distributions to be made on such Distribution Date.

              SECTION 4.05. Compliance with Withholding Requirements.

              Notwithstanding any other provision of this Agreement, the Trustee
shall comply with all federal withholding requirements respecting payments to
Certificateholders of interest or original issue discount that the Trustee
reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding. In the event the
Trustee does withhold any amount from interest or original issue discount
payments or advances thereof to any

<PAGE>

                                      -98-

Certificateholder pursuant to federal withholding requirements, the Trustee
shall indicate the amount withheld to such Certificateholders.

              SECTION 4.06. Commission Reporting.

              Within 15 days after each Distribution Date, the Trustee shall, in
accordance with industry standards, file with the Commission via the Electronic
Data Gathering and Retrieval System, a Form 8-K with a copy of the statement to
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30, 2001, the Trustee shall in accordance with industry standards file a
Form 15 Suspension Notification with respect to the Trust Fund, if applicable.
Prior to March 30, 2001, the Trustee shall file a Form 10-K, in substance
conforming to industry standards, with respect to the Trust Fund. The Depositor
hereby grants to the Trustee a limited power of attorney to execute and file
each such document on behalf of the Depositor. Such power of attorney shall
continue until the earlier of (i) receipt by the Trustee from the Depositor of
written termination of such power of attorney and (ii) the termination of the
Trust Fund. The Depositor agrees to promptly furnish to the 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
Trustee reasonably deems appropriate to prepare and file all necessary reports
with the Commission. The Trustee shall have no responsibility to file any items
other than those specified in this Section.

<PAGE>

                                      -99-

                                    ARTICLE V

                                THE CERTIFICATES

              SECTION 5.01. The Certificates.

              (a) The Certificates in the aggregate will represent the entire
beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I. At the Closing Date, the aggregate Certificate Principal
Balance of the Certificates will equal the aggregate Stated Principal Balance of
the Mortgage Loans.

              The Certificates will be substantially in the forms annexed hereto
as Exhibits A-1 through A-9. The Certificates of each Class will be issuable in
registered form only, in denominations of authorized Percentage Interests as
described in the definition thereof. Each Certificate will share ratably in all
rights of the related Class.

              Upon original issue, the Certificates shall be executed and
delivered by the Trustee, and the Trustee shall cause the Certificates to be
authenticated by the Certificate Registrar to or upon the order of the
Depositor. The Certificates shall be executed and attested by manual or
facsimile signature on behalf of the Trustee by an authorized signatory.
Certificates bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Trustee shall bind the Trustee,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Certificates or did not
hold such offices at the date of such Certificates. No Certificate shall be
entitled to any benefit under this Agreement or be valid for any purpose, unless
there appears on such Certificate a certificate of authentication substantially
in the form provided herein executed by the Certificate Registrar by manual
signature, and such certificate of authentication shall be conclusive evidence,
and the only evidence, that such Certificate has been duly authenticated and
delivered hereunder. All Certificates shall be dated the date of their
authentication.

              (b) The Class A Certificates and the Mezzanine Certificates shall
initially be issued as one or more Certificates held by the Book-Entry Custodian
or, if appointed to hold such Certificates as provided below, the Depository and
registered in the name of the Depository or its nominee and, except as provided
below, registration of such Certificates may not be transferred by the Trustee
except to another Depository that agrees to hold such Certificates for the
respective Certificate Owners with Ownership Interests therein. The Certificate
Owners shall hold their respective Ownership Interests in and to such
Certificates through the book-entry facilities of the Depository and, except as
provided below, shall not be entitled to definitive, fully registered
Certificates ("Definitive Certificates") in respect of such Ownership Interests.
All transfers by Certificate Owners of their respective Ownership Interests in
the Book-Entry Certificates shall be made in accordance with the procedures
established by the Depository Participant or brokerage firm representing such
Certificate Owner. Each Depository Participant shall only transfer the Ownership
Interests in the Book-Entry Certificates of Certificate Owners it represents or
of brokerage firms for which it acts as agent in accordance with the
Depository's normal procedures. The Trustee is hereby initially appointed as the
Book-Entry Custodian and hereby agrees to act as such in accordance

<PAGE>

                                      -100-

herewith and in accordance with the agreement that it has with the Depository
authorizing it to act as such. The Book-Entry Custodian may, and if it is no
longer qualified to act as such, the Book- Entry Custodian shall, appoint, by a
written instrument delivered to the Depositor, the Master Servicer, the Trustee
(if the Trustee is not the Book-Entry Custodian) and any other transfer agent
(including the Depository or any successor Depository) to act as Book-Entry
Custodian under such conditions as the predecessor Book-Entry Custodian and the
Depository or any successor Depository may prescribe, provided that the
predecessor Book-Entry Custodian shall not be relieved of any of its duties or
responsibilities by reason of any such appointment of other than the Depository.
If the Trustee resigns or is removed in accordance with the terms hereof, the
successor trustee or, if it so elects, the Depository shall immediately succeed
to its predecessor's duties as Book-Entry Custodian.
The Depositor shall have the right to inspect, and to obtain copies of, any
Certificates held as Book- Entry Certificates by the Book-Entry Custodian.

              The Trustee, the Master Servicer and the Depositor may for all
purposes (including the making of payments due on the Book-Entry Certificates)
deal with the Depository as the authorized representative of the Certificate
Owners with respect to the Book-Entry Certificates for the purposes of
exercising the rights of Certificateholders hereunder. The rights of Certificate
Owners with respect to the Book-Entry Certificates shall be limited to those
established by law and agreements between such Certificate Owners and the
Depository Participants and brokerage firms representing such Certificate
Owners. Multiple requests and directions from, and votes of, the Depository as
Holder of the Book-Entry Certificates with respect to any particular matter
shall not be deemed inconsistent if they are made with respect to different
Certificate Owners. The Trustee may establish a reasonable record date in
connection with solicitations of consents from or voting by Certificateholders
and shall give notice to the Depository of such record date.

              If (i)(A) the Depositor advises the Trustee in writing that the
Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (iii) after the occurrence of a Master Servicer Event of Default, Certificate
Owners representing in the aggregate not less than 51% of the Ownership
Interests of the Book-Entry Certificates advise the Trustee through the
Depository, in writing, that the continuation of a book-entry system through the
Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book- Entry Certificates by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions from the Depository for
registration of transfer, the Trustee shall issue the Definitive Certificates.
Such Definitive Certificates will be issued in minimum denominations of $10,000,
except that any beneficial ownership that was represented by a Book-Entry
Certificate in an amount less than $10,000 immediately prior to the issuance of
a Definitive Certificate shall be issued in a minimum denomination equal to the
amount represented by such Book-Entry Certificate. None of the Depositor, the
Master Servicer or the Trustee shall be liable for any delay in the delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates all
references herein to obligations imposed upon or to be performed by the
Depository shall be deemed to be imposed upon and

<PAGE>

                                      -101-

performed by the Trustee, to the extent applicable with respect to such
Definitive Certificates, and the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder.

              SECTION 5.02. Registration of Transfer and Exchange of
                            Certificates.

              (a) The Trustee shall cause to be kept at one of the offices or
agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.12 a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. The Trustee will initially serve as Certificate Registrar
for the purpose of registering Certificates and transfers and exchanges of
Certificates as herein provided. The Certificate Registrar may appoint, by a
written instrument delivered to the Master Servicer and the Depositor, any other
bank or trust company to act as Certificate Registrar under such conditions as
the predecessor Certificate Registrar may prescribe, provided that the
predecessor Certificate Registrar shall not be relieved of any of its duties or
responsibilities hereunder by reason of such appointment. If the Trustee shall
at any time not be the Certificate Registrar, the Trustee shall have and
maintain the right to inspect the Certificate Register or to obtain a copy
thereof at all reasonable times, and to rely conclusively upon a certificate of
the Certificate Registrar as to the information set forth in the Certificate
Register.

              (b) No transfer of any Class CE Certificate, Class P Certificate
or Residual Certificate shall be made unless that transfer is made pursuant to
an effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), and an effective registration or qualification under
applicable state securities laws, or is made in a transaction that does not
require such registration or qualification. In the event that such a transfer of
a Class CE Certificate, Class P Certificate or Residual Certificate is to be
made without registration or qualification (other than in connection with the
initial transfer of any such Certificate by the Depositor to an affiliate of the
Depositor), the Trustee and the Certificate Registrar shall each require receipt
of: (i) if such transfer is purportedly being made in reliance upon Rule 144A
under the 1933 Act, written certifications from the Certificateholder desiring
to effect the transfer and from such Certificateholder's prospective transferee,
substantially in the forms attached hereto as Exhibit F-1; and (ii) in all other
cases, an Opinion of Counsel satisfactory to it that such transfer may be made
without such registration or qualification (which Opinion of Counsel shall not
be an expense of the Depositor, the Trustee, the Master Servicer, in its
capacity as such, or the Trust Fund), together with copies of the written
certification(s) of the Certificateholder desiring to effect the transfer and/or
such Certificateholder's prospective transferee upon which such Opinion of
Counsel is based, if any. None of the Depositor, the Certificate Registrar or
the Trustee is obligated to register or qualify the Class CE Certificates, the
Class P Certificates or the Residual Certificates under the 1933 Act or any
other securities laws or to take any action not otherwise required under this
Agreement to permit the transfer of such Certificates without registration or
qualification. Any Certificateholder desiring to effect the transfer of a Class
CE Certificate, a Class P Certificate or a Residual Certificate shall, and does
hereby agree to, indemnify the Trustee, the Depositor, the Certificate Registrar
and the Master Servicer against any liability that may result if the transfer is
not so exempt or is not made in accordance with such federal and state laws.

<PAGE>

                                      -102-

              (c) No transfer of a Mezzanine Certificate, Class CE Certificate,
Class P Certificate or Residual Certificate or any interest therein shall be
made to any Plan subject to ERISA or Section 4975 of the Code, any Person
acting, directly or indirectly, on behalf of any such Plan or any Person
acquiring such Certificates with "Plan Assets" of a Plan within the meaning of
the Department of Labor regulation promulgated at 29 C.F.R. ss. 2510.3-101
("Plan Assets") unless the Depositor, the Trustee and the Master Servicer are
provided with an Opinion of Counsel which establishes to the satisfaction of the
Depositor, the Trustee and the Master Servicer that the purchase of such
Certificates is permissible under applicable law, will not constitute or result
in any prohibited transaction under ERISA or Section 4975 of the Code and will
not subject the Depositor, the Master Servicer, the Trustee or the Trust Fund to
any obligation or liability (including obligations or liabilities under ERISA or
Section 4975 of the Code) in addition to those undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Depositor, the Master
Servicer, the Trustee or the Trust Fund. In the case of the Mezzanine
Certificates, in lieu of such Opinion of Counsel, any prospective Transferee of
such Certificates may provide a certification (which in the case of the
Mezzanine Certificates sold in book-entry form, the Transferee will be deemed to
have represented such certification) in the form of Exhibit G to this Agreement
(or other form acceptable to the Depositor, the Trustee and the Master
Servicer), which the Trustee may rely upon without further inquiry or
investigation. Neither an Opinion of Counsel nor any certification will be
required in connection with the initial transfer of any such Certificate by the
Depositor to an affiliate of the Depositor (in which case, the Depositor or any
affiliate thereof shall have deemed to have represented that such affiliate is
not a Plan or a Person investing Plan Assets) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.

         If any Mezzanine Certificate, Class CE Certificate, Class P Certificate
or Residual Certificate or any interest therein is acquired or held in violation
of the provisions of the preceding paragraph, the next preceding permitted
beneficial owner will be treated as the beneficial owner of that Certificate
retroactive to the date of transfer to the purported beneficial owner. Any
purported beneficial owner whose acquisition or holding of any such Certificate
or interest therein was effected in violation of the provisions of the preceding
paragraph shall indemnify and hold harmless the Depositor, the Master Servicer,
the Trustee and the Trust Fund from and against any and all liabilities, claims,
costs or expenses incurred by those parties as a result of that acquisition or
holding.

              (d) (i) Each Person who has or who acquires any Ownership Interest
in a Residual Certificate shall be deemed by the acceptance or acquisition of
such Ownership Interest to have agreed to be bound by the following provisions
and to have irrevocably authorized the Trustee or its designee under clause
(iii)(A) below to deliver payments to a Person other than such Person and to
negotiate the terms of any mandatory sale under clause (iii)(B) below and to
execute all instruments of Transfer and to do all other things necessary in
connection with any such sale. The rights of each Person acquiring any Ownership
Interest in a Residual Certificate are expressly subject to the following
provisions:

<PAGE>

                                      -103-

                      (A) Each Person holding or acquiring any Ownership
                  Interest in a Residual Certificate shall be a Permitted
                  Transferee and shall promptly notify the Trustee of any change
                  or impending change in its status as a Permitted Transferee.

                      (B) In connection with any proposed Transfer of any
                  Ownership Interest in a Residual Certificate, the Trustee
                  shall require delivery to it and shall not register the
                  Transfer of any Residual Certificate until its receipt of an
                  affidavit and agreement (a "Transfer Affidavit and
                  Agreement"), in the form attached hereto as Exhibit F-2 from
                  the proposed Transferee, in form and substance satisfactory to
                  the Trustee, representing and warranting, among other things,
                  that such Transferee is a Permitted Transferee, that it is not
                  acquiring its Ownership Interest in the Residual Certificate
                  that is the subject of the proposed Transfer as a nominee,
                  trustee or agent for any Person that is not a Permitted
                  Transferee, that for so long as it retains its Ownership
                  Interest in a Residual Certificate, it will endeavor to remain
                  a Permitted Transferee, and that it has reviewed the
                  provisions of this Section 5.02(d) and agrees to be bound by
                  them.

                      (C) Notwithstanding the delivery of a Transfer Affidavit
                  and Agreement by a proposed Transferee under clause (B) above,
                  if a Responsible Officer of the Trustee who is assigned to
                  this transaction has actual knowledge that the proposed
                  Transferee is not a Permitted Transferee, no Transfer of an
                  Ownership Interest in a Residual Certificate to such proposed
                  Transferee shall be effected.

                      (D) Each Person holding or acquiring any Ownership
                  Interest in a Residual Certificate shall agree (x) to require
                  a Transfer Affidavit and Agreement in the form attached hereto
                  as Exhibit F-2 ) from any other Person to whom such Person
                  attempts to transfer its Ownership Interest in a Residual
                  Certificate and (y) not to transfer its Ownership Interest
                  unless it provides a Transferor Affidavit (in the form
                  attached hereto as Exhibit F-2), to the Trustee stating that,
                  among other things, it has no actual knowledge that such other
                  Person is not a Permitted Transferee.

                      (E) Each Person holding or acquiring an Ownership Interest
                  in a Residual Certificate, by purchasing an Ownership Interest
                  in such Certificate, agrees to give the Trustee written notice
                  that it is a "pass-through interest holder" within the meaning
                  of temporary Treasury regulation Section 1.67-3T(a)(2)(i)(A)
                  immediately upon acquiring an Ownership Interest in a Residual
                  Certificate, if it is, or is holding an Ownership Interest in
                  a Residual Certificate on behalf of, a "pass-through interest
                  holder."

                (ii) The Trustee will register the Transfer of any Residual
              Certificate only if it shall have received the Transfer Affidavit
              and Agreement and all of such other documents as shall have been
              reasonably required by the Trustee as a condition to such
              registration. In addition, no Transfer of a Residual Certificate
              shall be made unless the Trustee shall have received a
              representation letter from the Transferee of such Certificate to
              the effect that such Transferee is a Permitted Transferee.

<PAGE>

                                      -104-

              (iii) (A) If any purported Transferee shall become a Holder of a
              Residual Certificate in violation of the provisions of this
              Section 5.02(d), then the last preceding Permitted Transferee
              shall be restored, to the extent permitted by law, to all rights
              as holder thereof retroactive to the date of registration of such
              Transfer of such Residual Certificate. The Trustee shall be under
              no liability to any Person for any registration of Transfer of a
              Residual Certificate that is in fact not permitted by this Section
              5.02(d) or for making any payments due on such Certificate to the
              holder thereof or for taking any other action with respect to such
              holder under the provisions of this Agreement.

                      (B) If any purported Transferee shall become a holder of a
              Residual Certificate in violation of the restrictions in this
              Section 5.02(d) and to the extent that the retroactive restoration
              of the rights of the holder of such Residual Certificate as
              described in clause (iii)(A) above shall be invalid, illegal or
              unenforceable, then the Trustee shall have the right, without
              notice to the holder or any prior holder of such Residual
              Certificate, to sell such Residual Certificate to a purchaser
              selected by the Trustee on such terms as the Trustee may choose.
              Such purported Transferee shall promptly endorse and deliver each
              Residual Certificate in accordance with the instructions of the
              Trustee. Such purchaser may be the Trustee itself or any Affiliate
              of the Trustee. The proceeds of such sale, net of the commissions
              (which may include commissions payable to the Trustee or its
              Affiliates), expenses and taxes due, if any, will be remitted by
              the Trustee to such purported Transferee. The terms and conditions
              of any sale under this clause (iii)(B) shall be determined in the
              sole discretion of the Trustee, and the Trustee shall not be
              liable to any Person having an Ownership Interest in a Residual
              Certificate as a result of its exercise of such discretion.

               (iv) The Trustee shall make available to the Internal Revenue
              Service and those Persons specified by the REMIC Provisions all
              information necessary to compute any tax imposed (A) as a result
              of the Transfer of an Ownership Interest in a Residual Certificate
              to any Person who is a Disqualified Organization, including the
              information described in Treasury regulations sections
              1.860D-1(b)(5) and 1.860E-2(a)(5) with respect to the "excess
              inclusions" of such Residual Certificate and (B) as a result of
              any regulated investment company, real estate investment trust,
              common trust fund, partnership, trust, estate or organization
              described in Section 1381 of the Code that holds an Ownership
              Interest in a Residual Certificate having as among its record
              holders at any time any Person which is a Disqualified
              Organization. Reasonable compensation for providing such
              information may be accepted by the Trustee.

                (v) The provisions of this Section 5.02(d) set forth prior to
              this subsection (v) may be modified, added to or eliminated,
              provided that there shall have been delivered to the Trustee at
              the expense of the party seeking to modify, add to or eliminate
              any such provision the following:

                      (A) written notification from each Rating Agency to the
                  effect that the modification, addition to or elimination of
                  such provisions will not cause such Rating Agency to downgrade
                  its then-current ratings of any Class of Certificates; and

<PAGE>

                                      -105-

                      (B) an Opinion of Counsel, in form and substance
                  satisfactory to the Trustee, to the effect that such
                  modification of, addition to or elimination of such provisions
                  will not cause any of REMIC I, REMIC II or REMIC III to cease
                  to qualify as a REMIC and will not cause any of REMIC I, REMIC
                  II or REMIC III, as the case may be, to be subject to an
                  entity-level tax caused by the Transfer of any Residual
                  Certificate to a Person that is not a Permitted Transferee or
                  (y) a Person other than the prospective transferee to be
                  subject to a REMIC-tax caused by the Transfer of a Residual
                  Certificate to a Person that is not a Permitted Transferee.

              (e) Subject to the preceding subsections, upon surrender for
registration of transfer of any Certificate at any office or agency of the
Trustee maintained for such purpose pursuant to Section 8.12, the Trustee shall
execute and the Certificate Registrar shall authenticate and deliver, in the
name of the designated Transferee or Transferees, one or more new Certificates
of the same Class of a like aggregate Percentage Interest.

              (f) At the option of the Holder thereof, any Certificate may be
exchanged for other Certificates of the same Class with authorized denominations
and a like aggregate Percentage Interest, upon surrender of such Certificate to
be exchanged at any office or agency of the Trustee maintained for such purpose
pursuant to Section 8.12. Whenever any Certificates are so surrendered for
exchange the Trustee shall execute and cause the Certificate Registrar to
authenticate and deliver the Certificates which the Certificateholder making the
exchange is entitled to receive. Every Certificate presented or surrendered for
transfer or exchange shall (if so required by the Trustee) be duly endorsed by,
or be accompanied by a written instrument of transfer in the form satisfactory
to the Trustee and the Certificate Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing.

              (g) No service charge to the Certificateholders shall be made for
any transfer or exchange of Certificates, but the Trustee 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.

              (h) All Certificates surrendered for transfer and exchange shall
be canceled and destroyed by the Certificate Registrar in accordance with its
customary procedures.

              (i) The Trustee will cause the Certificate Registrar (unless the
Trustee is acting as Certificate Registrar) to provide notice to the Trustee of
each transfer of a Certificate and to provide the Trustee with an updated copy
of the Certificate Register on the first Business Day in January and June of
each year, commencing in January 2001.

              SECTION 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.

              If (i) any mutilated Certificate is surrendered to the Trustee or
the Certificate Registrar, or the Trustee and the Certificate Registrar receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate, and (ii) there is delivered to the Trustee and the Certificate
Registrar such security or indemnity as may be required by them to save each of
them harmless, then, in the

<PAGE>

                                      -106-

absence of actual knowledge by the Trustee or the Certificate Registrar that
such Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of the same Class and
of like denomination and Percentage Interest. Upon the issuance of any new
Certificate under this Section, the Trustee may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the fees and expenses of the
Certificate Registrar) connected therewith. Any replacement Certificate issued
pursuant to this Section shall constitute complete and indefeasible evidence of
ownership in the applicable REMIC created hereunder, as if originally issued,
whether or not the lost, stolen or destroyed Certificate shall be found at any
time.

              SECTION 5.04. Persons Deemed Owners.

              The Depositor, the Master Servicer, the Trustee, the Certificate
Registrar and any agent of any of them may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 4.01 and for all other purposes
whatsoever, and none of the Depositor, the Master Servicer, the Trustee, the
Certificate Registrar or any agent of any of them shall be affected by notice to
the contrary.

              SECTION 5.05. Certain Available Information.

              On or prior to the date of the first sale of any Class CE
Certificate, Class P Certificate or Residual Certificate to an Independent third
party, the Depositor shall provide to the Trustee ten copies of any private
placement memorandum or other disclosure document used by the Depositor in
connection with the offer and sale of such Certificates. In addition, if any
such private placement memorandum or disclosure document is revised, amended or
supplemented at any time following the delivery thereof to the Trustee, the
Depositor promptly shall inform the Trustee of such event and shall deliver to
the Trustee ten copies of the private placement memorandum or disclosure
document, as revised, amended or supplemented. The Trustee shall maintain at its
Corporate Trust Office and shall make available free of charge during normal
business hours for review by any Holder of a Certificate or any Person
identified to the Trustee as a prospective transferee of a Certificate,
originals or copies of the following items: (i) in the case of a Holder or
prospective transferee of a Class CE Certificate, a Class P Certificate or a
Residual Certificate, the related private placement memorandum or other
disclosure document relating to such Certificates, if any, in the form most
recently provided to the Trustee; and (ii) in all cases, (A) this Agreement and
any amendments hereof entered into pursuant to Section 11.01, (B) all monthly
statements required to be delivered to Certificateholders of the relevant Class
pursuant to Section 4.02 since the Closing Date, and all other notices, reports,
statements and written communications delivered to the Certificateholders of the
relevant Class pursuant to this Agreement since the Closing Date, (C) all
certifications delivered by a Responsible Officer of the Trustee since the
Closing Date pursuant to Section 10.01(h), (D) any and all Officers'
Certificates delivered to the Trustee by the Master Servicer since the Closing
Date to evidence the Master Servicer's determination that any P&I Advance was,
or if made, would be a Nonrecoverable P&I Advance or Nonrecoverable Servicing
Advance, respectively, and (E) any and all Officers' Certificates delivered to
the Trustee by the Master Servicer since the Closing Date

<PAGE>

                                      -107-

pursuant to Section 4.04(a). Copies and mailing of any and all of the foregoing
items will be available from the Trustee upon request at the expense of the
person requesting the same.

<PAGE>

                                      -108-

                                   ARTICLE VI

                      THE DEPOSITOR AND THE MASTER SERVICER

              SECTION 6.01. Liability of the Depositor and the Master Servicer.

              The Depositor and the Master Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement and undertaken hereunder by the Depositor and the Master
Servicer herein.

              SECTION 6.02. Merger or Consolidation of the Depositor or the
                            Master Servicer.

              Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Master Servicer will keep in full effect its existence, rights and
franchises as a corporation under the laws of the jurisdiction of its
incorporation and its qualification as an approved conventional seller/servicer
for Fannie Mae or Freddie Mac in good standing. The Depositor and the Master
Servicer each will obtain and preserve its qualification to do business as a
foreign corporation in each jurisdiction in which such qualification is or shall
be necessary to protect the validity and enforceability of this Agreement, the
Certificates or any of the Mortgage Loans and to perform its respective duties
under this Agreement.

              The Depositor or the Master Servicer may be merged or consolidated
with or into any Person, or transfer all or substantially all of its assets to
any Person, in which case any Person resulting from any merger or consolidation
to which the Depositor or the Master Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified to service mortgage loans on behalf of
Fannie Mae or Freddie Mac; and provided further that the Rating Agencies'
ratings of the Class A Certificates and the Mezzanine Certificates in effect
immediately prior to such merger or consolidation will not be qualified, reduced
or withdrawn as a result thereof (as evidenced by a letter to such effect from
the Rating Agencies).

              SECTION 6.03. Limitation on Liability of the Depositor, the Master
                            Servicer and Others.

              None of the Depositor, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor or the Master Servicer
shall be under any liability to the Trust Fund or the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Master Servicer or any such
person against any breach of warranties, representations or covenants made
herein, or against any specific liability imposed on the Master Servicer
pursuant hereto, or against any liability which would otherwise be imposed by
reason of

<PAGE>

                                      -109-

willful misfeasance, bad faith or negligence in the performance of duties or by
reason of reckless disregard of obligations and duties hereunder. The Depositor,
the Master Servicer and any director, officer, employee or agent of the
Depositor or the Master Servicer may rely in good faith on any document of any
kind which, PRIMA FACIE, is properly executed and submitted by any Person
respecting any matters arising hereunder. The Depositor, the Master Servicer and
any director, officer, employee or agent of the Depositor or the Master Servicer
shall be indemnified and held harmless by the Trust Fund against any loss,
liability or expense incurred in connection with any legal action relating to
this Agreement or the Certificates, other than any loss, liability or expense
relating to any specific Mortgage Loan or Mortgage Loans (except as any such
loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence in the performance of duties hereunder or
by reason of reckless disregard of obligations and duties hereunder. Neither the
Depositor nor the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action unless such action is related to its
respective duties under this Agreement and, in its opinion, does not involve it
in any expense or liability; provided, however, that each of the Depositor and
the Master Servicer may in its discretion undertake any such action which it may
deem necessary or desirable with respect to this Agreement and the rights and
duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, unless the Depositor or the Master Servicer acts
without the consent of Holders of Certificates entitled to at least 51% of the
Voting Rights (which consent shall not be necessary in the case of litigation or
other legal action by either to enforce their respective rights or defend
themselves hereunder), the legal expenses and costs of such action and any
liability resulting therefrom (except any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
duties hereunder or by reason of reckless disregard of obligations and duties
hereunder) shall be expenses, costs and liabilities of the Trust Fund, and the
Depositor and the Master Servicer shall be entitled to be reimbursed therefor
from the Collection Account as and to the extent provided in Section 3.11, any
such right of reimbursement being prior to the rights of the Certificateholders
to receive any amount in the Collection Account.

              SECTION 6.04. Limitation on Resignation of the Master Servicer.

              The Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) upon determination that its duties
hereunder are no longer permissible under applicable law or (ii) with the
written consent of the Trustee and written confirmation from each Rating Agency
(which confirmation shall be furnished to the Depositor and the Trustee) that
such resignation will not cause such Rating Agency to reduce the then current
rating of the Class A Certificates or the Mezzanine Certificates. Any such
determination pursuant to clause (i) of the preceding sentence permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect obtained at the expense of the Master Servicer and delivered to
the Trustee. No resignation of the Master Servicer shall become effective until
the Trustee or a successor servicer shall have assumed the Master Servicer's
responsibilities, duties, liabilities (other than those liabilities arising
prior to the appointment of such successor) and obligations under this
Agreement.

              Except as expressly provided herein, the Master Servicer shall not
assign or transfer any of its rights, benefits or privileges hereunder to any
other Person, nor delegate to or subcontract with,

<PAGE>

                                      -110-

nor authorize or appoint any other Person to perform any of the duties,
covenants or obligations to be performed by the Master Servicer hereunder. The
foregoing prohibition on assignment shall not prohibit the Master Servicer from
designating a Sub-servicer as payee of any indemnification amount payable to the
Master Servicer hereunder; provided, however, that as provided in Section 3.06
hereof, no Subservicer shall be a third-party beneficiary hereunder and the
parties hereto shall not be required to recognize any Subservicer as an
indemnitee under this Agreement. If, pursuant to any provision hereof, the
duties of the Master Servicer are transferred to a successor master servicer,
the entire amount of the Servicing Fee and other compensation payable to the
Master Servicer pursuant hereto shall thereafter be payable to such successor
master servicer.

              SECTION 6.05. Rights of the Depositor in Respect of the Master
                            Servicer.

              The Master Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Depositor and the
Trustee, upon reasonable notice, during normal business hours, access to all
records maintained by the Master Servicer (and any such Sub-Servicer) in respect
of the Master Servicer's rights and obligations hereunder and access to officers
of the Master Servicer (and those of any such Sub-Servicer) responsible for such
obligations. Upon request, the Master Servicer shall furnish to the Depositor
and the Trustee its (and any such Sub- Servicer's) most recent financial
statements and such other information relating to the Master Servicer's capacity
to perform its obligations under this Agreement that it possesses. To the extent
such information is not otherwise available to the public, the Depositor and the
Trustee shall not disseminate any information obtained pursuant to the preceding
two sentences without the Master Servicer's (or any such Sub-Servicer's) written
consent, except as required pursuant to this Agreement or to the extent that it
is necessary to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies, rating agencies or reinsurers or
(ii) pursuant to any law, rule, regulation, order, judgment, writ, injunction or
decree of any court or governmental authority having jurisdiction over the
Depositor, the Trustee or the Trust Fund, and in either case, the Depositor or
the Trustee, as the case may be, shall use its best efforts to assure the
confidentiality of any such disseminated non-public information. The Depositor
may, but is not obligated to, enforce the obligations of the Master Servicer
under this Agreement and may, but is not obligated to, perform, or cause a
designee to perform, any defaulted obligation of the Master Servicer under this
Agreement or exercise the rights of the Master Servicer under this Agreement;
provided that the Master Servicer shall not be relieved of any of its
obligations under this Agreement by virtue of such performance by the Depositor
or its designee. The Depositor shall not have any responsibility or liability
for any action or failure to act by the Master Servicer and is not obligated to
supervise the performance of the Master Servicer under this Agreement or
otherwise.

<PAGE>

                                      -111-

                                   ARTICLE VII

                                     DEFAULT

              SECTION 7.01. Master Servicer Events of Default.

              "Master Servicer Event of Default," wherever used herein, means
any one of the following events:

                (i) any failure by the Master Servicer to remit to the Trustee
              for distribution to the Certificateholders any payment (other than
              a P&I Advance required to be made from its own funds on any Master
              Servicer Remittance Date pursuant to Section 4.03) required to be
              made under the terms of the Certificates and this Agreement which
              continues unremedied for a period of one Business Day after the
              date upon which written notice of such failure, requiring the same
              to be remedied, shall have been given to the Master Servicer by
              the Depositor or the Trustee (in which case notice shall be
              provided by telecopy), or to the Master Servicer, the Depositor
              and the Trustee by the Holders of Certificates entitled to at
              least 25% of the Voting Rights; or

               (ii) any failure on the part of the Master Servicer duly to
              observe or perform in any material respect any of the covenants or
              agreements on the part of the Master Servicer contained in this
              Agreement (or, if the Master Servicer is the Seller, the failure
              of the Seller to repurchase a Mortgage Loan as to which a breach
              has been established that requires a repurchase pursuant to the
              terms of Section 7 of the Mortgage Loan Purchase Agreement) which
              continues unremedied for a period of 45 days after the earlier of
              (i) the date on which written notice of such failure, requiring
              the same to be remedied, shall have been given to the Master
              Servicer by the Depositor or the Trustee, or to the Master
              Servicer, the Depositor and the Trustee by the Holders of
              Certificates entitled to at least 25% of the Voting Rights and
              (ii) actual knowledge of such failure by a Servicing Officer of
              the Master Servicer; or

              (iii) a decree or order of a court or agency or supervisory
              authority having jurisdiction in the premises in an involuntary
              case under any present or future federal or state bankruptcy,
              insolvency or similar law or the appointment of a conservator or
              receiver or liquidator in any insolvency, readjustment of debt,
              marshalling of assets and liabilities or similar proceeding, or
              for the winding-up or liquidation of its affairs, shall have been
              entered against the Master Servicer and if such proceeding is
              being contested by the Master Servicer in good faith, such decree
              or order shall have remained in force undischarged or unstayed for
              a period of 60 days or results in the entry of an order for relief
              or any such adjudication or appointment; or

               (iv) 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 it or of or relating to all
              or substantially all of its property; or

<PAGE>

                                      -112-

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

                (vi) any failure by the Master Servicer of the Master Servicer
              Termination Test; or

                (vii) any failure of the Master Servicer to make any P&I Advance
              on any Master Servicer Remittance Date required to be made from
              its own funds pursuant to Section 4.03 which continues unremedied
              until 3:00 p.m. New York time on the Business Day immediately
              following the Master Servicer Remittance Date.

If a Master Servicer Event of Default described in clauses (i) through (vi) of
this Section shall occur, then, and in each and every such case, so long as such
Master Servicer Event of Default shall not have been remedied, the Depositor or
the Trustee may, and at the written direction of the Holders of Certificates
entitled to at least 51% of Voting Rights, the Trustee shall, by notice in
writing to the Master Servicer (and to the Depositor if given by the Trustee or
to the Trustee if given by the Depositor), terminate all of the rights and
obligations of the Master Servicer in its capacity as Master Servicer under this
Agreement, to the extent permitted by law, and in and to the Mortgage Loans and
the proceeds thereof. If a Master Servicer Event of Default described in clause
(vii) hereof shall occur, the Trustee shall, by notice in writing to the Master
Servicer and the Depositor, terminate all of the rights and obligations of the
Master Servicer in its capacity as Master Servicer under this Agreement and in
and to the Mortgage Loans and the proceeds thereof. On or after the receipt by
the Master Servicer of such written notice, all authority and power of the
Master Servicer under this Agreement, whether with respect to the Certificates
(other than as a Holder of any Certificate) or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section
and, without limitation, the Trustee is hereby authorized and empowered, as
attorney-in-fact or otherwise, to execute and deliver on behalf of and at the
expense of the Master Servicer, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of the Mortgage Loans and related documents, or
otherwise. The Master Servicer agrees, at its sole cost and expense, promptly
(and in any event no later than ten Business Days subsequent to such notice) to
provide the Trustee with all documents and records requested by it to enable it
to assume the Master Servicer's functions under this Agreement, and to cooperate
with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights under this Agreement, including, without limitation,
the transfer within one Business Day to the Trustee for administration by it of
all cash amounts which at the time shall be or should have been credited by the
Master Servicer to the Collection Account held by or on behalf of the Master
Servicer, the Distribution Account or any REO Account or Servicing Account held
by or on behalf of the Master Servicer or thereafter be received with respect to
the Mortgage Loans or any REO Property (provided, however, that the Master
Servicer shall continue to be entitled to receive all amounts accrued or owing
to it under this Agreement on or prior to the date of such termination, whether
in respect of P&I Advances or otherwise, and shall continue to be entitled to
the benefits of Section 6.03, notwithstanding any such termination, with respect
to events occurring prior to such termination). For purposes of this Section
7.01, the Trustee shall not be deemed to have knowledge

<PAGE>

                                      -113-

of a Master Servicer Event of Default unless a Responsible Officer of the
Trustee assigned to and working in the Trustee's Corporate Trust Office has
actual knowledge thereof or unless written notice of any event which is in fact
such a Master Servicer Event of Default is received by the Trustee and such
notice references the Certificates, REMIC I or this Agreement.

         The Trustee shall be entitled to be reimbursed by the Master Servicer
(or by the Trust Fund if the Master Servicer is unable to fulfill its
obligations hereunder) for all costs associated with the transfer of servicing
from the predecessor master servicer, including without limitation, any costs or
expenses associated with the complete transfer of all servicing data and the
completion, correction or manipulation of such servicing data as may be required
by the Trustee to correct any errors or insufficiencies in the servicing data or
otherwise to enable the Trustee to service the Mortgage Loans properly and
effectively.

              SECTION 7.02. Trustee to Act; Appointment of Successor.

              (a) On and after the time the Master Servicer receives a notice of
termination, the Trustee 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 herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto and arising thereafter
placed on the Master Servicer (except for any representations or warranties of
the Master Servicer under this Agreement, the responsibilities, duties and
liabilities contained in Section 2.03(c) and its obligation to deposit amounts
in respect of losses pursuant to Section 3.12) by the terms and provisions
hereof including, without limitation, the Master Servicer's obligations to make
P&I Advances pursuant to Section 4.03; provided, however, that if the Trustee is
prohibited by law or regulation from obligating itself to make advances
regarding delinquent mortgage loans, then the Trustee shall not be obligated to
make P&I Advances pursuant to Section 4.03; and provided further, that any
failure to perform such duties or responsibilities caused by the Master
Servicer's failure to provide information required by Section 7.01 shall not be
considered a default by the Trustee as successor to the Master Servicer
hereunder; provided, however, it is understood and acknowledged by the parties
that there will be a period of transition (not to exceed 90 days) before the
servicing transfer is fully effected. As compensation therefor, the Trustee
shall be entitled to the Servicing Fee and all funds relating to the Mortgage
Loans to which the Master Servicer would have been entitled if it had continued
to act hereunder (other than amounts which were due or would become due to the
Master Servicer prior to its termination or resignation). Notwithstanding the
above and subject to the next paragraph, the Trustee may, if it shall be
unwilling to so act, or shall, if it is unable to so act or if it is prohibited
by law from making advances regarding delinquent mortgage loans, or if the
Holders of Certificates entitled to at least 51% of the Voting Rights so request
in writing to the Trustee, promptly appoint or petition a court of competent
jurisdiction to appoint, an established mortgage loan servicing institution
acceptable to each Rating Agency and having a net worth of not less than
$15,000,000 as the successor to the Master Servicer under this Agreement in the
assumption of all or any part of the responsibilities, duties or liabilities of
the Master Servicer under this Agreement. No appointment of a successor to the
Master Servicer under this Agreement shall be effective until the assumption by
the successor of all of the Master Servicer's responsibilities, duties and
liabilities hereunder. In connection with such appointment and assumption
described herein, the Trustee may make such arrangements for the compensation of
such successor out of payments on Mortgage Loans

<PAGE>

                                      -114-

as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Master Servicer as such
hereunder. The Depositor, the Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Pending appointment of a successor to the Master Servicer under this
Agreement, the Trustee shall act in such capacity as hereinabove provided.

              Upon removal or resignation of the Master Servicer, the Trustee,
with the cooperation of the Depositor, (x) shall solicit bids for a successor
Master Servicer as described below and (y) pending the appointment of a
successor Master Servicer as a result of soliciting such bids, shall serve as
Master Servicer of the Mortgage Loans serviced by such predecessor Master
Servicer. The Trustee shall solicit, by public announcement, bids from housing
and home finance institutions, banks and mortgage servicing institutions meeting
the qualifications set forth above (including the Trustee or any affiliate
thereof). Such public announcement shall specify that the successor Master
Servicer shall be entitled to the servicing compensation agreed upon between the
Trustee, the successor Master Servicer and the Depositor; provided, however,
that no such fee shall exceed the Servicing Fee. Within thirty days after any
such public announcement, the Trustee, with the cooperation of the Depositor,
shall negotiate in good faith and effect the sale, transfer and assignment of
the servicing rights and responsibilities hereunder to the qualified party
submitting the highest satisfactory bid as to the price they will pay to obtain
such servicing. The Trustee upon receipt of the purchase price shall pay such
purchase price to the Master Servicer being so removed, after deducting from any
sum received by the Trustee from the successor to the Master Servicer in respect
of such sale, transfer and assignment all costs and expenses of any public
announcement and of any sale, transfer and assignment of the servicing rights
and responsibilities reasonably incurred hereunder. After such deductions, the
remainder of such sum shall be paid by the Trustee to the Master Servicer at the
time of such sale.

              (b) If the Master Servicer fails to remit to the Trustee for
distribution to the Certificateholders any payment required to be made under the
terms of this Agreement (for purposes of this Section 7.02(b), a "Remittance")
because the Master Servicer is the subject of a proceeding under the federal
Bankruptcy Code and the making of such Remittance is prohibited by Section 362
of the federal Bankruptcy Code, the Trustee shall upon notice of such
prohibition, regardless of whether it has received a notice of termination under
Section 7.01, advance the amount of such Remittance by depositing such amount in
the Distribution Account on the related Distribution Date. The Trustee shall be
obligated to make such advance only if (i) such advance, in the good faith
judgment of the Trustee, can reasonably be expected to be ultimately recoverable
from Stayed Funds and (ii) the Trustee is not prohibited by law from making such
advance or obligating itself to do so. Upon remittance of the Stayed Funds to
the Trustee or the deposit thereof in the Distribution Account by the Master
Servicer, a trustee in bankruptcy or a federal bankruptcy court, the Trustee may
recover the amount so advanced, without interest, by withdrawing such amount
from the Distribution Account; however, nothing in this Agreement shall be
deemed to affect the Trustee's rights to recover from the Master Servicer's own
funds interest on the amount of any such advance. If the Trustee at any time
makes an advance under this Subsection which it later determines in its good
faith judgment will not be ultimately recoverable from the Stayed Funds with
respect to which such advance was made, the Trustee shall be entitled to
reimburse itself for such advance, without

<PAGE>

                                      -115-

interest, by withdrawing from the Distribution Account, out of amounts on
deposit therein, an amount equal to the portion of such advance attributable to
the Stayed Funds.

              SECTION 7.03. Notification to Certificateholders.

              (a) Upon any termination of the Master Servicer pursuant to
Section 7.01 above or any appointment of a successor to the Master Servicer
pursuant to Section 7.02 above, the Trustee shall give prompt written notice
thereof to Certificateholders at their respective addresses appearing in the
Certificate Register.

              (b) Not later than the later of 60 days after the occurrence of
any event, which constitutes or which, with notice or lapse of time or both,
would constitute a Master Servicer Event of Default or five days after a
Responsible Officer of the Trustee becomes aware of the occurrence of such an
event, the Trustee shall transmit by mail to all Holders of Certificates notice
of each such occurrence, unless such default or Master Servicer Event of Default
shall have been cured or waived.

              SECTION 7.04. Waiver of Master Servicer Events of Default.

              The Holders representing at least 66% of the Voting Rights
evidenced by all Classes of Certificates affected by any default or Master
Servicer Event of Default hereunder may waive such default or Master Servicer
Event of Default; provided, however, that a default or Master Servicer Event of
Default under clause (i) or (vii) of Section 7.01 may be waived only by all of
the Holders of the Regular Certificates. Upon any such waiver of a default or
Master Servicer Event of Default, such default or Master Servicer Event of
Default shall cease to exist and shall be deemed to have been remedied for every
purpose hereunder. No such waiver shall extend to any subsequent or other
default or Master Servicer Event of Default or impair any right consequent
thereon except to the extent expressly so waived.

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                                      -116-

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

              SECTION 8.01. Duties of Trustee.

              The Trustee, prior to the occurrence of a Master Servicer Event of
Default and after the curing of all Master Servicer Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement. During a Master Servicer Event of
Default, the Trustee shall exercise such of the rights and powers vested in it
by this Agreement, and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs. Any permissive right of the Trustee enumerated in
this Agreement shall not be construed as a duty.

              The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee which are specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement. If any such instrument is found
not to conform to the requirements of this Agreement in a material manner, the
Trustee shall take such action as it deems appropriate to have the instrument
corrected, and if the instrument is not corrected to the Trustee's satisfaction,
the Trustee will provide notice thereof to the Certificateholders.

              No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own misconduct; provided, however, that:

                (i) Prior to the occurrence of a Master Servicer Event of
              Default, and after the curing of all such Master Servicer Events
              of Default which may have occurred, the duties and obligations of
              the Trustee shall be determined solely by the express provisions
              of this Agreement, the Trustee shall not be liable except for the
              performance of such duties and obligations as are specifically set
              forth in this Agreement, no implied covenants or obligations shall
              be read into this Agreement against the Trustee and, in the
              absence of bad faith on the part of the Trustee, the Trustee may
              conclusively rely, as to the truth of the statements and the
              correctness of the opinions expressed therein, upon any
              certificates or opinions furnished to the Trustee that conform to
              the requirements of this Agreement;

               (ii) The Trustee shall not be personally liable for an error of
              judgment made in good faith by a Responsible Officer or
              Responsible Officers of the Trustee, unless it shall be proved
              that the Trustee was negligent in ascertaining the pertinent
              facts; and

                (iii) The Trustee shall not be personally liable with respect to
              any action taken, suffered or omitted to be taken by it in good
              faith in accordance with the direction of the Holders of
              Certificates entitled to at least 25% of the Voting Rights
              relating to the time,

<PAGE>

                                      -117-

              method and place of conducting any proceeding for any remedy
              available to the Trustee, or exercising any trust or power
              conferred upon the Trustee, under this Agreement.

              SECTION 8.02. Certain Matters Affecting the Trustee.

              (a) Except as otherwise provided in Section 8.01:

                (i) The Trustee may request and rely upon and shall be protected
              in acting or refraining from acting upon any resolution, Officers'
              Certificate, certificate of auditors or any other certificate,
              statement, instrument, opinion, report, notice, request, consent,
              order, appraisal, bond or other paper or document reasonably
              believed by it to be genuine and to have been signed or presented
              by the proper party or parties;

               (ii) The Trustee may consult with counsel and any Opinion of
              Counsel shall be full and complete authorization and protection in
              respect of any action taken or suffered or omitted by it hereunder
              in good faith and in accordance with such Opinion of Counsel;

              (iii) The Trustee shall be under no obligation to exercise any of
              the trusts or powers vested in it by this Agreement or to
              institute, conduct or defend any litigation hereunder or in
              relation hereto at the request, order or direction of any of the
              Certificateholders, pursuant to the provisions of this Agreement,
              unless such Certificateholders shall have offered to the Trustee
              reasonable security or indemnity against the costs, expenses and
              liabilities which may be incurred therein or thereby; nothing
              contained herein shall, however, relieve the Trustee of the
              obligation, upon the occurrence of a Master Servicer Event of
              Default (which has not been cured or waived), to exercise such of
              the rights and powers vested in it by this Agreement, and to use
              the same degree of care and skill in their exercise as a prudent
              person would exercise or use under the circumstances in the
              conduct of such person's own affairs;

               (iv) The Trustee shall not be personally liable for any action
              taken, suffered or omitted by it in good faith and believed by it
              to be authorized or within the discretion or rights or powers
              conferred upon it by this Agreement;

                (v) Prior to the occurrence of a Master Servicer Event of
              Default hereunder and after the curing of all Master Servicer
              Events of Default which may have occurred, the Trustee shall not
              be bound to make any investigation into the facts or matters
              stated in any resolution, certificate, statement, instrument,
              opinion, report, notice, request, consent, order, approval, bond
              or other paper or document, unless requested in writing to do so
              by the Holders of Certificates entitled to at least 25% of the
              Voting Rights; provided, however, that if the payment within a
              reasonable time to the Trustee of the costs, expenses or
              liabilities likely to be incurred by it in the making of such
              investigation is, in the opinion of the Trustee, not reasonably
              assured to the Trustee by such Certificateholders, the Trustee may
              require reasonable indemnity against such expense, or liability
              from such Certificateholders as a condition to taking any such
              action;

<PAGE>

                                      -118-

               (vi) The Trustee may execute any of the trusts or powers
              hereunder or perform any duties hereunder either directly or by or
              through agents or attorneys; and

              (vii) The Trustee shall not be personally liable for any loss
              resulting from the investment of funds held in the Collection
              Account at the direction of the Master Servicer pursuant to
              Section 3.12.

              (b) All rights of action under this Agreement or under any of the
Certificates, enforceable by the Trustee, may be enforced by it without the
possession of any of the Certificates, or the production thereof at the trial or
other proceeding relating thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the benefit of all
the Holders of such Certificates, subject to the provisions of this Agreement.

              SECTION 8.03. Trustee Not Liable for Certificates or Mortgage
                            Loans.

              The recitals contained herein and in the Certificates (other than
the signature of the Trustee, the authentication of the Certificate Registrar on
the Certificates, the acknowledgments of the Trustee contained in Article II and
the representations and warranties of the Trustee in Section 8.12) shall be
taken as the statements of the Depositor and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth in Section 8.12) or of the Certificates (other than the
signature of the Trustee and authentication of the Certificate Registrar on the
Certificates) or of any Mortgage Loan or related document. The Trustee shall not
be accountable for the use or application by the Depositor of any of the
Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Depositor or the Master Servicer in respect
of the Mortgage Loans or deposited in or withdrawn from the Collection Account
by the Master Servicer, other than any funds held by or on behalf of the Trustee
in accordance with Section 3.10.

              SECTION 8.04. Trustee May Own Certificates.

              The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Certificates with the same rights it would have
if it were not Trustee.

              SECTION 8.05. Trustee's Fees and Expenses.

              (a) The Trustee shall withdraw from the Distribution Account on
each Distribution Date and pay to itself the Trustee Fee and, to the extent that
the funds therein are at anytime insufficient for such purpose, the Depositor
shall pay such fees. The Trustee, or any director, officer, employee or agent of
the Trustee, shall be indemnified by REMIC I and held harmless against any loss,
liability or expense (not including expenses, disbursements and advances
incurred or made by the Trustee, including the compensation and the expenses and
disbursements of its agents and counsel, in the ordinary course of the Trustee's
performance in accordance with the provisions of this Agreement) incurred by the
Trustee in connection with any claim or legal action or any pending or
threatened claim or legal action arising out of or in connection with the
acceptance or administration of its obligations and duties under this Agreement,
other than any loss, liability or

<PAGE>

                                      -119-

expense (i) resulting from the Master Servicer's actions or omissions in
connection with this Agreement and the Mortgage Loans, (ii) that constitutes a
specific liability of the Trustee pursuant to Section 10.01(c) or (iii) any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or negligence in the performance of duties hereunder or by reason of reckless
disregard of obligations and duties hereunder or as a result of a breach of the
Trustee's obligations under Article X hereof. It is understood by the parties
hereto that a "claim" as used in the preceding sentence includes any claim for
indemnification made by the Custodian under Section 3.2 of the Custodial
Agreement. Any amounts payable to the Trustee, or any director, officer,
employee or agent of the Trustee, in respect of the indemnification provided by
this paragraph (a), or pursuant to any other right of reimbursement from the
Trust Fund that the Trustee, or any director, officer, employee or agent of the
Trustee, may have hereunder in its capacity as such, may be withdrawn by the
Trustee from the Distribution Account at any time.

              (b) The Master Servicer agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense resulting from a breach
of the Master Servicer's obligations and duties under this Agreement. Such
indemnity shall survive the termination or discharge of this Agreement and the
resignation or removal of the Trustee. Any payment hereunder made by the Master
Servicer to the Trustee shall be from the Master Servicer's own funds, without
reimbursement from the Trust Fund therefor.

              (c) The Trustee shall pay any annual rating agency fees of DCR and
Moody's for ongoing surveillance from its own funds without right of
reimbursement.

              SECTION 8.06. Eligibility Requirements for Trustee.

              The Trustee hereunder shall at all times be a corporation or an
association (other than the Depositor, the Seller, the Master Servicer or any
Affiliate of the foregoing) organized and doing business under the laws of any
state or the United States of America, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by federal or state
authority. If such corporation or association publishes reports of conditions at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section the
combined capital and surplus of such corporation or association shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
conditions so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.07.

              SECTION 8.07. Resignation and Removal of the Trustee.

              The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Master Servicer and the Certificateholders. Upon receiving such notice of
resignation, the Depositor shall promptly appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the resigning
Trustee and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders and the Master Servicer by the Depositor. If
no successor trustee shall have been so appointed and have

<PAGE>

                                      -120-

accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

              If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders and the Master Servicer by the Depositor.

              The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered to the Depositor, one complete set to the Trustee so removed
and one complete set to the successor so appointed. A copy of such instrument
shall be delivered to the Certificateholders and the Master Servicer by the
Depositor.

              Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.

              SECTION 8.08. Successor Trustee.

              Any successor trustee appointed as provided in Section 8.07 shall
execute, acknowledge and deliver to the Depositor and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder (other than any Mortgage Files at the time held by a Custodian,
which Custodian shall become the agent of any successor trustee hereunder), and
the Depositor and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.

              No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.

<PAGE>

                                      -121-

              Upon acceptance of appointment by a successor trustee as provided
in this Section, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates at their addresses as shown in
the Certificate Register. If the Depositor fails to mail such notice within 10
days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Depositor.

              SECTION 8.09. Merger or Consolidation of Trustee.

              Any corporation or association into which the Trustee may be
merged or converted or with which it may be consolidated or any corporation or
association resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or association succeeding to the
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation or association shall be eligible under the provisions
of Section 8.06, without the execution or filing of any paper or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

              SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.

              Notwithstanding any other provisions hereof, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of REMIC I or property securing the same may at the time be located, the Master
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of REMIC I, and to
vest in such Person or Persons, in such capacity, such title to REMIC I, or any
part thereof, and, subject to the other provisions of this Section 8.10, such
powers, duties, obligations, rights and trusts as the Master Servicer and the
Trustee may consider necessary or desirable. If the Master Servicer shall not
have joined in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Master Servicer Event of Default shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee hereunder shall be required to
meet the terms of eligibility as a successor trustee under Section 8.06
hereunder and no notice to Holders of Certificates of the appointment of
co-trustee(s) or separate trustee(s) shall be required under Section 8.08
hereof.

              In the case of any appointment of a co-trustee or separate trustee
pursuant to this Section 8.10 all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or co-trustee
jointly, except to the extent that under any law of any jurisdiction in which
any particular act or acts are to be performed by the Trustee (whether as
Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of title to
REMIC I or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the direction of the
Trustee.

              Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them.

<PAGE>

                                      -122-

Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article VIII. Each separate trustee
and co-trustee, upon its acceptance of the trust conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee.

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

              SECTION 8.11. Appointment of Custodians.

              The Trustee may, with the consent of the Depositor and the Master
Servicer, appoint one or more Custodians to hold all or a portion of the
Mortgage Files as agent for the Trustee, by entering into a Custodial Agreement.
The appointment of any Custodian may at any time be terminated and a substitute
Custodian appointed therefor upon the reasonable request of the Master Servicer
to the Trustee, the consent to which shall not be unreasonably withheld. The
Trustee shall pay any and all fees and expenses of any Custodian in accordance
with each Custodial Agreement. The Trustee initially appoints Chase Bank of
Texas, N.A. as Custodian, and the Depositor and the Master Servicer consent to
such appointment. Subject to Article VIII hereof, the Trustee agrees to comply
with the terms of each Custodial Agreement and to enforce the terms and
provisions thereof against the Custodian for the benefit of the
Certificateholders having an interest in any Mortgage File held by such
Custodian. Each Custodian shall be a depository institution or trust company
subject to supervision by federal or state authority, shall have combined
capital and surplus of at least $10,000,000 and shall be qualified to do
business in the jurisdiction in which it holds any Mortgage File. Each Custodial
Agreement may be amended only as provided in Section 11.01. In no event shall
the appointment of any Custodian pursuant to a Custodial Agreement diminish the
obligations of the Trustee hereunder.

              SECTION 8.12. Appointment of Office or Agency.

              The Trustee will appoint an office or agency in the City of New
York where the Certificates may be surrendered for registration of transfer or
exchange, and presented for final distribution, and where notices and demands to
or upon the Trustee in respect of the Certificates and this Agreement may be
served.

              SECTION 8.13. Representations and Warranties of the Trustee.

              The Trustee hereby represents and warrants to the Master Servicer
and the Depositor, as of the Closing Date, that:

<PAGE>

                                      -123-

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

              (ii) The execution and delivery of this Agreement by the Trustee,
         and the performance and compliance with the terms of this Agreement by
         the Trustee, will not violate the Trustee's charter or bylaws or
         constitute a default (or an event which, with notice or lapse of time,
         or both, would constitute a default) under, or result in the breach of,
         any material agreement or other instrument to which it is a party or
         which is applicable to it or any of its assets.

              (iii) The Trustee has the full power and authority to enter into
         and consummate all transactions contemplated by this Agreement, has
         duly authorized the execution, delivery and performance of this
         Agreement, and has duly executed and delivered this Agreement.

              (iv) This Agreement, assuming due authorization, execution and
         delivery by the Master Servicer and the Depositor, constitutes a valid,
         legal and binding obligation of the Trustee, enforceable against the
         Trustee in accordance with the terms hereof, subject to (A) applicable
         bankruptcy, insolvency, receivership, reorganization, moratorium and
         other laws affecting the enforcement of creditors' rights generally,
         and (B) general principles of equity, regardless of whether such
         enforcement is considered in a proceeding in equity or at law.

              (v) The Trustee is not in violation of, and its execution and
         delivery of this Agreement and its performance and compliance with the
         terms of this Agreement will not constitute a violation of, any law,
         any order or decree of any court or arbiter, or any order, regulation
         or demand of any federal, state or local governmental or regulatory
         authority, which violation, in the Trustee's good faith and reasonable
         judgment, is likely to affect materially and adversely either the
         ability of the Trustee to perform its obligations under this Agreement
         or the financial condition of the Trustee.

              (vi) No litigation is pending or, to the best of the Trustee's
         knowledge, threatened against the Trustee which would prohibit the
         Trustee from entering into this Agreement or, in the Trustee's good
         faith reasonable judgment, is likely to materially and adversely affect
         either the ability of the Trustee to perform its obligations under this
         Agreement or the financial condition of the Trustee.

<PAGE>

                                      -124-

                                   ARTICLE IX

                                   TERMINATION

              SECTION 9.01 Termination Upon Repurchase or Liquidation of All
                           Mortgage Loans.

              (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Master Servicer and
the Trustee (other than the obligations of the Master Servicer to the Trustee
pursuant to Section 8.05 and of the Master Servicer to provide for and the
Trustee to make payments in respect of the REMIC I Regular Interests, the REMIC
II Regular Interests or the Classes of Certificates as hereinafter set forth)
shall terminate upon payment to the Certificateholders and the deposit of all
amounts held by or on behalf of the Trustee and required hereunder to be so paid
or deposited on the Distribution Date coinciding with or following the earlier
to occur of (i) the purchase by the Terminator (as defined below) of all
Mortgage Loans and each REO Property remaining in REMIC I and (ii) the final
payment or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan or REO Property remaining in REMIC I; provided, however, that in
no event shall the trust created hereby continue beyond 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,
living on the date hereof. The purchase by the Terminator of all Mortgage Loans
and each REO Property remaining in REMIC I shall be at a price (the "Termination
Price") equal to the greater of (A) the aggregate Purchase Price of all the
Mortgage Loans included in REMIC I, plus the appraised value of each REO
Property, if any, included in REMIC I, such appraisal to be conducted by an
appraiser mutually agreed upon by the Terminator and the Trustee in their
reasonable discretion and (B) the aggregate fair market value of all of the
assets of REMIC I (as determined by the Terminator and the Trustee, as of the
close of business on the third Business Day next preceding the date upon which
notice of any such termination is furnished to Certificateholders pursuant to
the third paragraph of this Section 9.01).

              (b) The Majority Class CE Certificateholder shall have the right,
and to the extent the Majority Class CE Certificateholder does not exercise such
right, the Master Servicer shall have the right (the party exercising such
right, the "Terminator"), to purchase all of the Mortgage Loans and each REO
Property remaining in REMIC I pursuant to clause (i) of the preceding paragraph
no later than the Determination Date in the month immediately preceding the
Distribution Date on which the Certificates will be retired; provided, however,
that the Terminator may elect to purchase all of the Mortgage Loans and each REO
Property remaining in REMIC I pursuant to clause (i) above only if the aggregate
Stated Principal Balance of the Mortgage Loans and each REO Property remaining
in the Trust Fund at the time of such election is less than 10% of the aggregate
Stated Principal Balance of the Mortgage Loans as of the Cut-off Date. By
acceptance of the Residual Certificates, the Holders of the Residual
Certificates agree, in connection with any termination hereunder, to assign and
transfer any amounts in excess of par, and to the extent received in respect of
such termination, to pay any such amounts to the Holders of the Class CE
Certificates.

              (c) Notice of the liquidation of the REMIC I Regular Interests
shall be given promptly by the Trustee by letter to Certificateholders mailed
(a) in the event such notice is given in connection with the purchase of the
Mortgage Loans and each REO Property by the Terminator, not

<PAGE>

                                      -125-

earlier than the 15th day and not later than the 25th day of the month next
preceding the month of the final distribution on the Certificates or (b)
otherwise during the month of such final distribution on or before the
Determination Date in such month, in each case specifying (i) the Distribution
Date upon which the Trust Fund will terminate and final payment in respect of
the REMIC I Regular Interests, the REMIC II Regular Interests and the
Certificates will be made upon presentation and surrender of the related
Certificates at the office of the Trustee therein designated, (ii) the amount of
any such final payment, (iii) that no interest shall accrue in respect of the
REMIC I Regular Interests, the REMIC II Regular Interests or the Certificates
from and after the Interest Accrual Period relating to the final Distribution
Date therefor and (iv) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only upon presentation
and surrender of the Certificates at the office of the Trustee. The Trustee
shall give such notice to the Certificate Registrar at the time such notice is
given to Certificateholders. In the event such notice is given in connection
with the purchase of all of the Mortgage Loans and each REO Property remaining
in REMIC I by the Terminator, the Terminator shall deliver to the Trustee for
deposit in the Distribution Account not later than the last Business Day of the
month next preceding the month of the final distribution on the Certificates an
amount in immediately available funds equal to the above-described purchase
price. The Trustee shall remit to the Master Servicer from such funds deposited
in the Distribution Account (i) any amounts which the Master Servicer would be
permitted to withdraw and retain from the Collection Account pursuant to Section
3.11 and (ii) any other amounts otherwise payable by the Trustee to the Master
Servicer from amounts on deposit in the Distribution Account pursuant to the
terms of this Agreement, in each case prior to making any final distributions
pursuant to Section 10.01(d) below. Upon certification to the Trustee by a
Servicing Officer of the making of such final deposit, the Trustee shall
promptly release or cause to be released to the Terminator the Mortgage Files
for the remaining Mortgage Loans, and the Trustee shall execute all assignments,
endorsements and other instruments necessary to effectuate such transfer.

              (d) Upon presentation of the Certificates by the
Certificateholders on the final Distribution Date, the Trustee shall distribute
to each Certificateholder so presenting and surrendering its Certificates the
amount otherwise distributable on such Distribution Date in accordance with
Section 4.01 in respect of the Certificates so presented and surrendered. Any
funds not distributed to any Holder or Holders of Certificates being retired on
such Distribution Date because of the failure of such Holder or Holders to
tender their Certificates shall, on such date, be set aside and held in trust by
the Trustee and credited to the account of the appropriate non-tendering Holder
or Holders. If any Certificates as to which notice has been given pursuant to
this Section 9.01 shall not have been surrendered for cancellation within six
months after the time specified in such notice, the Trustee shall mail a second
notice to the remaining non-tendering Certificateholders to surrender their
Certificates for cancellation in order to receive the final distribution with
respect thereto. If within one year after the second notice all such
Certificates shall not have been surrendered for cancellation, the Trustee
shall, directly or through an agent, mail a final notice to remaining related
non-tendering Certificateholders concerning surrender of their Certificates. The
costs and expenses of maintaining the funds in trust and of contacting such
Certificateholders shall be paid out of the assets remaining in the trust funds.
If within one year after the final notice any such Certificates shall not have
been surrendered for cancellation, the Trustee shall pay to Salomon Smith Barney
Inc. all such amounts, and all rights of non-tendering Certificateholders in or
to such amounts shall thereupon cease. No interest shall accrue or be payable to
any Certificateholder on

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                                      -126-

any amount held in trust by the Trustee as a result of such Certificateholder's
failure to surrender its Certificate(s) for final payment thereof in accordance
with this Section 9.01.

              Immediately following the deposit of funds in trust hereunder in
respect of the Certificates, the Trust Fund shall terminate.

              SECTION 9.02 Additional Termination Requirements.

              (a) In the event that the Terminator purchases all the Mortgage
Loans and each REO Property or the final payment on or other liquidation of the
last Mortgage Loan or REO Property remaining in REMIC I pursuant to Section
9.01, the Trust Fund shall be terminated in accordance with the following
additional requirements:

                (i) The Trustee shall specify the first day in the 90-day
              liquidation period in a statement attached to REMIC I's, REMIC
              II's and REMIC III's final Tax Return pursuant to Treasury
              regulation Section 1.860F-1 and shall satisfy all requirements of
              a qualified liquidation under Section 860F of the Code and any
              regulations thereunder, as evidenced by an Opinion of Counsel
              obtained at the expense of the Terminator;

               (ii) During such 90-day liquidation period, and at or prior to
              the time of making of the final payment on the Certificates, the
              Trustee shall sell all of the assets of REMIC I to the Terminator
              for cash; and

              (iii) At the time of the making of the final payment on the
              Certificates, the Trustee shall distribute or credit, or cause to
              be distributed or credited, to the Holders of the Residual
              Certificates all cash on hand in the Trust Fund (other than cash
              retained to meet claims), and the Trust Fund shall terminate at
              that time.

              (b) At the expense of the applicable Terminator (or in the event
of termination under Section 9.01(a)(ii), at the expense of the Trustee), the
Trustee shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each of REMIC I, REMIC
II and REMIC III pursuant to this Section 9.02.

              (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each of REMIC I, REMIC II and REMIC III, which authorization shall be
binding upon all successor Certificateholders.

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                                      -127-

                                    ARTICLE X

                                REMIC PROVISIONS

              SECTION 10.01. REMIC Administration.

              (a) The Trustee shall elect to treat each of REMIC I, REMIC II and
REMIC III as a REMIC under the Code and, if necessary, under applicable state
law. Each such election will be made on Form 1066 or other appropriate federal
tax or information return or any appropriate state return for the taxable year
ending on the last day of the calendar year in which the Certificates are
issued. For the purposes of the REMIC election in respect of REMIC I, the REMIC
I Regular Interests shall be designated as the Regular Interests in REMIC I and
the Class R-I Certificates shall be designated as the Residual Interests in
REMIC I. The REMIC II Regular Interests shall be designated as the Regular
Interests in REMIC II and the Class R-II Certificates shall be designated as the
Residual Interests in REMIC II. The Class A Certificates, the Mezzanine
Certificates, the Class CE Certificates and the Class P Certificates shall be
designated as the Regular Interests in REMIC III and the Class R-III
Certificates shall be designated as the Residual Interests in REMIC III. The
Trustee shall not permit the creation of any "interests" in REMIC I, REMIC II or
REMIC III (within the meaning of Section 860G of the Code) other than the REMIC
I Regular Interests, the REMIC II Regular Interests and the interests
represented by the Certificates.

              (b) The Closing Date is hereby designated as the "Startup Day" of
REMIC I, REMIC II and REMIC III within the meaning of Section 860G(a)(9) of the
Code.

              (c) The Trustee shall pay out of its own funds, without any right
of reimbursement, any and all expenses relating to any tax audit of the Trust
Fund (including, but not limited to, any professional fees or any administrative
or judicial proceedings with respect to any of REMIC I, REMIC II or REMIC III
that involve the Internal Revenue Service or state tax authorities), other than
the expense of obtaining any tax related Opinion of Counsel except as specified
herein. The Trustee, as agent for all of REMIC I's, REMIC II's and REMIC III's
tax matters person, shall (i) act on behalf of the Trust Fund in relation to any
tax matter or controversy involving any of REMIC I, REMIC II or REMIC III and
(ii) represent the Trust Fund in any administrative or judicial proceeding
relating to an examination or audit by any governmental taxing authority with
respect thereto. The holder of the largest Percentage Interest of each Class of
Residual Certificates shall be designated, in the manner provided under Treasury
regulations section 1.860F-4(d) and Treasury regulations section
301.6231(a)(7)-1, as the tax matters person of the related REMIC created
hereunder. By their acceptance thereof, the holder of the largest Percentage
Interest of the Residual Certificates hereby agrees to irrevocably appoint the
Trustee or an Affiliate as its agent to perform all of the duties of the tax
matters person for the Trust Fund.

              (d) The Trustee shall prepare, sign and file all of the Tax
Returns in respect of each REMIC created hereunder. The expenses of preparing
and filing such returns shall be borne by the Trustee without any right of
reimbursement therefor. The Master Servicer shall provide on a timely basis to
the Trustee or its designee such information with respect to the assets of the
Trust Fund as

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                                      -128-

is in its possession and reasonably required by the Trustee to enable it to
perform its obligations under this Article.

              (e) The Trustee shall perform on behalf of each of REMIC I, REMIC
II and REMIC III all reporting and other tax compliance duties that are the
responsibility of such REMIC under the Code, the REMIC Provisions or other
compliance guidance issued by the Internal Revenue Service or any state or local
taxing authority. Among its other duties, as required by the Code, the REMIC
Provisions or other such compliance guidance, the Trustee shall provide (i) to
any Transferor of a Residual Certificate such information as is necessary for
the application of any tax relating to the transfer of a Residual Certificate to
any Person who is not a Permitted Transferee, (ii) to the Certificateholders
such information or reports as are required by the Code or the REMIC Provisions
including reports relating to interest, original issue discount and market
discount or premium (using the Prepayment Assumption as required) and (iii) to
the Internal Revenue Service the name, title, address and telephone number of
the person who will serve as the representative of REMIC I, REMIC II and REMIC
III. The Master Servicer shall provide on a timely basis to the Trustee such
information with respect to the assets of the Trust Fund, including, without
limitation, the Mortgage Loans, as is in its possession and reasonably required
by the Trustee to enable it to perform its obligations under this subsection. In
addition, the Depositor shall provide or cause to be provided to the Trustee,
within ten (10) days after the Closing Date, all information or data that the
Trustee reasonably determines to be relevant for tax purposes as to the
valuations and issue prices of the Certificates, including, without limitation,
the price, yield, prepayment assumption and projected cash flow of the
Certificates.

              (f) The Trustee shall take such action and shall cause each REMIC
created hereunder to take such action as shall be necessary to create or
maintain the status thereof as a REMIC under the REMIC Provisions (and the
Master Servicer shall assist the Trustee, to the extent reasonably requested by
the Trustee to do specific actions in order to assist in the maintenance of such
status). The Trustee shall not take any action, cause the Trust Fund to take any
action or fail to take (or fail to cause to be taken) any action that, under the
REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger
the status of REMIC I, REMIC II or REMIC III as a REMIC or (ii) result in the
imposition of a tax upon the Trust Fund (including but not limited to the tax on
prohibited transactions as defined in Section 860F(a)(2) of the Code and the tax
on contributions to a REMIC set forth in Section 860G(d) of the Code) (either
such event, an "Adverse REMIC Event") unless the Trustee has received an Opinion
of Counsel, addressed to the Trustee (at the expense of the party seeking to
take such action but in no event at the expense of the Trustee) to the effect
that the contemplated action will not, with respect to any of REMIC I, REMIC II
or REMIC III, endanger such status or result in the imposition of such a tax,
nor shall the Master Servicer take or fail to take any action (whether or not
authorized hereunder) as to which the Trustee has advised it in writing that it
has received an Opinion of Counsel to the effect that an Adverse REMIC Event
could occur with respect to such action; provided that the Master Servicer may
conclusively rely on such Opinion of Counsel and shall incur no liability for
its action or failure to act in accordance with such Opinion of Counsel. In
addition, prior to taking any action with respect to REMIC I, REMIC II or REMIC
III or the respective assets of each, or causing REMIC I, REMIC II or REMIC III
to take any action, which is not contemplated under the terms of this Agreement,
the Master Servicer will consult with the Trustee or its designee, in writing,
with respect to whether such action could cause an Adverse

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                                      -129-

REMIC Event to occur with respect to REMIC I, REMIC II or REMIC III, and the
Master Servicer shall not take any such action or cause either REMIC I, REMIC II
or REMIC III to take any such action as to which the Trustee has advised it in
writing that an Adverse REMIC Event could occur; provided that the Master
Servicer may conclusively rely on such writing and shall incur no liability for
its action or failure to act in accordance with such writing. The Trustee may
consult with counsel to make such written advice, and the cost of same shall be
borne by the party seeking to take the action not permitted by this Agreement,
but in no event shall such cost be an expense of the Trustee.
At all times as may be required by the Code, the Trustee will ensure that
substantially all of the assets of both REMIC I and REMIC II will consist of
"qualified mortgages" as defined in Section 860G(a)(3) of the Code and
"permitted investments" as defined in Section 860G(a)(5) of the Code.

              (g) In the event that any tax is imposed on "prohibited
transactions" of any REMIC created hereunder as defined in Section 860F(a)(2) of
the Code, on the "net income from foreclosure property" of such REMIC as defined
in Section 860G(c) of the Code, on any contributions to any such REMIC after the
Startup Day therefor pursuant to Section 860G(d) of the Code, or any other tax
is imposed by the Code or any applicable provisions of state or local tax laws,
such tax shall be charged (i) to the Trustee pursuant to Section 10.03 hereof,
if such tax arises out of or results from a breach by the Trustee of any of its
obligations under this Article X, (ii) to the Master Servicer pursuant to
Section 10.03 hereof, if such tax arises out of or results from a breach by the
Master Servicer of any of its obligations under Article III or this Article X,
or otherwise (iii) against amounts on deposit in the Distribution Account and
shall be paid by withdrawal therefrom.

              (h) On or before April 15 of each calendar year, commencing April
15, 2001, the Trustee shall deliver to the Master Servicer and each Rating
Agency a Certificate from a Responsible Officer of the Trustee stating the
Trustee's compliance with this Article X.

              (i) The Trustee shall, for federal income tax purposes, maintain
books and records with respect to each of REMIC I, REMIC II and REMIC III on a
calendar year and on an accrual basis.

              (j) Following the Startup Day, the Trustee shall not accept any
contributions of assets to any of REMIC I, REMIC II or REMIC III other than in
connection with any Qualified Substitute Mortgage Loan delivered in accordance
with Section 2.03 unless it shall have received an Opinion of Counsel to the
effect that the inclusion of such assets in the Trust Fund will not cause the
related REMIC to fail to qualify as a REMIC at any time that any Certificates
are outstanding or subject such REMIC to any tax under the REMIC Provisions or
other applicable provisions of federal, state and local law or ordinances.

              (k) Neither the Trustee nor the Master Servicer shall enter into
any arrangement by which REMIC I, REMIC II or REMIC III will receive a fee or
other compensation for services nor permit any such REMIC to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code.

<PAGE>

                                      -130-

              SECTION 10.02. Prohibited Transactions and Activities.

              None of the Depositor, the Master Servicer or the Trustee shall
sell, dispose of or substitute for any of the Mortgage Loans (except in
connection with (i) the foreclosure of a Mortgage Loan, including but not
limited to, the acquisition or sale of a Mortgaged Property acquired by deed in
lieu of foreclosure, (ii) the bankruptcy of REMIC I, (iii) the termination of
REMIC I pursuant to Article IX of this Agreement, (iv) a substitution pursuant
to Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for any of REMIC I,
REMIC II or REMIC III (other than REO Property acquired in respect of a
defaulted Mortgage Loan), nor sell or dispose of any investments in the
Collection Account or the Distribution Account for gain, nor accept any
contributions to any of REMIC I, REMIC II or REMIC III after the Closing Date
(other than a Qualified Substitute Mortgage Loan delivered in accordance with
Section 2.03), unless it has received an Opinion of Counsel, addressed to the
Trustee (at the expense of the party seeking to cause such sale, disposition,
substitution, acquisition or contribution but in no event at the expense of the
Trustee) that such sale, disposition, substitution, acquisition or contribution
will not (a) affect adversely the status of any of REMIC I, REMIC II or REMIC
III as a REMIC or (b) cause any of REMIC I, REMIC II or REMIC III to be subject
to a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions.

              SECTION 10.03. Master Servicer and Trustee Indemnification.

              (a) The Trustee agrees to indemnify the Trust Fund, the Depositor
and the Master Servicer for any taxes and costs including, without limitation,
any reasonable attorneys fees imposed on or incurred by the Trust Fund, the
Depositor or the Master Servicer, as a result of a breach of the Trustee's
covenants set forth in this Article X.

              (b) The Master Servicer agrees to indemnify the Trust Fund, the
Depositor and the Trustee for any taxes and costs including, without limitation,
any reasonable attorneys' fees imposed on or incurred by the Trust Fund, the
Depositor or the Trustee, as a result of a breach of the Master Servicer's
covenants set forth in Article III or this Article X.

<PAGE>

                                      -131-

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

              SECTION 11.01. Amendment.

               This Agreement or any Custodial Agreement may be amended from
time to time by the Depositor, the Master Servicer, the Trustee and, if
applicable, the Custodian without the consent of any of the Certificateholders,
(i) to cure any ambiguity or defect, (ii) to correct, modify or supplement any
provisions herein (including to give effect to the expectations of
Certificateholders), or in any Custodial Agreement, or (iii) to make any other
provisions with respect to matters or questions arising under this Agreement or
in any Custodial Agreement which shall not be inconsistent with the provisions
of this Agreement or such Custodial Agreement, provided that such action shall
not, as evidenced by an Opinion of Counsel delivered to the Trustee, adversely
affect in any material respect the interests of any Certificateholder. No
amendment shall be deemed to adversely affect in any material respect the
interests of any Certificateholder who shall have consented thereto, and no
Opinion of Counsel shall be required to address the effect of any such amendment
on any such consenting Certificateholder.

               This Agreement or any Custodial Agreement may also be amended
from time to time by the Depositor, the Master Servicer and the Trustee with the
consent of the Holders of Certificates entitled to at least 66% of the Voting
Rights for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or any Custodial Agreement
or of modifying in any manner the rights of the Holders of Certificates;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the Holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the Holders of any Class of Certificates in a manner, other than as described
in (i), without the consent of the Holders of Certificates of such Class
evidencing at least 66% of the Voting Rights allocated to such Class, or (iii)
modify the consents required by the immediately preceding clauses (i) and (ii)
without the consent of the Holders of all Certificates then outstanding.
Notwithstanding any other provision of this Agreement, for purposes of the
giving or withholding of consents pursuant to this Section 11.01, Certificates
registered in the name of the Depositor or the Master Servicer or any Affiliate
thereof shall be entitled to Voting Rights with respect to matters affecting
such Certificates.

              Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment will
not result in the imposition of any tax on any of REMIC I, REMIC II or REMIC III
pursuant to the REMIC Provisions or cause any of REMIC I, REMIC II or REMIC III
to fail to qualify as a REMIC at any time that any Certificates are outstanding.

              Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

<PAGE>

                                      -132-

              It shall not be necessary for the consent of Certificateholders
under this Section 11.01 to approve the particular form of any proposed
amendment, but it shall be sufficient if such consent shall approve the
substance thereof. The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Certificateholders shall be subject to
such reasonable regulations as the Trustee may prescribe.

              The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.

              The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

              SECTION 11.02. Recordation of Agreement; Counterparts.

              To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Master Servicer at the expense of the Certificateholders, but
only upon direction of the Trustee accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.

              For the purpose of facilitating the recordation of this Agreement
as herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

              SECTION 11.03. Limitation on Rights of Certificateholders.

              The death or incapacity of any Certificateholder shall not operate
to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder'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 Fund, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.

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

<PAGE>

                                      -133-

              No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless (i)
such Holder previously shall have given to the Trustee a written notice of
default and of the continuance thereof, as hereinbefore provided, and (ii) the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder
and the Trustee shall be entitled to such relief as can be given either at law
or in equity.

              SECTION 11.04. Governing Law.

              This Agreement shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.

              SECTION 11.05. Notices.

              All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, 390 Greenwich Street, 4th Floor, New York, New York
10013, Attention: Mortgage Finance Group (telecopy number (212) 723-8604), or
such other address or telecopy number as may hereafter be furnished to the
Master Servicer and the Trustee in writing by the Depositor, (b) in the case of
Long Beach Mortgage Company, 1100 Town & Country Road, Suite 900, Orange,
California 92868, Attention: General Counsel (telecopy number: (714) 543-6847),
or such other address or telecopy number as may hereafter be furnished to the
Trustee and the Depositor in writing by Long Beach Mortgage Company and (c) in
the case of the Trustee, 11000 Broken Land Parkway, Columbia, Maryland 21044,
Attention: Securities Administration Services (telecopy number (410) 884-2360),
with a copy to the Trustee at Sixth Street & Marquette Avenue, Minneapolis,
Minnesota 55479-0070, Attention: Corporate Trust Services (telecopy number (612)
667-3539), or such other address or telecopy number as may hereafter be
furnished to the Master Servicer and the Depositor in writing by the Trustee.
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 Holder as
shown in the Certificate Register. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given when mailed, whether or not the

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                                      -134-

Certificateholder receives such notice. A copy of any notice required to be
telecopied hereunder also shall be mailed to the appropriate party in the manner
set forth above.

              SECTION 11.06. Severability of Provisions.

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

              SECTION 11.07. Notice to Rating Agencies.

              The Trustee shall use its best efforts promptly to provide notice
to the Rating Agencies with respect to each of the following of which it has
actual knowledge:

              1.  Any material change or amendment to this Agreement;

              2.  The occurrence of any Master Servicer Event of Default that
                  has not been cured or waived;

              3.  The resignation or termination of the Master Servicer or the
                  Trustee;

              4.  The repurchase or substitution of Mortgage Loans pursuant to
                  or as contemplated by Section 2.03;

              5.  The final payment to the Holders of any Class of Certificates;

              6.  Any change in the location of the Collection Account or the
                  Distribution Account;

              7.  Any event that would result in the inability of the Trustee,
                  were it to succeed as Master Servicer, to make advances
                  regarding delinquent Mortgage Loans; and

              8.  The filing of any claim under the Master Servicer's blanket
                  bond and errors and omissions insurance policy required by
                  Section 3.14 or the cancellation or material modification of
                  coverage under any such instrument.

              In addition, the Trustee shall promptly furnish to each Rating
Agency copies of each report to Certificateholders described in Section 4.02 and
the Master Servicer, as required pursuant to Section 3.20 and Section 3.21,
shall promptly furnish to each Rating Agency copies of the following:

              1.  Each annual statement as to compliance described in Section
                  3.20; and

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                                      -135-

              2.  Each annual independent public accountants' servicing report
                  described in Section 3.21.

              Any such notice pursuant to this Section 11.07 shall be in writing
and shall be deemed to have been duly given if personally delivered at or mailed
by first class mail, postage prepaid, or by express delivery service to Duff &
Phelps Credit Rating Co., 17 State Street, 12th Floor, New York, New York 10004
and to Moody's Investors Service, Inc., 99 Church Street, New York, NY 10048,
Attention: MBS Monitoring/Salomon Brothers Mortgage Securities VII, Inc., Series
2000- LB1, or such other addresses as the Rating Agencies may designate in
writing to the parties hereto.

              SECTION 11.08. Article and Section References.

              All article and section references used in this Agreement, unless
otherwise provided, are to articles and sections in this Agreement.

              SECTION 11.09. Grant of Security Interest.

              It is the express intent of the parties hereto that the conveyance
of the Mortgage Loans by the Depositor to the Trustee be, and be construed as, a
sale of the Mortgage Loans by the Depositor and not a pledge of the Mortgage
Loans by the Depositor to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans 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, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) 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 Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute

<PAGE>

                                      -136-

and unconditional sale of the Mortgage Loans and assets constituting the Trust
Fund by the Depositor to the Trustee.

<PAGE>

              IN WITNESS WHEREOF, the Depositor, the Master Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.

                                      SALOMON BROTHERS MORTGAGE
                                      SECURITIES VII, INC.,
                                      as Depositor

                                      By: /s/ Matthew R. Bollo
                                          ----------------------------
                                      Name:   Matthew R. Bollo
                                      Title:  Assistant Vice President

                                      LONG BEACH MORTGAGE COMPANY,
                                      as Master Servicer

                                      By: /s/ Jeffrey A. Sorensen
                                          ----------------------------
                                      Name:   Jeffery A Sorensen
                                      Title:  Vice President

                                      NORWEST BANK MINNESOTA,
                                      NATIONAL ASSOCIATION,
                                      as Trustee

                                      By: /s/ Randall S. Reider
                                          ----------------------------
                                      Name:   Randall S. Reider
                                      Title:  Assistant Vice President

<PAGE>

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

                  On the 25th day of February 2000, before me, a notary public
in and for said State, personally appeared Matthew R. Bollo, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.

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

                                        ----------------------------
                                                Notary Public

[Notarial Seal]

<PAGE>

STATE OF CALIFORNIA    )
                       ) ss.:
COUNTY OF ORANGE       )

                  On the ____ day of February 2000, before me, a notary public
in and for said State, personally appeared Jeffery A. Sorensen, known to me to
be a Vice President of Long Beach Mortgage Company, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                        ----------------------------
                                                Notary Public

[Notarial Seal]

<PAGE>

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

                  On the 25th day of February 2000, before me, a notary public
in and for said State, personally appeared Randall S. Reider, known to me to be
an Assistant Vice President of Norwest Bank Minnesota, National Association, one
of the entities that executed the within instrument, and also known to me to be
the person who executed it on behalf of said corporation, and acknowledged to me
that such entity executed the within instrument.

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

                                        ----------------------------
                                                Notary Public

[Notarial Seal]

<PAGE>

                               EXHIBIT A-1
                               -----------

                       FORM OF CLASS A CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2000-LB1, Class A                  Aggregate Certificate Principal
                                          Balance of the Class A Certificates as
Pass-Through Rate: Variable               of the Issue Date: $645,109,000.00

Date of Pooling and Servicing Agreement   Denomination:  $____________
and Cut-off Date: February 1, 2000
                                          Master Servicer:
First Distribution Date:                  Long Beach Mortgage Company
March 27, 2000
                                          Trustee:  Norwest Bank Minnesota,
No. ___                                   National Association

                                          Issue Date: February 25, 2000

                                          CUSIP: 79548K W4 6

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class A Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class A Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class A Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class A Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                      -3-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the One-Month LIBOR plus 0.34%, in the
case of each Distribution Date through and including the Distribution Date on
which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus 0.68% per annum, in the case of any Distribution
Date thereafter, and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or

<PAGE>

                                       -4-

more new Certificates of the same Class in authorized denominations evidencing
the same aggregate Percentage Interest will be issued to the designated
transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

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

          The Depositor, the Master Servicer, the Trustee, and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                      Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address: _________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-2
                               -----------

                      FORM OF CLASS M-1 CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

       THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES TO THE
       EXTENT DESCRIBED IN THE POOLING AND SERVICING  AGREEMENT  REFERRED
       TO HEREIN.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"),  SHALL BE MADE EXCEPT IN COMPLIANCE WITH THE PROCEDURES
       DESCRIBED HEREIN.

Series 2000-LB1, Class M-1                Aggregate Certificate Principal
                                          Balance of the Class M-1 Certificates
Pass-Through Rate: Variable               as of the Issue Date: $47,203,000.00

Date of Pooling and Servicing Agreement   Denomination:  $_____________
and Cut-off Date: February 1, 2000
                                          Master Servicer:
First Distribution Date:                  Long Beach Mortgage Company
March 27, 2000
                                          Trustee:  Norwest Bank Minnesota,
No. ___                                   National Association

                                          Issue Date: February 25, 2000

                                          CUSIP: 79548K W5 3

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-1 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-1 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class M-1 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class M-1 Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                       -3-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the One-Month LIBOR plus 0.60%, in the
case of each Distribution Date through and including the Distribution Date on
which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus 0.90% per annum, in the case of any Distribution
Date thereafter, and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or

<PAGE>

                                       -4-

more new Certificates of the same Class in authorized denominations evidencing
the same aggregate Percentage Interest will be issued to the designated
transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

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

          The Depositor, the Master Servicer, the Trustee, and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

<PAGE>

                                       -5-

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class M-1 Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-3
                               -----------

                      FORM OF CLASS M-2 CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

       THIS  CERTIFICATE IS  SUBORDINATE TO THE CLASS A CERTIFICATES  AND
       THE CLASS M-1  CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
       AND SERVICING AGREEMENT REFERRED TO HEREIN.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"), OR THE CODE SHALL BE MADE EXCEPT IN COMPLIANCE WITH THE
       PROCEDURES DESCRIBED HEREIN.

Series 2000-LB1, Class M-2                Aggregate Certificate Principal
                                          Balance of the Class M-2 Certificates
Pass-Through Rate: Variable               as of the Issue Date: $41,302,000.00

Date of Pooling and Servicing Agreement   Denomination:  $___________
and Cut-off Date: February 1, 2000
                                          Master Servicer:
First Distribution Date:                  Long Beach Mortgage Company
March 27, 2000
                                          Trustee:  Norwest Bank Minnesota,
No. ___                                   National Association

                                          Issue Date: February 25, 2000

                                          CUSIP: 79548K W6 1

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-2 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-2 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class M-2 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class M-2 Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be

<PAGE>

                                       -3-

made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose as provided in the Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the One-Month LIBOR plus 1.15%, in the
case of each Distribution Date through and including the Distribution Date on
which the aggregate principal balance of the Mortgage Loans (and properties
acquired in respect thereof) remaining in the Trust Fund is reduced to less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date, or One-Month LIBOR plus 1.725% per annum, in the case of any Distribution
Date thereafter, and (ii) the Net WAC Pass-Through Rate for such Distribution
Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or

<PAGE>

                                       -4-

more new Certificates of the same Class in authorized denominations evidencing
the same aggregate Percentage Interest will be issued to the designated
transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

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

          The Depositor, the Master Servicer, the Trustee, and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

<PAGE>

                                       -5-

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class M-2 Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-4
                               -----------

                      FORM OF CLASS M-3 CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

       THIS  CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES,  THE
       CLASS  M-1  CERTIFICATES  AND THE CLASS  M-2  CERTIFICATES  TO THE
       EXTENT DESCRIBED IN THE POOLING AND SERVICING  AGREEMENT  REFERRED
       TO HEREIN.

       THE FOLLOWING  INFORMATION IS PROVIDED  SOLELY FOR THE PURPOSES OF
       APPLYING  THE U.S.  FEDERAL  INCOME TAX  ORIGINAL  ISSUE  DISCOUNT
       ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF  THIS
       CERTIFICATE IS FEBRUARY 25, 2000. BASED ON THE OID REGULATIONS AND
       ASSUMING  THAT THE  MORTGAGE  LOANS  PREPAY AT 28% OF THE CONSTANT
       PREPAYMENT  RATE, USED SOLELY FOR THE PURPOSES OF APPLYING THE OID
       RULES TO THE  CERTIFICATES  (THE  "PREPAYMENT  ASSUMPTION"),  THIS
       CERTIFICATE  HAS BEEN ISSUED WITH NO MORE THAN  $112.84 OF OID PER
       $1,000 OF INITIAL  CERTIFICATE  BALANCE,  THE YIELD TO MATURITY IS
       10.0619% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL
       PERIOD IS NO MORE THAN  $1.61 PER  $1,000 OF  INITIAL  CERTIFICATE
       BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION  IS
       MADE THAT THE  MORTGAGE  LOANS WILL  PREPAY AT A RATE BASED ON THE
       PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"), OR THE CODE SHALL BE MADE EXCEPT IN ACCORDANCE WITH THE
       PROCEDURES DESCRIBED HEREIN.

<PAGE>

Series 2000-LB1, Class M-3                Aggregate Certificate Principal
                                          Balance of the Class M-3 Certificates
Pass-Through Rate: 7.000%                 as of the Issue Date: $31,468,000.00

Date of Pooling and Servicing Agreement   Denomination:  $_____________
and Cut-off Date: February 1, 2000
                                          Master Servicer:
First Distribution Date:                  Long Beach Mortgage Company
March 27, 2000
                                          Trustee:  Norwest Bank Minnesota,
No. ___                                   National Association

                                          Issue Date: February 25, 2000

                                          CUSIP: 79548K W7 9

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class M-3 Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class M-3 Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class M-3 Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class M-3 Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                       -3-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -4-

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any person using Plan Assets to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

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

          The Depositor, the Master Servicer, the Trustee, and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class M-3 Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                    Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:__________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-5
                               -----------

                       FORM OF CLASS CE CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT",
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

       THE FOLLOWING  INFORMATION IS PROVIDED  SOLELY FOR THE PURPOSES OF
       APPLYING  THE U.S.  FEDERAL  INCOME TAX  ORIGINAL  ISSUE  DISCOUNT
       ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF  THIS
       CERTIFICATE IS FEBRUARY 25, 2000. BASED ON THE OID REGULATIONS AND
       ASSUMING  THAT THE  MORTGAGE  LOANS  PREPAY AT 28% OF THE CONSTANT
       PREPAYMENT  RATE, USED SOLELY FOR THE PURPOSES OF APPLYING THE OID
       RULES TO THE  CERTIFICATES  (THE  "PREPAYMENT  ASSUMPTION"),  THIS
       CERTIFICATE HAS BEEN ISSUED WITH NO MORE THAN $9,248.51 OF OID PER
       $100,000  OF INITIAL  NOTIONAL  AMOUNT,  THE YIELD TO  MATURITY IS
       28.2805% AND THE AMOUNT OF OID ATTRIBUTABLE TO THE INITIAL ACCRUAL
       PERIOD IS NO MORE THAN  $160.54 PER  $100,000 OF INITIAL  NOTIONAL
       AMOUNT, COMPUTED UNDER THE EXACT METHOD. NO REPRESENTATION IS MADE
       THAT  THE  MORTGAGE  LOANS  WILL  PREPAY  AT A RATE  BASED  ON THE
       PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

       THIS  CERTIFICATE IS  SUBORDINATE TO THE CLASS A CERTIFICATES  AND
       THE MEZZANINE  CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING
       AND SERVICING AGREEMENT REFERRED TO HEREIN.

       THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
       STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
       PURSUANT  TO SUCH  ACT AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
       TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION  UNDER SUCH ACT AND
       UNDER  APPLICABLE  STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
       THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE RETIREMENT INCOME SECURITY ACT

<PAGE>

       OF 1974,  AS  AMENDED  ("ERISA"),  OR THE CODE WILL BE  REGISTERED
       EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED HEREIN.

Series 2000-LB1, Class CE                 Aggregate Notional Amount of the Class
                                          CE Certificates as of the Issue Date:
Pass-Through Rate: Variable               $786,718,342.75

Date of Pooling and Servicing Agreement   Notional Amount: $786,718,342.75
and Cut-off Date: February 1, 2000
                                          Aggregate Certificate Principal
First Distribution Date:                  Balance of the Class CE Certificates
March 27, 2000                            as of the Issue Date: $21,636,342.75

No. ___                                   Denomination:  $_____________

                                          Master Servicer:
                                          Long Beach Mortgage Company

                                          Trustee:  Norwest Bank Minnesota,
                                          National Association

                                          Issue Date: February 25, 2000

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class CE Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class CE Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class CE Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class CE Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class CE Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                       -5-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -6-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
require receipt of (i) if such transfer is purportedly being made in reliance
upon Rule 144A under the 1933 Act, written certifications from the Holder of the
Certificate desiring to effect the transfer, and from such Holder's prospective
transferee, substantially in the forms attached to the Agreement as Exhibit F-1,
and (ii) in all other cases, an Opinion of Counsel satisfactory to it that such
transfer may be made without such registration or qualification (which Opinion
of Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Master Servicer in their respective capacities as such), together
with copies of the written certification(s) of the Holder of the Certificate
desiring to effect the transfer and/or such Holder's prospective transferee upon
which such Opinion of Counsel is based. Neither the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor, the Certificate
Registrar and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

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

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price

<PAGE>

                                       -7-

determined as provided in the Agreement from REMIC I of all the Mortgage Loans
and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
Stated Principal Balance of the Mortgage Loans at the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement .

<PAGE>

                                       -8-

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-6
                               -----------

                       FORM OF CLASS P CERTIFICATE

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
       "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT",
       AS THOSE TERMS ARE  DEFINED,  RESPECTIVELY,  IN SECTIONS  860G AND
       860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

       THE FOLLOWING  INFORMATION IS PROVIDED  SOLELY FOR THE PURPOSES OF
       APPLYING  THE U.S.  FEDERAL  INCOME TAX  ORIGINAL  ISSUE  DISCOUNT
       ("OID")  RULES  TO  THIS  CERTIFICATE.  THE  ISSUE  DATE  OF  THIS
       CERTIFICATE IS FEBRUARY 25, 2000. BASED ON THE OID REGULATIONS AND
       ASSUMING  THAT THE  MORTGAGE  LOANS  PREPAY AT 28% OF THE CONSTANT
       PREPAYMENT  RATE, USED SOLELY FOR THE PURPOSES OF APPLYING THE OID
       RULES TO THE  CERTIFICATES  (THE  "PREPAYMENT  ASSUMPTION"),  THIS
       CERTIFICATE  HAS BEEN ISSUED WITH NO MORE THAN  $398.82 OF OID PER
       $100,000 OF INITIAL CERTIFICATE  BALANCE, THE YIELD TO MATURITY IS
       28.28% AND THE AMOUNT OF OID  ATTRIBUTABLE  TO THE INITIAL ACCRUAL
       PERIOD IS NO MORE THAN $29.32 PER $100,000 OF INITIAL  CERTIFICATE
       BALANCE,  COMPUTED UNDER THE EXACT METHOD.  NO  REPRESENTATION  IS
       MADE THAT THE  MORTGAGE  LOANS WILL  PREPAY AT A RATE BASED ON THE
       PREPAYMENT ASSUMPTION OR AT ANY OTHER RATE.

       THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
       STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
       PURSUANT  TO SUCH  ACT AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
       TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION  UNDER SUCH ACT AND
       UNDER  APPLICABLE  STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
       THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN  COMPLIANCE
       WITH THE PROCEDURES DESCRIBED HEREIN.

<PAGE>

Series 2000-LB1, Class P                  Aggregate Certificate Principal
                                          Balance of the Class P Certificates as
Pass-Through Rate: Variable               of the Issue Date: $100.00

Date of Pooling and Servicing Agreement   Denomination:  $______
and Cut-off Date: February 1, 2000
                                          Master Servicer:
First Distribution Date:                  Long Beach Mortgage Company
March 27, 2000
                                          Trustee:  Norwest Bank Minnesota,
No. ___                                   National Association

                                          Issue Date: February 25, 2000

       DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
       THIS  CERTIFICATE  MAY  BE  MADE  MONTHLY  AS  SET  FORTH  HEREIN.
       ACCORDINGLY,  THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
       AT ANY  TIME  MAY BE LESS  THAN  THE  AMOUNT  SHOWN  ABOVE  AS THE
       DENOMINATION OF THIS CERTIFICATE.

<PAGE>

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class P Certificates as of
the Issue Date) in that certain beneficial ownership interest evidenced by all
the Class P Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class P Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class P Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class P Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the Certificate Register. Notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                       -4-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee and the Certificate Registrar shall
require receipt of (i) if such transfer is purportedly being made in reliance
upon Rule 144A under the 1933 Act, written certifications from the Holder of the
Certificate desiring to effect the transfer, and from such Holder's prospective
transferee, substantially in the forms attached to the Agreement as Exhibit F-1,
and (ii) in all other cases, an Opinion of Counsel satisfactory to it that such
transfer may be made without such registration or qualification (which Opinion
of Counsel shall not be an expense of the Trust Fund or of the Depositor, the
Trustee or the Master Servicer in their respective capacities as such), together
with copies of the written certification(s) of the Holder of the Certificate
desiring to effect the transfer and/or such Holder's prospective transferee upon
which such Opinion of Counsel is based. None of the Depositor, the Certificate
Registrar or the Trustee is obligated to register or qualify the Class of
Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor, the Certificate
Registrar and the Master Servicer against any liability that may result if the
transfer is not so exempt or is not made in accordance with such federal and
state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

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

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price

<PAGE>

                                       -6-

determined as provided in the Agreement from REMIC I of all the Mortgage Loans
and all property acquired in respect of such Mortgage Loans. The Agreement
permits, but does not require, the party designated in the Agreement to purchase
from REMIC I all the Mortgage Loans and all property acquired in respect of any
Mortgage Loan at a price determined as provided in the Agreement. The exercise
of such right will effect early retirement of the Certificates; however, such
right to purchase is subject to the aggregate Stated Principal Balance of the
Mortgage Loans at the time of purchase being less than 10% of the aggregate
Stated Principal Balance of the Mortgage Loans at the Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement .

<PAGE>

                                       -7-

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM - as tenants in common            UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-7
                               -----------

                      FORM OF CLASS R-I CERTIFICATE

       THIS  CERTIFICATE  MAY NOT BE TRANSFERRED  TO A NON-UNITED  STATES
       PERSON.

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFI CATE IS
       A  "RESIDUAL  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
       CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN
       SECTIONS  860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
       "CODE").

       THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
       STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
       PURSUANT  TO SUCH  ACT AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
       TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION  UNDER SUCH ACT AND
       UNDER  APPLICABLE  STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
       THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IN ACCORDANCE  WITH THE PROVISIONS OF SECTION 5.02 OF
       THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN  COMPLIANCE
       WITH THE PROCEDURES DESCRIBED HEREIN.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IF THE PROPOSED  TRANSFEREE PROVIDES (I) AN AFFIDAVIT
       TO THE  TRUSTEE  THAT (A) SUCH  TRANSFEREE  IS NOT (1) THE  UNITED
       STATES  OR  ANY  POSSESSION   THEREOF,   ANY  STATE  OR  POLITICAL
       SUBDIVISION  THEREOF,  ANY FOREIGN  GOVERNMENT,  ANY INTERNATIONAL
       ORGANIZATION,  OR  ANY  AGENCY  OR  INSTRUMENTALITY  OF ANY OF THE
       FOREGOING,   (2)  ANY  ORGANIZATION   (OTHER  THAN  A  COOPERATIVE
       DESCRIBED  IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX
       IMPOSED  BY  CHAPTER 1 OF THE CODE  UNLESS  SUCH  ORGANIZATION  IS
       SUBJECT TO THE TAX IMPOSED BY SECTION 511

<PAGE>

                                   -11-

       OF  THE  CODE,   (3)  ANY   ORGANIZATION   DESCRIBED   IN  SECTION
       1381(A)(2)(C)  OF THE  CODE  (ANY  SUCH  PERSON  DESCRIBED  IN THE
       FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE REFERRED TO
       AS  A   "DISQUALIFIED   ORGANIZATION")   OR  (4)  AN  AGENT  OF  A
       DISQUALIFIED  ORGANIZATION  AND (B) NO PURPOSE OF SUCH TRANSFER IS
       TO IMPEDE  THE  ASSESSMENT  OR  COLLECTION  OF TAX,  AND (II) SUCH
       TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
       FINANCIAL  CONDITION OF THE PROPOSED  TRANSFEREE.  NOTWITHSTANDING
       THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE
       OR  OTHER  DISPOSITION  OF  THIS  CERTIFICATE  TO  A  DISQUALIFIED
       ORGANIZATION  OR AN AGENT  OF A  DISQUALIFIED  ORGANIZATION,  SUCH
       REGISTRATION  SHALL BE  DEEMED  TO BE OF NO LEGAL  FORCE OR EFFECT
       WHATSOEVER   AND  SUCH  PERSON   SHALL  NOT  BE  DEEMED  TO  BE  A
       CERTIFICATEHOLDER  FOR ANY PURPOSE HEREUNDER,  INCLUDING,  BUT NOT
       LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
       HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO
       HAVE  CONSENTED  TO THE  PROVISIONS  OF  THIS  PARAGRAPH  AND  THE
       PROVISIONS  OF  SECTION  5.02(D)  OF  THE  POOLING  AND  SERVICING
       AGREEMENT  REFERRED TO HEREIN.  ANY PERSON THAT IS A  DISQUALIFIED
       ORGANIZATION IS PROHIBITED FROM ACQUIRING  BENEFICIAL OWNERSHIP OF
       THIS CERTIFICATE.

Series 2000-LB1, Class R-I                Aggregate Percentage Interest of the
                                          Class R-I Certificates as of the Issue
Date of Pooling and Servicing Agreement   Date: 100.00%
and Cut-off Date: February 1, 2000
                                          Percentage Interest of this Class R-I
First Distribution Date: March 27, 2000   Certificate: 100.00%

No. ___                                   Master Servicer:
                                          Long Beach Mortgage Company

                                          Trustee:  Norwest Bank Minnesota,
                                          National Association

                                          Issue Date: February 25, 2000

                                          CUSIP:

<PAGE>

                                      -1-

             FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-I Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-I Certificates in REMIC I created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-I Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-I Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-I Certificates, or otherwise by check mailed by
first class mail to the address of the Person entitled thereto, as such name and
address shall appear on the

<PAGE>

                                       -4-

Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-I Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-I Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

<PAGE>

                                       -6-

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

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

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class R-I Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM  - as tenants in common           UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:_________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-8
                               -----------

                      FORM OF CLASS R-II CERTIFICATE

       THIS  CERTIFICATE  MAY NOT BE TRANSFERRED  TO A NON-UNITED  STATES
       PERSON.

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFI CATE IS
       A  "RESIDUAL  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
       CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN
       SECTIONS  860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
       "CODE").

       THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
       STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
       PURSUANT  TO SUCH  ACT AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
       TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION  UNDER SUCH ACT AND
       UNDER  APPLICABLE  STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
       THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IN ACCORDANCE  WITH THE PROVISIONS OF SECTION 5.02 OF
       THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN  COMPLIANCE
       WITH THE PROCEDURES DESCRIBED HEREIN.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IF THE PROPOSED  TRANSFEREE PROVIDES (I) AN AFFIDAVIT
       TO THE  TRUSTEE  THAT (A) SUCH  TRANSFEREE  IS NOT (1) THE  UNITED
       STATES  OR  ANY  POSSESSION   THEREOF,   ANY  STATE  OR  POLITICAL
       SUBDIVISION  THEREOF,  ANY FOREIGN  GOVERNMENT,  ANY INTERNATIONAL
       ORGANIZATION,  OR  ANY  AGENCY  OR  INSTRUMENTALITY  OF ANY OF THE
       FOREGOING,   (2)  ANY  ORGANIZATION   (OTHER  THAN  A  COOPERATIVE
       DESCRIBED  IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX
       IMPOSED  BY  CHAPTER 1 OF THE CODE  UNLESS  SUCH  ORGANIZATION  IS
       SUBJECT TO THE TAX IMPOSED BY SECTION 511

<PAGE>

       OF  THE  CODE,   (3)  ANY   ORGANIZATION   DESCRIBED   IN  SECTION
       1381(A)(2)(C)  OF THE  CODE  (ANY  SUCH  PERSON  DESCRIBED  IN THE
       FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE REFERRED TO
       AS  A   "DISQUALIFIED   ORGANIZATION")   OR  (4)  AN  AGENT  OF  A
       DISQUALIFIED  ORGANIZATION  AND (B) NO PURPOSE OF SUCH TRANSFER IS
       TO IMPEDE  THE  ASSESSMENT  OR  COLLECTION  OF TAX,  AND (II) SUCH
       TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
       FINANCIAL  CONDITION OF THE PROPOSED  TRANSFEREE.  NOTWITHSTANDING
       THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE
       OR  OTHER  DISPOSITION  OF  THIS  CERTIFICATE  TO  A  DISQUALIFIED
       ORGANIZATION  OR AN AGENT  OF A  DISQUALIFIED  ORGANIZATION,  SUCH
       REGISTRATION  SHALL BE  DEEMED  TO BE OF NO LEGAL  FORCE OR EFFECT
       WHATSOEVER   AND  SUCH  PERSON   SHALL  NOT  BE  DEEMED  TO  BE  A
       CERTIFICATEHOLDER  FOR ANY PURPOSE HEREUNDER,  INCLUDING,  BUT NOT
       LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
       HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO
       HAVE  CONSENTED  TO THE  PROVISIONS  OF  THIS  PARAGRAPH  AND  THE
       PROVISIONS  OF  SECTION  5.02(D)  OF  THE  POOLING  AND  SERVICING
       AGREEMENT  REFERRED TO HEREIN.  ANY PERSON THAT IS A  DISQUALIFIED
       ORGANIZATION IS PROHIBITED FROM ACQUIRING  BENEFICIAL OWNERSHIP OF
       THIS CERTIFICATE.

Series 2000-LB1, Class R-II               Aggregate Percentage Interest of the
                                          Class R- II Certificates as of the
Date of Pooling and Servicing Agreement   Issue Date: 100.00%
and Cut-off Date: February 1, 2000
                                          Percentage Interest of this Class R-II
First Distribution Date:                  Certificate: 100.00%
March 27, 2000
                                          Master Servicer:
No. ___                                   Long Beach Mortgage Company

                                          Trustee:  Norwest Bank Minnesota,
                                          National Association

                                          Issue Date: February 25, 2000

                                          CUSIP:

<PAGE>

                 FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-II Certificates as
of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-II Certificates in REMIC II created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-II Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-II Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-II Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the Certificate Register. Notwithstanding the above,
the final distribution on this Certificate will be made after due notice by the
Trustee of the pendency of such distribution and only upon presentation

<PAGE>

                                      -4-

and surrender of this Certificate at the office or agency appointed by the
Trustee for that purpose as provided in the Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -5-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-II Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-II Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.

<PAGE>

                                       -6-

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

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

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, any Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                       Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

          This is one of the Class R-II Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                      Authorized Signatory

<PAGE>

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

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

TEN COM  - as tenants in common           UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

          I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address: _________________________
_______________________________________________________________________________.

Dated:

                                          ______________________________________
                                          Signature by or on behalf of assignor

                                          ______________________________________
                                          Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                               EXHIBIT A-9
                               -----------

                     FORM OF CLASS R-III CERTIFICATE

       THIS  CERTIFICATE  MAY NOT BE TRANSFERRED  TO A NON-UNITED  STATES
       PERSON.

       SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES,  THIS CERTIFI CATE IS
       A  "RESIDUAL  INTEREST"  IN A  "REAL  ESTATE  MORTGAGE  INVESTMENT
       CONDUIT" ("REMIC"), AS THOSE TERMS ARE DEFINED,  RESPECTIVELY,  IN
       SECTIONS  860G AND 860D OF THE INTERNAL  REVENUE CODE OF 1986 (THE
       "CODE").

       THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
       SECURITIES ACT OF 1933, AS AMENDED,  OR THE SECURITIES LAWS OF ANY
       STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
       PURSUANT  TO SUCH  ACT AND  LAWS  OR IS  SOLD  OR  TRANSFERRED  IN
       TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION  UNDER SUCH ACT AND
       UNDER  APPLICABLE  STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
       THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IN ACCORDANCE  WITH THE PROVISIONS OF SECTION 5.02 OF
       THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

       NO TRANSFER OF THIS  CERTIFICATE  TO AN EMPLOYEE  BENEFIT  PLAN OR
       OTHER  RETIREMENT  ARRANGEMENT  (EACH  A  "PLAN")  SUBJECT  TO THE
       EMPLOYEE  RETIREMENT  INCOME  SECURITY  ACT OF  1974,  AS  AMENDED
       ("ERISA"),  OR THE CODE WILL BE  REGISTERED  EXCEPT IN  COMPLIANCE
       WITH THE PROCEDURES DESCRIBED HEREIN.

       ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
       BE MADE ONLY IF THE PROPOSED  TRANSFEREE PROVIDES (I) AN AFFIDAVIT
       TO THE  TRUSTEE  THAT (A) SUCH  TRANSFEREE  IS NOT (1) THE  UNITED
       STATES  OR  ANY  POSSESSION   THEREOF,   ANY  STATE  OR  POLITICAL
       SUBDIVISION  THEREOF,  ANY FOREIGN  GOVERNMENT,  ANY INTERNATIONAL
       ORGANIZATION,  OR  ANY  AGENCY  OR  INSTRUMENTALITY  OF ANY OF THE
       FOREGOING,   (2)  ANY  ORGANIZATION   (OTHER  THAN  A  COOPERATIVE
       DESCRIBED  IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX
       IMPOSED  BY  CHAPTER 1 OF THE CODE  UNLESS  SUCH  ORGANIZATION  IS
       SUBJECT TO THE TAX IMPOSED BY SECTION 511

<PAGE>

                                   -1-

       OF  THE  CODE,   (3)  ANY   ORGANIZATION   DESCRIBED   IN  SECTION
       1381(A)(2)(C)  OF THE  CODE  (ANY  SUCH  PERSON  DESCRIBED  IN THE
       FOREGOING CLAUSES (1), (2) OR (3) SHALL HEREINAFTER BE REFERRED TO
       AS  A   "DISQUALIFIED   ORGANIZATION")   OR  (4)  AN  AGENT  OF  A
       DISQUALIFIED  ORGANIZATION  AND (B) NO PURPOSE OF SUCH TRANSFER IS
       TO IMPEDE  THE  ASSESSMENT  OR  COLLECTION  OF TAX,  AND (II) SUCH
       TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
       FINANCIAL  CONDITION OF THE PROPOSED  TRANSFEREE.  NOTWITHSTANDING
       THE REGISTRATION IN THE CERTIFICATE REGISTER OF ANY TRANSFER, SALE
       OR  OTHER  DISPOSITION  OF  THIS  CERTIFICATE  TO  A  DISQUALIFIED
       ORGANIZATION  OR AN AGENT  OF A  DISQUALIFIED  ORGANIZATION,  SUCH
       REGISTRATION  SHALL BE  DEEMED  TO BE OF NO LEGAL  FORCE OR EFFECT
       WHATSOEVER   AND  SUCH  PERSON   SHALL  NOT  BE  DEEMED  TO  BE  A
       CERTIFICATEHOLDER  FOR ANY PURPOSE HEREUNDER,  INCLUDING,  BUT NOT
       LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS CERTIFICATE. EACH
       HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF SHALL BE DEEMED TO
       HAVE  CONSENTED  TO THE  PROVISIONS  OF  THIS  PARAGRAPH  AND  THE
       PROVISIONS  OF  SECTION  5.02(D)  OF  THE  POOLING  AND  SERVICING
       AGREEMENT  REFERRED TO HEREIN.  ANY PERSON THAT IS A  DISQUALIFIED
       ORGANIZATION IS PROHIBITED FROM ACQUIRING  BENEFICIAL OWNERSHIP OF
       THIS CERTIFICATE.

Series 1999-LB1, Class R-III              Aggregate Percentage Interest of the
                                          Class R-III Certificates as of the
Date of Pooling and Servicing Agreement   Issue Date: 100.00%
and Cut-off Date: February 1, 2000
                                          Percentage Interest of this Class
First Distribution Date:                  R-III Certificate: 100.00%
March 27, 2000
                                          Master Servicer:
No. ___                                   Long Beach Mortgage Company

                                          Trustee:  Norwest Bank Minnesota,
                                          National Association

                                          Issue Date: February 25, 2000

                                          CUSIP:

<PAGE>

                                       -4-

                 FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a Trust Fund (the "Trust Fund")
consisting primarily of a pool of conventional one- to four-family fixed-rate
and adjustable-rate first lien mortgage loans (the "Mortgage Loans") formed and
sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

       THIS  CERTIFICATE  DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST
       IN SALOMON  BROTHERS  MORTGAGE  SECURITIES  VII,  INC., THE MASTER
       SERVICER,  THE  TRUSTEE  OR ANY OF  THEIR  RESPECTIVE  AFFILIATES.
       NEITHER THIS  CERTIFICATE  NOR THE  UNDERLYING  MORTGAGE LOANS ARE
       GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that _____________ is the registered owner of a
Percentage Interest (obtained by dividing the denomination of this Certificate
by the aggregate Certificate Principal Balance of the Class R-III Certificates
as of the Issue Date) in that certain beneficial ownership interest evidenced by
all the Class R-III Certificates in REMIC III created pursuant to a Pooling and
Servicing Agreement, dated as specified above (the "Agreement"), among Salomon
Brothers Mortgage Securities VII, Inc. (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the Master
Servicer and the Trustee, a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, the capitalized
terms used herein have the meanings assigned in the Agreement. This Certificate
is issued under and is subject to the terms, provisions and conditions of the
Agreement, to which Agreement the Holder of this Certificate by virtue of the
acceptance hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-III Certificates on such
Distribution Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by or on behalf of the Trustee by
wire transfer in immediately available funds to the account of the Person
entitled thereto if such Person shall have so notified the Trustee in writing at
least five Business Days prior to the Record Date immediately prior to such
Distribution Date and is the registered owner of Class R-III Certificates the
aggregate initial Certificate Principal Balance of which is in excess of the
lesser of (i) $5,000,000 or (ii) two-thirds of the aggregate initial Certificate
Principal Balance of the Class R-III Certificates, or otherwise by check mailed
by first class mail to the address of the Person entitled thereto, as such name
and address shall appear on the

<PAGE>

                                      -5-

Certificate Register. Notwithstanding the above, the final distribution on this
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Floating Rate Mortgage Pass-Through Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class of Certificates specified on the face hereof
equal to the denomination specified on the face hereof divided by the aggregate
Certificate Principal Balance of the Class of Certificates specified on the face
hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Master Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the Master
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to at least 66% of the Voting Rights. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon the
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent is made upon this Certificate. The Agreement also permits the
amendment thereof, in certain limited circumstances, without the consent of the
Holders of any of the Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
of the same Class in authorized denominations evidencing the same aggregate
Percentage Interest will be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.

<PAGE>

                                       -6-

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Master Servicer in their respective capacities as such), together with
copies of the written certification(s) of the Holder of the Certificate desiring
to effect the transfer and/or such Holder's prospective transferee upon which
such Opinion of Counsel is based. Neither the Depositor nor the Trustee is
obligated to register or qualify the Class of Certificates specified on the face
hereof under the 1933 Act or any other securities law or to take any action not
otherwise required under the Agreement to permit the transfer of such
Certificates without registration or qualification. Any Holder desiring to
effect a transfer of this Certificate shall be required to indemnify the
Trustee, the Depositor and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-III Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-III Certificates. Notwithstanding the
registration in the Certificate Register of any transfer, sale or other
disposition of this Certificate to a Disqualified Organization or an agent
(including a broker, nominee or middleman) of a Disqualified Organization, such
registration shall be deemed to be of no legal force or effect whatsoever and
such Person shall not be deemed to be a Certificateholder for any purpose,
including, but not limited to, the receipt of distributions in respect of this
Certificate.

<PAGE>

                                       -7-

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

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

          The Depositor, the Master Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, any Master Servicer, the Trustee or
the Certificate Registrar may treat the Person in whose name this Certificate is
registered as the owner hereof for all purposes, and none of the Depositor, the
Master Servicer, the Trustee, the Certificate Registrar nor any such agent shall
be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by or on behalf of the Trustee and required to be paid to them pursuant to
the Agreement following the earlier of (i) the final payment or other
liquidation (or any advance with respect thereto) of the last Mortgage Loan
remaining in REMIC I, and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate Stated Principal Balance of the Mortgage Loans at the
Cut-off Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Certificate Registrar, by manual signature, this Certificate shall not be
entitled to any benefit under the Agreement or be valid for any purpose.

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: February __, 2000

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Trustee

                                          By:__________________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

          This is one of the Class R-III Certificates referred to in the
within-mentioned Agreement.

                                          NORWEST BANK MINNESOTA,
                                          NATIONAL ASSOCIATION
                                          as Certificate Registrar

                                          By:__________________________________
                                                   Authorized Signatory

<PAGE>

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

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

TEN COM  - as tenants in common           UNIF GIFT MIN ACT -    Custodian
                                                             -------------
                                                             (Cust)  (Minor)
TEN ENT  - as tenants by the entireties                      under Uniform Gifts
                                                             to Minors Act
JT TEN   - as joint tenants with right                    _______________
           if survivorship and not as                         (State)
           tenants in commo

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

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee)

a Percentage Interest equal to ____% evidenced by the within Floating Rate
Mortgage Pass-Through Certificate and hereby authorize(s) the registration of
transfer of such interest to assignee on the Certificate Register of the Trust
Fund.

                  I (we) further direct the Certificate Registrar to issue a new
Certificate of a like Percentage Interest and Class to the above named assignee
and deliver such Certificate to the following address:

Dated:

                                        Signature by or on behalf of assignor

                                        Signature Guaranteed

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

          The assignee should include the following for purposes of
distribution:

          Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to ________________________________________________
_______________________________________________________________________________
for the account of ___________________, account number ________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to _____________________________________
_______________________________________________________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

<PAGE>

                                    EXHIBIT B

                                   [RESERVED]

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION
                      (ATTACHING CUSTODIAN'S CERTIFICATION)

                                             [Date]

Salomon Brothers Mortgage                            Long Beach Mortgage Company
  Securities VII, Inc.                               1100 Town & Country Road
390 Greenwich Street, 4th Floor                         Orange, California 92868
New York, New York  10013

           Re:  Pooling and Servicing Agreement, dated as of February 1, 2000
                among Salomon Brothers Mortgage Securities VII, Inc.,
                Long Beach Mortgage Company, Norwest Bank Minnesota, National
                Association, Floating Rate Mortgage Pass-Through Certificates
                Series 2000-LB1
                -------------------------------------------------------------

Ladies and Gentlemen:

         Pursuant to Section 2.02 of the Pooling and Servicing Agreement,
attached hereto as Exhibit A is the Custodial Initial Certification delivered by
Chase Bank of Texas, National Association, as Custodian, pursuant to the
Custodial Agreement dated as of February 1, 2000, by and among Norwest Bank
Minnesota, National Association, Salomon Brothers Mortgage Securities VII, Inc.,
Long Beach Mortgage Company and Chase Bank of Texas, National Association.

         The Trustee (nor the Custodian on its behalf) has made no independent
examination of any documents contained in each Mortgage File beyond the review
specifically required in the above- referenced Pooling and Servicing Agreement.
The Trustee makes no representations as to: (i) the validity, legality,
sufficiency, enforceability due authorization, recordability or genuineness of
any of the documents contained in the Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan.

                                                 NORWEST BANK MINNESOTA,
                                                 NATIONAL ASSOCIATION

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

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                       FORM OF TRUSTEE FINAL CERTIFICATION

                                             [Date]

Salomon Brothers Mortgage                            Long Beach Mortgage Company
  Securities VII, Inc.                               1100 Town & Country Road
390 Greenwich Street, 4th Floor                      Orange, California 92868
New York, New York  10013

             Re:   Pooling and Servicing Agreement, dated as of February 1, 2000
                   among Salomon Brothers Mortgage Securities VII, Inc.
                   Long Beach Mortgage Company, and Norwest Bank Minnesota,
                   National Association Floating Rate Mortgage Pass-Through
                   Certificates, Series 2000-LB1
                   -------------------------------------------------------------

Ladies and Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:

                  (a) the original Mortgage Note, endorsed in the following
         form: "Pay to the order of Norwest Bank Minnesota, National
         Association, as Trustee under the applicable agreement, without
         recourse," with all prior and intervening endorsements showing a
         complete chain of endorsement from the originator to the Person so
         endorsing to the Trustee;

                  (b) the original Mortgage with evidence of recording thereon,
         and a copy, certified by the appropriate recording office, of the
         recorded power of attorney, if the Mortgage was executed pursuant to a
         power of attorney, with evidence of recording thereon;

                  (c) an original Assignment of the Mortgage executed in the
         following form: "Norwest Bank Minnesota, National Association, as
         Trustee";

                  (d) the original recorded Assignment or Assignments of the
         Mortgage showing a complete chain of assignment from the originator to
         the Person assigning the Mortgage to the Trustee or as contemplated by
         the immediately preceding clause (c);

                  (e) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any; and

<PAGE>

                  (f) the original lender's title insurance policy, together
         with all endorsements or riders which were issued with or subsequent to
         the issuance of such policy, insuring the priority of the Mortgage as a
         first lien on the Mortgaged Property represented therein as a fee
         interest vested in the Mortgagor, or in the event such original title
         policy is unavailable, a written commitment or uniform binder or
         preliminary report of title issued by the title insurance or escrow
         company.

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

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

                                             NORWEST BANK MINNESOTA,
                                             NATIONAL ASSOCIATION

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

<PAGE>

                                    EXHIBIT D
                                    ---------

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

<PAGE>

                        MORTGAGE LOAN PURCHASE AGREEMENT

                  This is a Mortgage Loan Purchase Agreement (the "Agreement"),
dated February 23, 2000, between Salomon Brothers Mortgage Securities VII, Inc.,
a Delaware corporation (the "Purchaser") and Long Beach Mortgage Company, a
Delaware corporation (the "Seller").

                              PRELIMINARY STATEMENT

                  The Seller intends to sell the Mortgage Loans (as hereinafter
defined) to the Purchaser on the terms and subject to the conditions set forth
in this Agreement. The Purchaser intends to deposit the Mortgage Loans into a
mortgage pool constituting the trust fund. The trust fund will be evidenced by a
single series of floating rate mortgage pass-through certificates designated as
Series 2000-LB1, (the "Certificates"). The Certificates will consist of nine
classes of certificates. The Certificates will be issued pursuant to a Pooling
and Servicing Agreement, dated as of February 1, 2000 (the "Pooling and
Servicing Agreement"), among the Purchaser as depositor, Norwest Bank Minnesota,
National Association as trustee and the Seller as master servicer (in such
capacity, the "Master Servicer"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Pooling and Servicing Agreement.

                  The parties hereto agree as follows:

                  SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell,
and the Purchaser agrees to purchase, on or before February 25, 2000 (the
"Closing Date"), certain fixed-rate and adjustable-rate conventional residential
mortgage loans (the "Mortgage Loans"), having an aggregate principal balance as
of the close of business on February 1, 2000 (the "Cut-off Date") of
approximately $786,718,443 (the "Closing Balance"), after giving effect to all
payments due on the Mortgage Loans on or before the Cut-off Date, whether or not
received.

                  SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the
Seller have agreed upon which of the mortgage loans owned by the Seller are to
be purchased by the Purchaser pursuant to this Agreement and the Seller will
prepare or cause to be prepared on or prior to the Closing Date a final schedule
(the "Closing Schedule") that together shall describe such Mortgage Loans and
set forth all of the Mortgage Loans to be purchased under this Agreement. The
Closing Schedule will conform to the requirements set forth in this Agreement
and to the definition of "Mortgage Loan Schedule" under the Pooling and
Servicing Agreement. The Closing Schedule shall be used as the Mortgage Loan
Schedule under the Pooling and Servicing Agreement.

                  SECTION 3. CONSIDERATION.

                  (a) In consideration for the Mortgage Loans to be purchased
hereunder, the Purchaser shall, as described in Section 8, (i) pay to or upon
the order of the Seller in immediately available funds an amount (the "Purchase
Price") equal to the net sale proceeds of the Class A Certificates, the Class
M-1 Certificates, the Class M-2 Certificates and the Class M-3 Certificates and
(ii) will have delivered to Long Beach Mortgage Securities Corp. upon the order
of the Seller the Class CE Certificates, the Class P Certificates and the
Residual Certificates (the "Long Beach Mortgage Securities Corp. Certificates").

<PAGE>

                                       -2-

                  (b) The Purchaser or any assignee, transferee or designee of
the Purchaser shall be entitled to all scheduled payments of principal due after
the Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.

                  (c) Pursuant to the Pooling and Servicing Agreement, the
Purchaser will assign all of its right, title and interest in and to the
Mortgage Loans, together with its rights under this Agreement, to the Trustee
for the benefit of the related Certificateholders.

                  SECTION 4. TRANSFER OF THE MORTGAGE LOANS.

                  (a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell,
transfer, assign, set over and convey to the Purchaser, without recourse but
subject to the terms of this Agreement, all of its right, title and interest in,
to and under the Mortgage Loans. The contents of each Mortgage File not
delivered to the Purchaser or to any assignee, transferee or designee of the
Purchaser on or prior to the Closing Date are and shall be held in trust by the
Seller for the benefit of the Purchaser or any assignee, transferee or designee
of the Purchaser. Upon the sale of the Mortgage Loans the ownership of each
Mortgage Note, the related Mortgage and the other contents of the related
Mortgage File is vested in the Purchaser and the ownership of all records and
documents with respect to the related Mortgage Loan prepared by or that come
into the possession of the Seller on or after the Closing Date shall immediately
vest in the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.

                  (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on
or prior to the Closing Date, deliver or cause to be delivered to the Purchaser
or any assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:

                  (i) the original Mortgage Note, endorsed in blank or in the
         following form: "Pay to the order of Norwest Bank Minnesota, National
         Association, as Trustee under the applicable agreement, without
         recourse," with all prior and intervening endorsements showing a
         complete chain of endorsement from the originator to the Person so
         endorsing to the Trustee;

                  (ii) the original Mortgage with evidence of recording thereon,
         and a copy, certified by the appropriate recording office, of the
         recorded power of attorney, if the Mortgage was executed pursuant to a
         power of attorney, with evidence of recording thereon;

                  (iii) an original Assignment of Mortgage executed in blank;

                  (iv) the original recorded Assignment or Assignments of the
         Mortgage showing a complete chain of assignment from the originator to
         the Person assigning the Mortgage to the Trustee or as contemplated by
         the immediately preceding clause (iii);

<PAGE>

                                       -3-

                  (v) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any; and

                  (vi) the original lender's title insurance policy, together
         with all endorsements or riders which were issued with or subsequent to
         the issuance of such policy, insuring the priority of the Mortgage as a
         first lien on the Mortgaged Property represented therein as a fee
         interest vested in the Mortgagor, or in the event such original title
         policy is unavailable, a written commitment or uniform binder or
         preliminary report of the title issued by the title insurance or escrow
         company.

                  The Seller shall promptly (and in no event later than thirty
(30) Business Days, subject to extension upon a mutual agreement between the
Seller and the Trustee, following the later of the Closing Date and the date of
receipt by the Seller of recording information for a Mortgage) submit or cause
to be submitted for recording, at no expense to the Trust Fund or the Trustee,
in the appropriate public office for real property records, each Assignment
referred to in (iii) and (iv) above and shall execute each original Assignment
in the following form: "Norwest Bank Minnesota, National Association, as Trustee
under the applicable agreement". In the event that any such Assignment is lost
or returned unrecorded because of a defect therein, the Seller shall promptly
prepare or cause to be prepared a substitute Assignment or cure or cause to be
cured such defect, as the case may be, and thereafter cause each such Assignment
to be duly recorded. Notwithstanding the foregoing, however, for administrative
convenience and facilitation of servicing and to reduce closing costs, the
Assignments shall not be required to be submitted for recording with respect to
any Mortgage Loan only if the Trustee and each Rating Agency has received an
opinion of counsel, satisfactory in form and substance to the Trustee and each
Rating Agency, to the effect that the recordation of such Assignments in any
specific jurisdiction is not necessary to protect the Trustee's interest in the
related Mortgage Note; provided further, however, notwithstanding the delivery
of any opinion of counsel, each Assignment shall be submitted for recording by
the Seller in the manner described above, at no expense to the Trust Fund or
Trustee, upon the earliest to occur of: (i) reasonable direction by Holders of
Certificates entitled to at least 25% of the Voting Rights, (ii) failure of the
Master Servicer Termination Test, (iii) the occurrence of a bankruptcy,
insolvency or foreclosure relating to the Seller, (iv) the occurrence of a
servicing transfer as described in Section 7.02 of the Pooling and Servicing
Agreement and (iv) if the Seller is not the Master Servicer and with respect to
any one Assignment, the occurrence of a bankruptcy, insolvency or foreclosure
relating to the Mortgagor under the related Mortgage. Notwithstanding the
foregoing, if the Seller is unable to pay the cost of recording the Assignments,
such expense will be paid by the Trustee in accordance with Section 2.01 of the
Pooling and Servicing Agreeement.

                  Notwithstanding anything to the contrary contained in this
Section 4, if any document referred to in Section 4(b)(ii), Section 4(b)(iii) or
Section 4(b)(iv) above has been submitted for recording but either (x) has not
been returned from the applicable public recording office or (y) has been lost
or such public recording office has retained the original of such document, the
obligations of the Seller hereunder shall be deemed to have been satisfied upon
(1) delivery by or on behalf of the Seller promptly upon receipt thereof to or
on behalf of the Purchaser or any assignee, transferee or designee of the
Purchaser of a copy of such document certified by the Seller in the case of (x)

<PAGE>

                                       -4-

above or the public recording office in the case of (y) above to be a true and
complete copy of the recorded original thereof and (2) if such copy is certified
by the Seller delivery promptly upon receipt thereof of either the original or a
copy of such document certified by the public recording office to be a true and
complete copy of the original.

                  If the original lender's title insurance policy was not
delivered pursuant to Section 4(b)(vi) above, the Seller shall deliver or cause
to be delivered to the Purchaser or any assignee, transferee or designee of the
Purchaser, promptly after receipt thereof, the original lender's title insurance
policy. The Seller shall deliver or cause to be delivered to the Purchaser or
any assignee, transferee or designee of the Purchaser, promptly upon receipt
thereof any other original documents constituting a part of a Mortgage File
received with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any Mortgage
Loan.

                  Each original document relating to a Mortgage Loan which is
not delivered to the Purchaser or its assignee, transferee or designee, if held
by the Seller, shall be so held for the benefit of the Purchaser or its
assignee, transferee or designee.

                  (c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered
pursuant to Section 4(b) hereof shall be reviewed by the Purchaser or any
assignee, transferee or designee of the Purchaser at any time before or after
the Closing Date (and with respect to each document permitted to be delivered
after the Closing Date within seven days of its delivery) to ascertain that all
required documents have been executed and received and that such documents
relate to the Mortgage Loans identified on the Mortgage Loan Schedule.

                  (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the
right to assign its interest under this Agreement, in whole or in part, to the
Trustee, as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller, and the Trustee shall succeed to
the rights and obligations hereunder of the Purchaser. Any expense reasonably
incurred by or on behalf of the Purchaser or the Trustee in connection with
enforcing any obligations of the Seller under this Agreement will be promptly
reimbursed by the Seller.

                  (e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date,
the Seller shall either (i) deliver in escrow to the Purchaser or to any
assignee, transferee or designee of the Purchaser, for examination, the Mortgage
File pertaining to each Mortgage Loan, or (ii) make such Mortgage Files
available to the Purchaser or to any assignee, transferee or designee of the
Purchaser for examination. Such examination may be made by the Purchaser or the
Trustee, and their respective designees, upon reasonable notice to the Seller
during normal business hours at any time before or after the Closing Date. If
any such person makes such examination prior to the Closing Date and identifies
any Mortgage Loans that do not conform to the requirements of the Purchaser as
described in this Agreement, such Mortgage Loans shall be deleted from the
Closing Schedule. The Purchaser may, at its option and without notice to the
Seller, purchase all or part of the Mortgage Loans without conducting any
partial or complete examination. The fact that the Purchaser or any person has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the rights of the Purchaser or any assignee,
transferee or designee of the

<PAGE>

                                       -5-

Purchaser to demand repurchase or other relief as provided herein or under the
Pooling and Servicing Agreement.

                  SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
                             SELLER.

         The Seller hereby represents and warrants to the Purchaser, as of the
date hereof and as of the Closing Date, and covenants, that:

                  (i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly authorized and qualified to transact any and all business contemplated by
this Agreement to be conducted by the Seller in any state in which a Mortgaged
Property is located or is otherwise not required under applicable law to effect
such qualification and, in any event, is in compliance with the doing business
laws of any such State, to the extent necessary to ensure its ability to enforce
each Mortgage Loan and to service the Mortgage Loans in accordance with the
terms of the Pooling and Servicing Agreement;

                  (ii) The Seller had the full corporate power and authority to
originate, hold and sell each Mortgage Loan and has the full corporate power and
authority to service each Mortgage Loan, and to execute, deliver and perform,
and to enter into and consummate the transactions contemplated by this Agreement
and has duly authorized by all necessary corporate action on the part of the
Seller the execution, delivery and performance of this Agreement; and this
Agreement, assuming the due authorization, execution and delivery thereof by the
Purchaser, constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except to the
extent that (a) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, receivership and other similar laws relating to
creditors' rights generally and (b) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought;

                  (iii) The execution and delivery of this Agreement by the
Seller, the servicing of the Mortgage Loans by the Seller under the Pooling and
Servicing Agreement, the consummation of any other of the transactions herein
contemplated, and the fulfillment of or compliance with the terms hereof are in
the ordinary course of business of the Seller and will not (A) result in a
breach of any term or provision of the charter or by-laws of the Seller or (B)
conflict with, result in a breach, violation or acceleration of, or result in a
default under, the terms of any other material agreement or instrument to which
the Seller is a party or by which it may be bound, or any statute, order or
regulation applicable to the Seller of any court, regulatory body,
administrative agency or governmental body having jurisdiction over the Seller;
and the Seller is not a party to, bound by, or in breach or violation of any
indenture or other agreement or instrument, or subject to or in violation of any
statute, order or regulation of any court, regulatory body, administrative
agency or governmental body having jurisdiction over it, which materially and
adversely affects or, to the Seller's knowledge, would in the future result 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 or materially and adversely

<PAGE>

                                       -6-

affect (x) the ability of the Seller to perform its obligations under this
Agreement or the Pooling and Servicing Agreement or (y) the business,
operations, financial condition, properties or assets of the Seller taken as a
whole;

                  (iv) No consent, approval, authorization or order of any court
or governmental agency or body is required for the execution, delivery and
performance by the Seller of, or compliance by the Seller with, this Agreement
or the consummation of the transactions contemplated hereby, or if any such
consent, approval, authorization or order is required, the Seller has obtained
the same;

                  (v) The Seller is an approved seller/servicer for Fannie Mae
or Freddie Mac in good standing and is a HUD approved mortgagee pursuant to
Section 203 and Section 211 of the National Housing Act;

                  (vi) No litigation is pending against the Seller that would
materially and adversely affect the execution, delivery or enforceability of
this Agreement or the Pooling and Servicing Agreement or the ability of the
Seller to service the Mortgage Loans or to perform any of its other obligations
hereunder in accordance with the terms hereof and the terms of the Pooling and
Servicing Agreement;

                  (vii) No certificate of an officer, statement or other
information furnished in writing or report delivered by the Seller to the
Purchaser, any affiliate of the Purchaser or the Trustee for use in connection
with the purchase of the Mortgage Loans and the transactions contemplated
hereunder and under the Pooling and Servicing Agreement will contain any untrue
statement of a material fact, or omit a material fact necessary to make the
information, certificate, statement or report not misleading in any material
respect;

                  (viii) The Seller has not dealt with any broker, investment
banker, agent or other person, except for the Purchaser or any of its
affiliates, that may be entitled to any commission or compensation in connection
with the sale of the Mortgage Loans;

                  (ix) Each Mortgage Note, each Mortgage, each Assignment and
any other document required to be delivered by or on behalf of the Seller under
this Agreement or the Pooling and Servicing Agreement to the Purchaser or any
assignee, transferee or designee of the Purchaser for each Mortgage Loan has
been or will be, in accordance with Section 4(b) hereof, delivered to the
Purchaser or any such assignee, transferee or designee. With respect to each
Mortgage Loan, the Seller is in possession of a complete Mortgage File in
compliance with the Pooling and Servicing Agreement, except for such documents
that have been delivered (1) to the Purchaser or any assignee, transferee or
designee of the Purchaser or (2) for recording to the appropriate public
recording office and have not yet been returned;

                  (x) The transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller pursuant to this Agreement are not subject
to the bulk transfer or any similar

<PAGE>

                                       -7-

statutory provisions in effect in any relevant jurisdiction, except any as may
have been complied with;

                  (xi) The Seller (A) is a solvent entity and is paying its
debts as they become due and (B) after giving effect to the transfer of the
Mortgage Loans, will be a solvent entity and will have sufficient resources to
pay its debts as they become due;

                  (xii) The form of endorsement of each Mortgage Note satisfied
the requirement, if any, of endorsement in order to transfer all right, title
and interest of the party so endorsing, as noteholder or assignee thereof, in
and to that Mortgage Note; and each Assignment to be delivered hereunder is in
recordable form and is sufficient to effect the assignment of and to transfer to
the assignee thereunder the benefits of the assignor, as mortgagee or assignee
thereof, under each Mortgage to which that Assignment relates;

                  (xiii) The transfer of the Mortgage Loans to the Purchaser at
the Closing Date will be treated by the Seller for financial accounting and
reporting purposes as a sale of assets; and

                  (xiv) Immediately prior to the sale of the Mortgage Loans to
the Purchaser as herein contemplated, the Seller had good title to, and was the
sole owner of, the Mortgage Loans, and such sale validly transfers the Mortgage
Loans to the Purchaser free and clear of any pledge, lien, encumbrance or
security interest.

                  SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE SELLER
                             RELATING TO THE INDIVIDUAL MORTGAGE LOANS.

         The Seller hereby represents and warrants to the Purchaser, that as of
the Closing Date:

                  (i) The information set forth on the Mortgage Loan Schedule
with respect to each Mortgage Loan is complete, true and correct in all material
respects;

                  (ii) The Mortgage Loan is in compliance with the
characteristics of the Mortgage Loans as set Forth on Exhibit 1;

                  (iii) As of January 31, 2000, the Monthly Payment due under
each Mortgage Loan is not 30 or more days delinquent in payment and none of the
Mortgage Loans will have been contractually delinquent for more than 30 days
more than once during the preceding twelve months and, except as provided above,
no Mortgage Loan will ever have experienced a delinquency of 60 or more days
since the origination thereof;

                  (iv) Each Mortgage is a valid and enforceable first lien on
the Mortgaged Property, including all improvements thereon, subject only to (a)
the lien of nondelinquent current real property taxes and assessments, (b)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically

<PAGE>

                                       -8-

reflected in the appraisal made in connection with the origination of the
related Mortgage Loan, and (c) other matters to which like properties are
commonly subject which do not materially interfere with the benefits of the
security intended to be provided by such Mortgage;

                  (v) Immediately prior to the assignment of the Mortgage Loans
to the Purchaser, the Seller had good title to, and was the sole legal and
beneficial owner of, each Mortgage Loan free and clear of any pledge, lien,
encumbrance or security interest and has full right and authority, subject to no
interest or participation of, or agreement with, any other party to sell and
assign the same;

                  (vi) To the best of the Seller's knowledge, there is no
delinquent tax or assessment lien against any Mortgaged Property;

                  (vii) There is no valid offset, defense or counterclaim to any
Mortgage Note or Mortgage, including the obligation of the Mortgagor to pay the
unpaid principal of or interest on such Mortgage Note, nor will the operation of
any of the terms of the Mortgage Note and the Mortgage, or the exercise of any
right thereunder, render 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;

                  (viii) To the best of the Seller's knowledge, there are no
mechanics' liens or claims for work, labor or material affecting any Mortgaged
Property which are or may be a lien prior to, or equal with, the lien of the
related Mortgage, except those which are insured against by the title insurance
policy referred to in (xii) below;

                  (ix) To the best of the Seller's knowledge, each Mortgaged
Property is free of material damage and is in average repair;

                  (x) Each Mortgage Loan at origination complied in all material
respects with applicable local, state and federal laws, including, without
limitation, usury, equal credit opportunity, real estate settlement procedures,
truth-in-lending and disclosure laws, and consummation of the transactions
contemplated hereby will not involve the violation of any such laws;

                  (xi) Neither the Seller nor any prior holder of any Mortgage
has modified the Mortgage in any material respect (except that a Mortgage Loan
may have been modified by a written instrument which has been recorded, if
necessary, to protect the interests of the Seller and the Purchaser and which
has been delivered to the Custodian); satisfied, cancelled or subordinated such
Mortgage in whole or in part; released the related Mortgaged Property in whole
or in part from the lien of such Mortgage; or executed any instrument of
release, cancellation, modification or satisfaction with respect thereto;

                  (xii) A lender's policy of title insurance together with a
condominium endorsement and extended coverage endorsement, if applicable, and,
with respect to each Adjustable Rate

<PAGE>

                                       -9-

Mortgage Loan, an adjustable rate mortgage endorsement in an amount at least
equal to the balance of the Mortgage Loan as of the Cut-off Date, or a
commitment (binder) to issue the same was effective on the date of the
origination of each Mortgage Loan, each such policy is valid and remains in full
force and effect, the transfer of the related Mortgage Loan to the Purchaser
will not affect the validity or enforceability of such policy and each such
policy was issued by a title insurer qualified to do business in the
jurisdiction where the Mortgaged Property is located and acceptable to Fannie
Mae or Freddie Mac and in a form acceptable to Fannie Mae or Freddie Mac, which
policy insures the Seller and successor owners of indebtedness secured by the
insured Mortgage, as to the first priority lien of the Mortgage; to the best of
the Seller's knowledge, no claims have been made under such mortgage title
insurance policy and no prior holder of the related Mortgage, including the
Seller, has done, by act or omission, anything which would impair the coverage
of such mortgage title insurance policy;

                  (xiii) Each Mortgage Loan was originated by the Seller (or, if
generated on behalf of the Seller by a Person other than the Seller, is subject
to the same standards and procedures used by the Seller in originating mortgage
loans directly) or by a savings and loan association, savings bank, commercial
bank, credit union, insurance company or similar institution which is supervised
and examined by a federal or state authority, or by a mortgagee approved by the
Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of
the National Housing Act;

                  (xiv) With respect to each Adjustable Rate Mortgage Loan on
each Adjustment Date, the Mortgage Interest Rate will be adjusted to equal the
Index plus the Gross Margin, rounded to the nearest 0.125%, subject to the
Periodic Rate Cap, the Maximum Rate and the Minimum Rate. Except for Balloon
Loans, the related Mortgage Note is payable on the first day of each month in
self-amortizing monthly installments of principal and interest, with interest
payable in arrears, and requires a Monthly Payment which is sufficient to fully
amortize the outstanding principal balance of the Mortgage Loan over its
remaining term and to pay interest at the applicable Mortgage Rate. No Mortgage
Loan is subject to negative amortization;

                  (xv) To the best of the Seller's knowledge, all of the
improvements which were included for the purpose of determining the Value of the
Mortgaged Property lie wholly within the boundaries and building restriction
lines of such property, and no improvements on adjoining properties encroach
upon the Mortgaged Property;

                  (xvi) All inspections, licenses and certificates required to
be made or issued with respect to all occupied portions of the Mortgaged
Property and, with respect to the use and occupancy of the same, including but
not limited to certificates of occupancy, have been made or obtained from the
appropriate authorities and to the best of the Seller's knowledge, the Mortgaged
Property is lawfully occupied under applicable law;

                  (xvii) All parties which have had any interest in the
Mortgage, whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located;

<PAGE>

                                      -10-

                  (xviii) The Mortgage Note and the related Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms and with applicable laws. To
the best of the Seller's knowledge, all parties to the Mortgage Note and the
Mortgage had legal capacity to execute the Mortgage Note and the Mortgage and
each Mortgage Note and Mortgage have been duly and properly executed by such
parties;

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

                  (xx) The related Mortgage contains customary and enforceable
provisions which render the rights and remedies of the holder thereof adequate
for the realization against the 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 to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage;

                  (xxi) 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 Purchaser to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;

                  (xxii) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary arrangements
for repayment thereof have not been made, and no escrow deposits or payments of
other charges or payments due the Seller have been capitalized under the
Mortgage or the related Mortgage Note;

                  (xxiii) The origination, underwriting and collection practices
used by the Seller with respect to each Mortgage Loan have been in all respects
legal, proper, prudent and customary in the mortgage servicing business;

                  (xxiv) There is no pledged account or other security other
than real estate securing the Mortgagor's obligations;

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

                  (xxvi) No Mortgage Loan provides for primary mortgage
insurance;

                  (xxvii) The improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy with a generally
acceptable carrier that provides for fire extended

<PAGE>

                                      -11-

coverage and such other hazards as are customary in the area where the Mortgaged
Property is located representing coverage not less than the lesser of the
outstanding principal balance of the related Mortgage Loan or the minimum amount
required to compensate for damage or loss on a replacement cost basis. All
individual insurance policies and flood policies referred to in clause (xxviii)
below contain a standard mortgagee clause naming the Seller or the original
mortgagee, and its successors in interest, as mortgagee, and the Seller has
received no notice that any premiums due and payable thereon have not been paid;
the Mortgage obligates the Mortgagor thereunder to maintain all such insurance,
including flood insurance, at the Mortgagor's cost and expense, and upon the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain
and maintain such insurance at the Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;

                  (xxviii) If the 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 in a form meeting the
requirements of the current guidelines of the Flood 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 (A) the
original outstanding principal balance of the Mortgage Loan, (B) the minimum
amount required to compensate for damage or loss on a replacement cost basis or
(C) the maximum amount of insurance that is available under the Flood Disaster
Protection Act of 1973;

                  (xxix) There is no default, breach, violation or event of
acceleration existing under the Mortgage or the related Mortgage Note; and the
Seller has not waived any default, breach, violation or event of acceleration;

                  (xxx) Each Mortgaged Property is improved by a one- to
four-family residential dwelling, including condominium units and dwelling units
in planned unit developments, which, to the best of the Seller's knowledge, does
not include cooperatives or mobile homes and does not constitute property other
than real property under state law;

                  (xxxi) There is no obligation on the part of the Seller or any
other party under the terms of the Mortgage or related Mortgage Note to make
payments in addition to those made by the Mortgagor;

                  (xxxii) Any future advances made prior to the Cut-off Date
have been consolidated with the outstanding principal amount secured by the
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the related Mortgage Loan
Schedule. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;

                  (xxxiii) Each Mortgage Loan was underwritten in accordance
with the Seller's underwriting guidelines as described in the Prospectus
Supplement;

<PAGE>

                                      -12-

                  (xxxiv) The Mortgage File contains an appraisal which was
performed by an appraiser who satisfied, and which was conducted in accordance
with, all of the applicable requirements of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended;

                  (xxxv) None of the Mortgage Loans is a graduated payment
mortgage loan, nor is any Mortgage Loan subject to a temporary buydown or
similar arrangement;

                  (xxxvi) With respect to each Mortgage Loan, no loan junior in
lien priority to such Mortgage Loan and secured by the related Mortgaged
Property was originated by the Seller at the time of origination of such
Mortgage Loan;

                  (xxxvii) The Mortgage contains an enforceable provision for
the acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder;

                  (xxxviii) No 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;

                  (xxxix) Each Mortgage Loan constitutes a "qualified mortgage"
within the meaning of Section 860(G)(a)(3) of the Code;

                  (xl) The information set forth in the Prepayment Charge
Schedule is complete, true and correct in all material respects at the date or
dates respecting with such information is furnished and each Prepayment Charge
is permissible and enforceable in accordance with its terms upon the Mortgagor's
full and voluntary Principal Prepayment (except to the extent that: (1) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
receivership and other similar laws relating to creditors' rights generally; (2)
the collectability thereof may be limited due to acceleration in connection with
a foreclosure or other involuntary prepayment; or (3) subsequent changes in
applicable law may limit or prohibit enforceability thereof) under applicable
law; and

                  (xli) For any Mortgage Loan with a first Due Date subsequent
to December 1, 1999, the related Mortgagor shall not fail to make the first
Monthly Payment due under such Mortgage Loan within forty-five (45) days after
the Due Date on which such Monthly Payment was due (a "First Payment Default").

<PAGE>

                                      -13-

                  SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION
                             AND FOR BREACH OF REPRESENTATION AND WARRANTY.

                  (a) The representations and warranties contained in Section 6
shall not be impaired by any review and examination of loan files or other
documents evidencing or relating to the Mortgage Loans or any failure on the
part of the Seller or the Purchaser to review or examine such documents and
shall inure to the benefit of any assignee, transferee or designee of the
Purchaser, including the Trustee for the benefit of holders of floating rate
mortgage pass-through certificates evidencing an interest in all or a portion of
the Mortgage Loans. With respect to the representations and warranties contained
herein which are made to the knowledge or the best of knowledge of the Seller,
or as to which the Seller has no knowledge, if it is discovered that the
substance of any such representation and warranty was inaccurate as of the date
such representation and warranty was made or deemed to be made, and such
inaccuracy materially and adversely affects the value of the related Mortgage
Loan or the interest therein of the Purchaser or the Purchaser's assignee,
transferee or designee, then notwithstanding the lack of knowledge by the Seller
with respect to the substance of such representation and warranty being
inaccurate at the time the representation and warranty was made, the Seller
shall take such action described in the following paragraph in respect of such
Mortgage Loan.

                  Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by the Seller (as listed on
the Trustee's Preliminary Exception Report), as part of, any Mortgage File or of
a breach of any of the representations and warranties contained in Section 5 or
Section 6 that materially and adversely affects the value of any Mortgage Loan,
the party discovering the breach shall give prompt written notice to the others.
Within ninety (90) days of its discovery or its receipt of notice of any such
missing documentation which was not transferred to the Purchaser as described
above or materially defective documentation or any such breach of a
representation and warranty, the Seller promptly shall deliver such missing
document or cure such defect or breach in all material respects, or in the event
the Seller cannot deliver such missing document or such defect or breach cannot
be cured, the Seller shall, within 90 days of its discovery or receipt of
notice, either (i) repurchase the affected Mortgage Loan at a price equal to the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement)
or (ii) pursuant to the provisions of the Pooling and Servicing Agreement, cause
the removal of such Mortgage Loan from the Trust Fund and substitute one or more
Qualified Substitute Mortgage Loans. The Seller shall amend the Closing Schedule
to reflect the withdrawal of such Mortgage Loan from the terms of this Agreement
and the Pooling and Servicing Agreement and the addition, if any, of a Qualified
Substitute Mortgage Loan. The Seller shall deliver to the Purchaser such amended
Closing Schedule and shall deliver such other docu ments as are required by this
Agreement or the Pooling and Servicing Agreement within five (5) days of any
such amendment. Any repurchase pursuant to this Section 7(a) shall be
accomplished by deposit in the Collection Account of the amount of the Purchase
Price in accordance with Section 2.03 of the Pooling and Servicing Agreement.
Any repurchase or substitution required by this Section shall be made in a
manner consistent with Section 2.03 of the Pooling and Servicing Agreement.

<PAGE>

                                      -14-

                  (b) It is understood and agreed that the obligations of the
Seller set forth in this Section 7 to cure, repurchase or substitute for a
defective Mortgage Loan constitute the sole remedies of the Purchaser against
the Seller respecting a missing or defective document or a breach of the rep
resentations and warranties contained in Section 5 or Section 6.

                  SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The
closing of the purchase and sale of the Mortgage Loans shall be held at the New
York City office of Thacher Proffitt & Wood at 10:00 AM New York City time on
the Closing Date.

                  The closing shall be subject to each of the following
conditions:

                  (a)      All of the representations and warranties of the
                           Seller under this Agreement shall be true and correct
                           in all material respects as of the date as of which
                           they are made and no event shall have occurred which,
                           with notice or the passage of time, would constitute
                           a default under this Agreement;

                  (b)      The Purchaser shall have received, or the attorneys
                           of the Purchaser shall have received in escrow (to be
                           released from escrow at the time of closing), all
                           Closing Documents as specified in Section 9 of this
                           Agreement, in such forms as are agreed upon and
                           acceptable to the Purchaser, duly executed by all
                           signatories other than the Purchaser as required
                           pursuant to the respective terms thereof;

                  (c)      The Seller shall have delivered or caused to be
                           delivered and released to the Purchaser or to its
                           designee, all documents (including without
                           limitation, the Mortgage Loans) required to be so
                           delivered by the Purchaser pursuant to Section 2.01
                           of the Pooling and Servicing Agreement; and

                  (d)      All other terms and conditions of this Agreement
                           shall have been complied with.

                  Subject to the foregoing conditions, the Purchaser shall
deliver or cause to be delivered to the Seller on the Closing Date, against
delivery and release by the Seller to the Trustee of all documents required
pursuant to the Pooling and Servicing Agreement, the consideration for the
Mortgage Loans as specified in Section 3 of this Agreement, by delivery to the
Seller of the Purchase Price in immediately available funds and delivery of the
Long Beach Mortgage Securities Corp. Certificates to Long Beach Mortgage
Securities Corp.

                  SECTION 9. CLOSING DOCUMENTS. Without limiting the generality
of Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:

                  (a)      An Officers' Certificate of the Seller, dated the
                           Closing Date, upon which the Purchaser and Salomon
                           Smith Barney Inc. (the "Underwriter") may rely, in
                           the form of Exhibit 2 hereto, and attached thereto
                           copies of the certificate of

<PAGE>

                                      -15-

                           incorporation, by-laws and certificate of good
                           standing of the Seller under the laws of Delaware;

                  (b)      An Officers' Certificate of the Seller, dated the
                           Closing Date, upon which the Purchaser and the
                           Underwriter may rely, in the form of Exhibit 3
                           hereto, with respect to certain facts regarding the
                           sale of the Mortgage Loans by the Seller to the
                           Purchaser;

                  (c)      An Opinion of Counsel of the Seller, dated the
                           Closing Date and addressed to the Purchaser and the
                           Underwriter, substantially in the form attached
                           hereto as Exhibit 4;

                  (d)      Such opinions of counsel as the Rating Agencies or
                           the Trustee may request in connection with the sale
                           of the Mortgage Loans by the Seller to the Purchaser
                           or the Seller's execution and delivery of, or
                           performance under, this Agreement;

                   (e)     A letter from Deloitte & Touche L.L.P., certified
                           public accountants, dated the date hereof and to the
                           effect that they have performed certain specified
                           procedures as a result of which they determined that
                           certain information of an accounting, financial or
                           statistical nature set forth in the Purchaser's
                           Prospectus Supplement, dated February 23, 2000, under
                           the captions "Summary of Prospectus Supplement," "The
                           Mortgage Pool," "Yield on the Certificates,"
                           "Description of the Certificates" and "Pooling and
                           Servicing Agreement--The Master Servicer" agrees with
                           the records of the Seller;

                  (f)      The Seller shall deliver to the Purchaser for
                           inclusion in the Prospectus Supplement under the
                           captions "The Mortgage Pool--Underwriting Standards;
                           Representations" and "Pooling and Servicing
                           Agreement--The Master Servicer," or for inclusion in
                           other offering material such publicly available
                           information regarding the Seller, its financial
                           condition and its mortgage loan delinquency,
                           foreclosure and loss experience, underwriting
                           standards, lending activities and loan sales,
                           production, and servicing and collection practices,
                           and any similar nonpublic, unaudited financial
                           information; and

                   (g)     Such further information, certificates, opinions and
                           documents as the Purchaser or the Underwriter may
                           reasonably request.

                  SECTION 10. COSTS. The Seller shall pay (or shall reimburse
the Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and the
fees for recording Assignments of Mortgage, the fees and expenses of the
Seller's in-house accountants and

<PAGE>

                                      -16-

attorneys, the costs and expenses incurred in connection with determining the
Seller's loan loss, foreclosure and delinquency experience, the costs and
expenses incurred in connection with obtaining the documents referred to in
Sections 9(d) and 9(e), the cost of an opinion of counsel regarding the true
sale of the mortgage loans, the legal fees and disbursements of counsel to the
Underwriter which shall not exceed $30,000, the costs and expenses of printing
(or otherwise reproducing) and delivering this Agreement, the Pooling and
Servicing Agreement, the Certificates, the prospectus, prospectus supplement,
and private placement memorandum relating to the Certificates and other related
documents, the initial fees, costs and expenses of the Trustee, the fees and
expenses of the Purchaser's counsel in connection with the preparation of all
documents relating to the securitization of the Mortgage Loans, the filing fee
charged by the Securities and Exchange Commission for registration of the
Certificates, the cost of any opinions of outside special counsel that may be
required for the Seller, the cost of obtaining the documents referred to in
Section 9(e) hereof and the fees charged by any rating agency to rate the
Certificates. All other costs and expenses in connection with the transactions
contemplated hereunder shall be borne by the party incurring such expense.

                  SECTION 11. SERVICING. The Seller has represented to the
Purchaser that the Mortgage Loans are being serviced in accordance with the
terms of the Pooling and Servicing Agreement, and it is understood and agreed by
and between the Seller and the Purchaser that any interim servicing arrangements
with the Seller will be superseded by the servicing arrangements set forth in
the Pooling and Servicing Agreement.

                  SECTION 12. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans described on the
Mortgage Loan Schedule in accordance with the terms and conditions of this
Agreement is mandatory. It is specifically understood and agreed that each
Mortgage Loan is unique and identifiable on the date hereof and that an award of
money damages would be insufficient to compensate the Purchaser for the losses
and damages incurred by the Purchaser in the event of the Seller's failure to
deliver the Mortgage Loans on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in the
Seller's interest in each Mortgage Loan and each document and instrument
evidencing each such Mortgage Loan to secure the performance by the Seller of
its obligation hereunder, and the Seller agrees that it holds such Mortgage
Loans in custody for the Purchaser, subject to (i) the Purchaser's right, prior
to the Closing Date, to reject any Mortgage Loan to the extent permitted by this
Agreement and (ii) the Purchaser's obligation to deliver or cause to be
delivered the consideration for the Mortgage Loans pursuant to Section 8 hereof.
Any Mortgage Loans rejected by the Purchaser shall concurrently therewith be
released from the security interest created hereby. The Seller agrees that, upon
acceptance of the Mortgage Loans by the Purchaser or its designee and delivery
of payment to the Seller, that its security interest in the Mortgage Loans shall
be released. All rights and remedies of the Purchaser under this Agreement are
distinct from, and cumulative with, any other rights or remedies under this
Agreement or afforded by law or equity and all such rights and remedies may be
exercised concurrently, independently or successively.

                  Notwithstanding the foregoing, if on the Closing Date, each of
the conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be

<PAGE>

                                      -17-

paid the Purchase Price, or any such condition shall not have been waived or
satisfied and the Purchaser determines not to pay or cause to be paid the
Purchase Price, the Purchaser shall immediately effect the redelivery of the
Mortgage Loans, if delivery to the Purchaser has occurred and the security
interest created by this Section 12 shall be deemed to have been released.

                  SECTION 13. NOTICES. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered to or mailed by registered mail, postage prepaid, or
transmitted by telex or telegraph and confirmed by a similar mailed writing, if
to the Purchaser, addressed to the Purchaser at 390 Greenwich Street, 4th Floor,
New York, New York 10013, Attention: Mortgage Finance Group, or such other
address as may hereafter be furnished to the Seller in writing by the Purchaser;
if to the Seller, addressed to the Seller at 1100 Town & Country Road, Suite
1650, Orange, California 92868, Attention: General Counsel, or to such other
address as the Seller may designate in writing to the Purchaser.

                  SECTION 14. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement which is prohibited or which is
held to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement which
is prohibited or unenforceable or is held to be void 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 as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

                  SECTION 15. AGREEMENT OF PARTIES. The Seller and the Purchaser
each agree to execute and deliver such instruments and take such actions as
either of the others may, from time to time, reasonably request in order to
effectuate the purpose and to carry out the terms of this Agree ment and the
Pooling and Servicing Agreement.

                  SECTION 16. SURVIVAL. (a) The Seller agrees that the
representations, warranties and agreements made by it herein and in any
certificate or other instrument delivered pursuant hereto shall be deemed to be
relied upon by the Purchaser, notwithstanding any investigation heretofore or
hereafter made by the Purchaser or on its behalf, and that the representations,
warranties and agreements made by the Seller herein or in any such certificate
or other instrument shall survive the delivery of and payment for the Mortgage
Loans 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, the Pooling and Servicing Agreement or
the Trust Fund.

                  SECTION 17. INDEMNIFICATION. (a) The Seller will indemnify and
hold harmless each of (i) Salomon Smith Barney Inc. (the "Underwriter"), (ii)
the Purchaser and (iii) each person, if any, who controls the Underwriter or the
Purchaser within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act") or the Securities Exchange Act of 1934, as amended (the
"1934 Act") ((i) through (iii) collectively, the "Indemnified Party") against
any and all losses, claims,

<PAGE>

                                      -18-

expenses, damages or liabilities to which the Indemnified Party may become
subject, under the 1933 Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Prospectus Supplement dated February 23, 2000 (the
"Prospectus Supplement"), as amended or supplemented, relating to the public
offering of the Certificates, representing interests in the Mortgage Loans, or
in any other offering document (the "Private Placement Memorandum") relating to
the offering by the Purchaser or an affiliate thereof, of the Class CE
Certificates or Class P Certificates, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with (i) information
furnished in writing to the Purchaser or any of its affiliates by the Seller
specifically for use therein, which shall include, with respect to the
Prospectus Supplement, the information set forth under the captions "Summary of
Prospectus Supplement--The Mortgage Loans," "Risk Factors" (but only to the
extent that the information under "Risk Factors" has been furnished by the
Seller), "The Mortgage Pool," "Pooling and Servicing Agreement--The Master
Servicer" and, with respect to any Private Placement Memorandum, any information
of a comparable nature, (ii) the data files containing information with respect
to the Mortgage Loans as transmitted by modem to the Purchaser by the Seller or
any of its affiliates (as such transmitted information may have been amended in
writing by the Seller or any of its affiliates and received by the Purchaser
subsequent to transmission) specifically for use therein, which shall include,
with respect to the Prospectus Supplement, the information set forth under the
captions "Summary of Prospectus Supplement--The Mortgage Loans," "Risk Factors"
(but only to the extent that the information under "Risk Factors" has been
furnished by the Seller), "The Mortgage Pool," "Pooling and Servicing
Agreement--The Master Servicer" and, with respect to any Private Placement
Memorandum, any information of a comparable nature or (iii) any representation,
warranty or covenant made by the Seller or any affiliate of the Seller in this
Agreement and the Pooling and Servicing Agreement, on which the Indemnified
Party has relied ((i) through (iii) collectively "Seller Information"),
provided, however, that to the extent that any such losses, claims, expenses,
damages or liabilities to which the Indemnified Party may become subject arise
out of or are based upon both (1) statements, omissions, representations,
warranties or covenants of the Seller described above and (2) any other factual
basis, the Seller shall indemnify and hold harmless the Indemnified Party only
to the extent that the losses, claims, expenses, damages or liabilities of the
person or persons asserting the claim are determined to arise from or be based
only upon matters set forth in clause (1) above. The Seller's liability under
this Section 17 shall be in addition to any other liability the Seller may
otherwise have.

                  (b) The Purchaser agrees to indemnify and hold harmless the
Seller, its officers and its directors, and each person who controls the Seller
within the meaning of either the 1933 Act or the 1934 Act against any and all
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act, the 1934 Act, or other federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based in whole or in part upon any untrue statement or alleged untrue
statement of a material fact contained in the Prospectus Supplement, the
Prospectus

<PAGE>

                                      -19-

or Private Placement Memorandum, or in any revision or amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances in
which they were made, not misleading, as of the date thereof and as of the
Closing Date, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made therein in reliance upon and in conformity with the Seller's
Information and will reimburse the Seller and any controlling person for any
legal or other expenses reasonably incurred by such Seller and any controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action. The Purchaser's liability under this Section 17
shall be in addition to any other liability the Purchaser may otherwise have.

                  (c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 17(a) or 17(b) above, such
person (the "indemnified party") shall promptly notify the person against whom
such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the reasonable fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel, but the reasonable fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm for all such indemnified parties.
Such firm shall be designated in writing by the Purchaser, in the case of
parties indemnified pursuant to clause 17(a) and by the Seller, in the case of
parties indemnified pursuant to clause 17(b). The indemnifying party may, at its
option, at any time upon written notice to the indemnified party, assume the
defense of any proceeding and may designate counsel satisfactory to the
indemnified party in connection therewith provided that the counsel so
designated would have no actual or potential conflict of interest in connection
with such representation. Unless it shall assume the defense of any proceeding,
the indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If the indemnifying party assumes the defense of
any proceeding, it shall be entitled to settle such proceeding with the consent
of the indemnified party or, if such settlement provides for release of the
indemnified party in connection with all matters relating to the proceeding
which have been asserted against the indemnified party in such proceeding by the
other parties to such settlement, without the consent of the indemnified party.

<PAGE>

                                      -20-

                  (d) If the indemnification provided for in this Section 17 is
unavailable to an indemnified party under Section 17(a) or 17(b) hereof or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities, in
such proportion as is appropriate to reflect the relative fault of the
indemnified and indemnifying parties in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
indemnified and indemnifying parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such parties and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

                  (e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
Section 17 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Seller on grounds of policy or otherwise, the
Seller on the one hand and the Purchaser on the other hand shall contribute to
the aggregate losses, claims, damages and liabilities (including legal and other
expenses reasonably incurred in connection with investigating or defending same)
(collectively, "Losses") to which the Seller on the one hand and the Purchaser
on the other hand may be subject in such proportion as is appropriate to reflect
the relative benefits received by the Seller on the one hand and the Purchaser
on the other hand from the sale of the Mortgage Loans; PROVIDED, HOWEVER, that
in no case shall the Purchaser be responsible for any amount in excess of 0.25%
of the aggregate initial principal balance of the Mortgage Loans. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Seller on the one hand and the Purchaser on the other hand shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Seller on the one hand and
the Purchaser on the other hand in connection with the statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Seller shall be deemed to be equal to
the total net proceeds from the sale (before deducting expenses) and benefits
received by the Purchaser shall be deemed to be equal to 0.25% of the aggregate
initial principal balance of the Mortgage Loans. Relative fault shall be
determined by reference to whether any alleged untrue statement or omission
relates to the information provided by the Seller on the one hand or the
Purchaser on the other hand. The Seller and the Purchaser agree that it would
not be just and equitable if contribution were determined by pro rata allocation
or any other method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph 17(e), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 17, each person, if any, who
controls the Purchaser within the meaning of the Securities Act or the 1934 Act
and each director, officer, employee and agent of the Purchaser shall have the
same rights to contribution as the Purchaser, and each person, if any, who
controls the Seller within the meaning of either the Securities Act or the 1934
Act and each director of the Seller shall have the same rights to contribution
as the Seller, subject in each case to the applicable terms and conditions of
this paragraph 17(e).

<PAGE>

                                      -21-

                  (f) The indemnity and contribution agreements contained in
this Section 17 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement, (ii) any investigation made by the
Purchaser or any person controlling the Purchaser or by or on behalf of the
Seller and their respective directors or officers or any person controlling the
Seller, and (iii) acceptance of and payment for any of the Certificates.

                  SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS,
DUTIES, OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (INCLUDING THE CHOICE OF LAW
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO INTEND
THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW
SHALL APPLY TO THIS AGREEMENT.

                  SECTION 19. MISCELLANEOUS. This Agreement may be executed in
two or more counterparts, each of which when so executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Seller to the Purchaser as provided in
Section 4 hereof be, and be construed as, a sale of the Mortgage Loans by the
Seller to the Purchaser and not as a pledge of the Mortgage Loans by the Seller
to the Purchaser to secure a debt or other obligation of the Seller. However, in
the event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then, (a) it is the
express intent of the parties that such conveyance be deemed a pledge of the
Mortgage Loans by the Seller to the Purchaser to secure a debt or other
obligation of the Seller and (b) (1) this Agreement shall also be deemed to be a
security agreement within the meaning of Articles 8 and 9 of the New York
Uniform Commercial Code; (2) the conveyance provided for in Section 4 hereof
shall be deemed to be a grant by the Seller to the Purchaser of a security
interest in all of the Seller's right, title and interest in and to the Mortgage
Loans and all amounts payable to the holders of the Mortgage Loans in accordance
with the terms thereof and all proceeds of the con version, voluntary or
involuntary, of the foregoing into cash, instruments, securities or other
property, including without limitation all amounts, other than investment
earnings, from time to time held or invested in the Collection Account whether
in the form of cash, instruments, securities or other property; (3) the
possession by the Purchaser or its agent of Mortgage Notes, the related
Mortgages and such other items of property that 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
Section 9-305 of the New York Uniform Commercial Code; and (4) notifications to
persons holding such property, and acknowledgments, receipts or

<PAGE>

                                      -22-

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 Purchaser for the
purpose of perfecting such security interest under applicable law. Any
assignment of the interest of the Purchaser pursuant to Section 4(d) hereof
shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, 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 and the Pooling and Servicing Agreement.

<PAGE>

                                      -23-

                  IN WITNESS WHEREOF, the Purchaser and the Seller have caused
their names to be signed by their respective officers thereunto duly authorized
as of the date first above written.

                                         SALOMON BROTHERS MORTGAGE
                                         SECURITIES VII, INC.

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

                                         LONG BEACH MORTGAGE COMPANY

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

<PAGE>

                                                                       EXHIBIT 1

                  Pool Characteristics of the Mortgage Loans as delivered on the
Closing Date:

                  All percentages set forth herein are based upon the aggregate
unpaid principal balances of the Mortgage Loans as of the Cut-off Date.

         (1)      No Mortgage Loan had a Loan-to-Value Ratio at origination in
                  excess of 90.00%;

         (2)      No more than 0.42% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance), are related to Mortgaged
                  Properties located in any one zip code area;

         (3)      Each Mortgaged Property is located in one of the states listed
                  in the chart entitled "Geographic Distribution of the
                  Mortgaged Properties" in the Prospectus Supplement;

         (4)      No more than approximately 5.68% of the Mortgage Loans
                  (measured by the Cut-off Date Principal Balance) are secured
                  by condominium units and all condominium Mortgage Loans have
                  been originated on a form acceptable to Fannie Mae or Freddie
                  Mac with such riders as have been acceptable to Fannie Mae or
                  Freddie Mac, as the case may be;

         (5)      No more than 4.05% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance) are secured by two- to
                  four-family dwellings. No more than 0.18% of the Mortgage
                  Loans (measured by the Cut-off Date Principal Balance) are
                  secured by Town Houses. No more than 2.63% of the Mortgage
                  Loans (measured by the Cut-off Date Principal Balance) are
                  secured by Manufactured Housing. No more than 8.31% of the
                  Mortgage Loans (measured by the Cut-off Date Principal
                  Balance) are secured by dwelling units in PUDs;

         (6)      No Mortgage Loan had a principal balance in excess of $720,000
                  at origination;

         (7)      Each Mortgage Loan was originated on or after [month/year] and
                  each Adjustable Rate Mortgage Loan has a next Adjustment Date
                  no later than February 2003;

         (8)      On the basis of representations made by the Mortgagors in
                  their loan applications, no more than 1.12% of the Mortgage
                  Loans are secured by investor properties and at least 92.86%
                  of the Mortgage Loans are owner-occupied Mortgaged Properties
                  (in each case measured by the Cut-off Date Principal Balance);

         (9)      The Mortgage Rates borne by the Mortgage Loans as of the
                  Cut-off Date ranged from 7.125% per annum to 14.650% per annum
                  and the weighted average Mortgage Interest Rate as of the
                  Cut-off Date was 9.729% per annum;

         (10)     As of the Cut-off Date, approximately 18.11% of the Mortgage
                  Loans were rate/term refinancings, approximately 37.35% of the
                  Mortgage Loans were cash out

<PAGE>

                                       -2-

                  refinancings and approximately 44.54% of the Mortgage Loans
                  were made to purchase the related Mortgaged Properties;

         (11)     The Gross Margins on the Mortgage Loans range from 4.00% to
                  8.00% and the weighted average Gross Margin as of the Cut-off
                  Date was approximately 6.628%;

         (12)     No less than 8.014%of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance) were originated by the Seller
                  under the Seller's "Full Documentation" mortgage loan program,
                  no more than 5.26% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance) were originated by the Seller
                  under the Seller's "Fast Trac" mortgage loan programs and no
                  more than 14.60% of the Mortgage Loans (measured by the
                  Cut-off Date Principal Balance) were originated by the Seller
                  under the Seller's "Stated Income Documentation" mortgage loan
                  program; and

         (13)     With respect to the Seller's underwriting risk categories,
                  0.00%, 0.00%, 0.00%, 7.81% and 2.43% of the Mortgage Loans
                  constitute A- Risk Mortgage Loans, B Risk Mortgage Loans, B-
                  Risk Mortgage Loans, C Risk Mortgage Loans and D Risk Mortgage
                  Loans, respectively, in each case measured by the Cut-off Date
                  Principal Balance.

<PAGE>

                                                                       EXHIBIT 2

                  [FORM OF OFFICER'S CERTIFICATE OF THE SELLER]

                           LONG BEACH MORTGAGE COMPANY

                              Officer's Certificate

                  I, _______________, hereby certify that I am the duly
appointed ____________ of Long Beach Mortgage Company, a Delaware corporation
(the "Company"), and further certify, on behalf of the Company, as follows:

                  1. Attached hereto as Exhibit A is a true and correct copy of
         the Certificate of Incorporation and By-laws of the Company, both of
         which are in full force and effect on the date hereof. There has been
         no amendment or other document filed affecting the Certificate of
         Incorporation of the Company since April 29, 1997, and no such
         amendment has been authorized. There has been no amendment or other
         document filed affecting the By-laws of the Company since April 12,
         1996, and no such amendment has been authorized. Attached hereto as
         Exhibit B is a certificate of good standing, dated February __, 2000
         issued by the State of Delaware with respect to the Company. No event
         has occurred since the date thereof that has affected the good standing
         of the Company under the laws of the State of Delaware.

                  2. There are no actions, suits or proceedings pending or, to
         the best of my knowledge, threatened against or affecting the Company
         that, if adversely determined, individually or in the aggregate, would
         adversely affect the Company's ability to perform its obligations under
         (ii) the Mortgage Loan Purchase Agreement, dated February __, 2000 (the
         "Mortgage Loan Purchase Agreement"), between the Company and Salomon
         Brothers Mortgage Securities VII, Inc. (the "Depositor") or (ii) the
         Pooling and Servicing Agreement, dated as of February 1, 2000 (the
         "Pooling and Servicing Agreement"; together with the Mortgage Loan
         Purchase Agreement, the "Agreements"), among the Depositor, the Company
         as master servicer and Norwest Bank Minnesota, National Association as
         trustee. No proceedings looking toward merger, consolidation or
         liquidation, dissolution or bankruptcy of the Company are pending or
         contemplated.

                  3. Each person who, as an officer or representative of the
         Company signed the Agreements and any other document delivered prior
         hereto or on the date hereof in connection with the transactions
         described in the Agreements was, at the respective times of such
         signing and delivery, and is now, duly elected or appointed, qualified
         and acting as such officer or representative, and the signatures of
         such persons appearing on such documents are their genuine signatures.

                  4. All of the representations and warranties of the Company
         under the Agreements are true and correct in all material respects as
         of the Closing Date and no event has occurred which, with notice or the
         passage of time or both, would constitute a default under the
         Agreements.

<PAGE>

                                       -2-

                  5. The information set forth in the Mortgage Loan Schedule
         attached as an exhibit to each of the Agreements is true and correct in
         all material respects.

                   6. The information regarding the Company, its financial
         condition and its mortgage loan delinquency, foreclosure and loss
         experience, underwriting standards, lending activities and loan sales,
         production and servicing and collection practices, as set forth in the
         Prospectus Supplement, is accurate in all material respects.

                  7. Capitalized terms used but not defined herein shall have
         the meanings assigned in the Pooling and Servicing Agreement.

                  IN WITNESS WHEREOF, I have hereunto signed my name and affixed
the seal of the Company.

Dated: February __, 2000

         (Seal)                           LONG BEACH MORTGAGE COMPANY

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

                  I, ________________________________, [Assistant] Secretary of
______________________________, hereby certify that ____________________________
is the duly elected, qualified and acting ______________________________________
of _______________________________ and that the signature appearing above is his
genuine signature.

                  IN WITNESS WHEREOF, I have hereunto signed my name.

Dated: February __, 2000

                                          LONG BEACH MORTGAGE COMPANY

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

<PAGE>

                                                                       EXHIBIT 3

                  [FORM OF OFFICER'S CERTIFICATE OF THE SELLER]

                 Salomon Brothers Mortgage Securities VII, Inc.
                Floating Mortgage Pass-Through Rate Certificates
                                 Series 2000-LB1

                                 CERTIFICATE OF
                           LONG BEACH MORTGAGE COMPANY

         Reference is made to the sale of mortgage loans (the "Mortgage Loans")
by Long Beach Mortgage Company (the "Seller") to Salomon Brothers Mortgage
Securities VII, Inc. (the "Depositor") pursuant to a Mortgage Loan Purchase
Agreement, dated February 23, 2000 (the "Purchase Agreement") and the
simultaneous issuance of Floating Rate Mortgage Pass-Through Certificates,
Series 2000-LB1, Class A, Class M-1, Class M-2, Class M-3, Class CE, Class P,
Class R-I, Class R-II and Class R-III (the "Certificates"), pursuant to a
Pooling and Servicing Agreement, dated as of February 1, 2000 (the "Pooling and
Servicing Agreement") among the Depositor as depositor, the Seller as master
servicer (in such capacity, the "Master Servicer") and Norwest Bank Minnesota,
National Association as trustee (the "Trustee"). In consideration for its
purchase of the Mortgage Loans, the Depositor will (i) pay to or upon the order
of the Seller in immediately available funds an amount equal to the net sale
proceeds of the Class A Certificates, the Class M-1 Certificates, the Class M-2
Certificates and the Class M-3 Certificates and (ii) deliver to Long Beach
Mortgage Securities Corp. upon the order of the Seller the Class CE
Certificates, the Class P Certificates and the Residual Certificates. The
Depositor will sell the Class A, Class M-1, Class M-2 and Class M-3 Certificates
to Salomon Smith Barney Inc. (the "Underwriter") for offer and sale pursuant to
the terms of an Underwriting Agreement, dated February 23, 2000 (the
"Underwriting Agreement"), between the Depositor and the Underwriter. The
Purchase Agreement, the Pooling and Servicing Agreement and the Underwriting
Agreement together, are hereinafter collectively referred to as the
"Agreements." Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Agreements.

         1. The transfer of the Mortgage Loans by the undersigned pursuant to
the Agreements was intended to be a sale and to be reported as such under
generally accepted accounting principles ("GAAP") and for federal income tax
purposes.

         2. In connection with the sale of the Mortgage Loans by the undersigned
pursuant to the Agreements, the undersigned (i) was solvent at all relevant
times prior thereto and was not rendered insolvent thereby, (ii) after giving
effect thereto, is able to pay its debts as they mature, (iii) was not left with
unreasonably small capital for the business in which engaged and proposed to be
engaged, (iv) had and has no intention of commencing any bankruptcy, insolvency
or similar proceeding, (v) did not and does not have any intent to hinder, delay
or defraud any of the undersigned's creditors, (vi) had a valid business reason
therefor and (vii) received new value and consideration constituting reasonably
equivalent value and fair consideration.

<PAGE>

                                       -2-

         3. The undersigned has not acquired, and will not acquire at any time,
any direct or indirect ownership or other economic interest in, or other right
or obligation with respect to, any Mortgage Loan or Certificate, except as
described in the Agreements.

                  IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of February __, 2000.

                                          LONG BEACH MORTGAGE COMPANY

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

<PAGE>

                                                                       EXHIBIT 4

                   [FORM OF OPINION OF COUNSEL TO THE SELLER]

                                   SEE TAB 30

<PAGE>

                                   EXHIBIT E-1
                                   -----------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

Loan Information
----------------

         Name of Mortgagor:   _________________________________

         Master Servicer
         Loan No.:            _________________________________

Trustee/Custodian
-----------------

         Name:                _________________________________

         Address:             _________________________________
                              _________________________________

         Trustee/Custodian
         Mortgage File No.:   _________________________________

Depositor
---------

         Name:                SALOMON BROTHERS MORTGAGE
                              SECURITIES VII, INC.

         Address:             _________________________________
                              _________________________________

         Certificates:        Floating Rate Mortgage Pass-Through
                              Certificates, Series 2000-LB1.

<PAGE>

                  The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of
Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1, the documents
referred to below (the "Documents"). All capitalized terms not otherwise defined
in this Request for Release shall have the meanings given them in the Pooling
and Servicing Agreement, dated as of February 1, 2000, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").

( )      Promissory Note dated _______________, 20__, in the original principal
         sum of $__________, made by _____________________, payable to, or
         endorsed to the order of, the Trustee.

( )      Mortgage recorded on _________________________ as instrument no.
         ____________________ in the County Recorder's Office of the County of
         _________________, State of __________________ in book/reel/docket
         _________________ of official records at page/image _____________.

( )      Deed of Trust recorded on ___________________ as instrument no.
         ________________ in the County Recorder's Office of the County of
         _________________, State of ____________________ in book/reel/docket
         _________________ of official records at page/image ______________.

( )      Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
         ___________________ as instrument no. _________ in the County
         Recorder's Office of the County of _______________, State of
         _______________________ in book/reel/docket ____________ of official
         records at page/image ____________.

( )      Other documents, including any amendments, assignments or other
         assumptions of the Mortgage Note or Mortgage.

( )      ---------------------------------------------

( )      ---------------------------------------------

( )      ---------------------------------------------

( )      ---------------------------------------------

                  The undersigned Master Servicer hereby acknowledges and agrees
as follows:

                  (1) The Master Servicer shall hold and retain possession of
         the Documents in trust for the benefit of the Trustee, solely for the
         purposes provided in the Agreement.

                  (2) The Master Servicer shall not cause or permit the
         Documents to become subject to, or encumbered by, any claim, liens,
         security interest, charges, writs of attachment

<PAGE>

         or other impositions nor shall the Master Servicer assert or seek to
         assert any claims or rights of setoff to or against the Documents or
         any proceeds thereof.

                  (3) The Master Servicer shall return each and every Document
         previously requested from the Mortgage File to the Trustee when the
         need therefor no longer exists, unless the Mortgage Loan relating to
         the Documents has been liquidated and the proceeds thereof have been
         remitted to the Collection Account and except as expressly provided in
         the Agreement.

                  (4) The Documents and any proceeds thereof, including any
         proceeds of proceeds, coming into the possession or control of the
         Master Servicer shall at all times be earmarked for the account of the
         Trustee, and the Master Servicer shall keep the Documents and any
         proceeds separate and distinct from all other property in the Master
         Servicer's possession, custody or control.

Dated:

                                        LONG BEACH MORTGAGE COMPANY

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

<PAGE>

                                   EXHIBIT E-2
                                   -----------

                               REQUEST FOR RELEASE
                          [Mortgage Loans Paid in Full]

                     OFFICERS' CERTIFICATE AND TRUST RECEIPT
                FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATES
                                 SERIES 2000-LB1

____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH
BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN
MADE.

LOAN NUMBER:_____________________________    BORROWER'S NAME:___________________

COUNTY:__________________________________

WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

_________________________________________    DATED:_______________________

/  /   VICE PRESIDENT

/  /   ASSISTANT VICE PRESIDENT

<PAGE>

                                   EXHIBIT F-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                                     [Date]

Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

        Re:  Salomon Brothers Mortgage Securities VII, Inc.,
             Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1,
             Class ___, representing a ___% Class ___ Percentage Interest
             ------------------------------------------------------------------

Ladies and Gentlemen:

                  In connection with the transfer by ________________ (the
"Transferor") to ________________ (the "Transferee") of the captioned mortgage
pass-through certificates (the "Certificates"), the Transferor hereby certifies
as follows:

                  Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
February 1, 2000, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Long Beach Mortgage Company as Master Servicer and Norwest Bank
Minnesota, National Association as Trustee (the "Pooling and Servicing
Agreement"), pursuant to which Pooling and Servicing Agreement the Certificates
were issued.

<PAGE>

                  Capitalized terms used but not defined herein shall have the
meanings assigned thereto in the Pooling and Servicing Agreement.

                                      Very truly yours,

                                      [Transferor]

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

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                             [Date]

Norwest Bank Minnesota, National Association
Norwest Center
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

         Re: Salomon Brothers Mortgage Securities VII, Inc.,
             Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1,
             Class ___, representing a ___% Class ___ Percentage Interest
             ------------------------------------------------------------------

Ladies and Gentlemen:

                  In connection with the purchase from ______________________
(the "Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:

                  1. The Transferee is a "qualified institutional buyer" as that
         term is defined in Rule 144A ("Rule 144A") under the Securities Act of
         1933 (the "1933 Act") and has completed either of the forms of
         certification to that effect attached hereto as Annex 1 or Annex 2. The
         Transferee is aware that the sale to it is being made in reliance on
         Rule 144A. The Transferee is acquiring the Certificates for its own
         account or for the account of a qualified institutional buyer, and
         understands that such Certificate may be resold, pledged or transferred
         only (i) to a person reasonably believed to be a qualified
         institutional buyer that purchases for its own account or for the
         account of a qualified institutional buyer to whom notice is given that
         the resale, pledge or transfer is being made in reliance on Rule 144A,
         or (ii) pursuant to another exemption from registration under the 1933
         Act.

                  2. The Transferee has been furnished with all information
         regarding (a) the Certificates and distributions thereon, (b) the
         nature, performance and servicing of the Mortgage Loans, (c) the
         Pooling and Servicing Agreement referred to below, and (d) any credit
         enhancement mechanism associated with the Certificates, that it has
         requested.

<PAGE>

                  All capitalized terms used but not otherwise defined herein
have the respective meanings assigned thereto in the Pooling and Servicing
Agreement, dated as of February 1, 2000, among Salomon Brothers Mortgage
Securities VII, Inc. as Depositor, Long Beach Mortgage Company as Master
Servicer and Norwest Bank Minnesota, National Association as Trustee, pursuant
to which the Certificates were issued.

                                            [TRANSFEREE]

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

<PAGE>

                                                          ANNEX 1 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Norwest Bank Minnesota, National Association
as Trustee, with respect to the floating rate mortgage pass-through certificates
(the "Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act of 1933 ("Rule 144A") because (i) the Transferee
owned and/or invested on a discretionary basis $______________________1 in
securities (except for the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year (such amount being calculated in
accordance with Rule 144A) and (ii) the Transferee satisfies the criteria in the
category marked below.

         ___      CORPORATION, ETC. The Transferee is a corporation (other than
                  a bank, savings and loan association or similar institution),
                  Massachusetts or similar business trust, partnership, or any
                  organization described in Section 501(c)(3) of the Internal
                  Revenue Code of 1986.

         ___      BANK. The Transferee (a) is a national bank or banking
                  institution organized under the laws of any State, territory
                  or the District of Columbia, the business of which is
                  substantially confined to banking and is supervised by the
                  State or territorial banking commission or similar official or
                  is a foreign bank or equivalent institution, and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, a copy of which is
                  attached hereto.

         ___      SAVINGS AND LOAN. The Transferee (a) is a savings and loan
                  association, building and loan association, cooperative bank,
                  homestead association or similar institution, which is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent institution and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, a copy of which is
                  attached hereto.

--------

1 Transferee must own and/or invest on a discretionary basis at least
$100,000,000 in securities unless Transferee is a dealer, and, in that case,
Transferee must own and/or invest on a discretionary basis at least $10,000,000
in securities.

<PAGE>

         ___      BROKER-DEALER. The Transferee is a dealer registered pursuant
                  to Section 15 of the Securities Exchange Act of 1934.

         ___      INSURANCE COMPANY. The Transferee is an insurance company
                  whose primary and predominant business activity is the writing
                  of insurance or the reinsuring of risks underwritten by
                  insurance companies and which is subject to supervision by the
                  insurance commissioner or a similar official or agency of a
                  State, territory or the District of Columbia.

         ___      STATE OR LOCAL PLAN. The Transferee is a plan established and
                  maintained by a State, its political subdivisions, or any
                  agency or instrumentality of the State or its political
                  subdivisions, for the benefit of its employees.

         ___      ERISA PLAN. The Transferee is an employee benefit plan within
                  the meaning of Title I of the Employee Retirement Income
                  Security Act of 1974.

         ___      INVESTMENT ADVISOR. The Transferee is an investment advisor
                  registered under the Investment Advisers Act of 1940.

                  3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

                  4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Transferee, the
Transferee used the cost of such securities to the Transferee and did not
include any of the securities referred to in the preceding paragraph. Further,
in determining such aggregate amount, the Transferee may have included
securities owned by subsidiaries of the Transferee, but only if such
subsidiaries are consolidated with the Transferee in its financial statements
prepared in accordance with generally accepted accounting principles and if the
investments of such subsidiaries are managed under the Transferee's direction.
However, such securities were not included if the Transferee is a
majority-owned, consolidated subsidiary of another enterprise and the Transferee
is not itself a reporting company under the Securities Exchange Act of 1934.

                  5. The Transferee acknowledges that it is familiar with Rule
144A and understands that the Transferor and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Transferee may be in reliance on Rule 144A.

         ___      ___        Will the Transferee be purchasing the Certificates
         Yes      No         only for the Transferee's own account?

<PAGE>

                  6. If the answer to the foregoing question is "no", the
Transferee agrees that, in connection with any purchase of securities sold to
the Transferee for the account of a third party (including any separate account)
in reliance on Rule 144A, the Transferee will only purchase for the account of a
third party that at the time is a "qualified institutional buyer" within the
meaning of Rule 144A. In addition, the Transferee agrees that the Transferee
will not purchase securities for a third party unless the Transferee has
obtained a current representation letter from such third party or taken other
appropriate steps contemplated by Rule 144A to conclude that such third party
independently meets the definition of "qualified institutional buyer" set forth
in Rule 144A.

                  7. The Transferee will notify each of the parties to which
this certification is made of any changes in the information and conclusions
herein. Until such notice is given, the Transferee's purchase of the
Certificates will constitute a reaffirmation of this certification as of the
date of such purchase. In addition, if the Transferee is a bank or savings and
loan as provided above, the Transferee agrees that it will furnish to such
parties updated annual financial statements promptly after they become
available.

Dated:

                                         ---------------------------------------
                                         Print Name of Transferee

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

<PAGE>

                                                          ANNEX 2 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]

                  The undersigned hereby certifies as follows to [name of
Transferor] (the "Transferor") and Norwest Bank Minnesota, National Association,
as Trustee, with respect to the mortgage pass- through certificates (the
"Certificates") described in the Transferee Certificate to which this
certification relates and to which this certification is an Annex:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

                  2. In connection with purchases by the Transferee, the
Transferee is a "qualified institutional buyer" as defined in Rule 144A because
(i) the Transferee is an investment company registered under the Investment
Company Act of 1940, and (ii) as marked below, the Transferee alone, or the
Transferee's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to below) as of the end
of the Transferee's most recent fiscal year. For purposes of determining the
amount of securities owned by the Transferee or the Transferee's Family of
Investment Companies, the cost of such securities was used.

____              The Transferee owned $___________________ in securities (other
                  than the excluded securities referred to below) as of the end
                  of the Transferee's most recent fiscal year (such amount being
                  calculated in accordance with Rule 144A).

____              The Transferee is part of a Family of Investment Companies
                  which owned in the aggregate $______________ in securities
                  (other than the excluded securities referred to below) as of
                  the end of the Transferee's most recent fiscal year (such
                  amount being calculated in accordance with Rule 144A).

                  3. The term "Family of Investment Companies" as used herein
means two or more registered investment companies (or series thereof) that have
the same investment adviser or investment advisers that are affiliated (by
virtue of being majority owned subsidiaries of the same parent or because one
investment adviser is a majority owned subsidiary of the other).

                  4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi)

<PAGE>

securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

                  5. The Transferee is familiar with Rule 144A and understands
that the parties to which this certification is being made are relying and will
continue to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

                  6. The undersigned will notify the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice, the Transferee's purchase of the Certificates will constitute
a reaffirmation of this certification by the undersigned as of the date of such
purchase.

Dated:

                                     -------------------------------------------
                                     Print Name of Transferee or Advisor

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

                                     IF AN ADVISER:

                                     -------------------------------------------
                                     Print Name of Transferee

<PAGE>

                                     FORM OF TRANSFEREE REPRESENTATION LETTER

                  The undersigned hereby certifies on behalf of the purchaser
named below (the "Purchaser") as follows:

                  1. I am an executive officer of the Purchaser.

                  2. The Purchaser is a "qualified institutional buyer", as
         defined in Rule 144A, ("Rule 144A") under the Securities Act of 1933,
         as amended.

                  3. As of the date specified below (which is not earlier than
         the last day of the Purchaser's most recent fiscal year), the amount of
         "securities", computed for purposes of Rule 144A, owned and invested on
         a discretionary basis by the Purchaser was in excess of $100,000,000.

Name of Purchaser_______________________________________________________________

By:      (Signature)____________________________________________________________

Name of Signatory_______________________________________________________________

Title___________________________________________________________________________

Date of this certificate________________________________________________________

Date of information provided in paragraph 3_____________________________________

<PAGE>

                                   EXHIBIT F-2
                                   -----------

                    FORM OF TRANSFER AFFIDAVIT AND AGREEMENT

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

                  ___________________________________, being duly sworn,
deposes, represents and warrants as follows:

                  1. I am a ______________________ of __________________________
(the "Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Salomon Brothers Mortgage Securities VII,
Inc., Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1, [Class
R-I] [and Class R-II][Class R-III] (the "Class R Certificates"), on behalf of
whom I make this affidavit and agreement. Capitalized terms used but not defined
herein have the respective meanings assigned thereto in the Pooling and
Servicing Agreement pursuant to which the Class R Certificates were issued.

                  2. The Owner (i) is and will be a "Permitted Transferee" as of
____________________, 20___ and (ii) is acquiring the Class R Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.

                  3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class R Certificates to disqualified organizations under the
Internal Revenue Code of 1986 that applies to all transfers of the Class R
Certificates after March 31, 1988; (ii) that such tax would be on the transferor
or, if such transfer is through an agent (which person includes a broker,
nominee or middleman) for a non-Permitted Transferee, on the agent; (iii) that
the person otherwise liable for the tax shall be relieved of liability for the
tax if the transferee furnishes to such person an affidavit that the transferee
is a Permitted Transferee and, at the time of transfer, such person does not
have actual knowledge that the affidavit is false; and (iv) that each of the
Class R Certificates may be a "noneconomic residual interest" within the meaning
of proposed Treasury regulations promulgated under the Code and that the
transferor of a "noneconomic residual interest" will remain liable for any

<PAGE>

taxes due with respect to the income on such residual interest, unless no
significant purpose of the transfer is to impede the assessment or collection of
tax.

                  4. The Owner is aware of the tax imposed on a "pass-through
entity" holding the Class R Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)

                  5. The Owner is aware that the Trustee will not register the
transfer of any Class R Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.

                  6. The Owner consents to any additional restrictions or
arrangements that shall be deemed necessary upon advice of counsel to constitute
a reasonable arrangement to ensure that the Class R Certificates will only be
owned, directly or indirectly, by an Owner that is a Permitted Transferee.

                  7. The Owner's taxpayer identification number is
___________________.

                  8. The Owner has reviewed the restrictions set forth on the
face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class R Certificates were issued
(in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d) which authorize
the Trustee to deliver payments to a person other than the Owner and negotiate a
mandatory sale by the Trustee in the event that the Owner holds such Certificate
in violation of Section 5.02(d)); and that the Owner expressly agrees to be
bound by and to comply with such restrictions and provisions.

                  9. The Owner is not acquiring and will not transfer the Class
R Certificates in order to impede the assessment or collection of any tax.

                  10. The Owner anticipates that it will, so long as it holds
the Class R Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class R Certificates, and hereby represents to and for the
benefit of the person from whom it acquired the Class R Certificates that the
Owner intends to pay taxes associated with holding such Class R Certificates as
they become due, fully understanding that it may incur tax liabilities in excess
of any cash flows generated by the Class R Certificates.

                  11. The Owner has no present knowledge that it may become
insolvent or subject to a bankruptcy proceeding for so long as it holds the
Class R Certificates.

                  12. The Owner has no present knowledge or expectation that it
will be unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.

<PAGE>

                  13. The Owner is not acquiring the Class R Certificates with
the intent to transfer the Class R Certificates to any person or entity that
will not have sufficient assets to pay any taxes owed by the holder of such
Class R Certificates, or that may become insolvent or subject to a bankruptcy
proceeding, for so long as the Class R Certificates remain outstanding.

                  14. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, obtain from its transferee the
representations required by Section 5.02(d) of the Pooling and Servicing
Agreement under which the Class R Certificate were issued and will not
consummate any such transfer if it knows, or knows facts that should lead it to
believe, that any such representations are false.

                  15. The Owner will, in connection with any transfer that it
makes of the Class R Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class R Certificates to
impede the assessment or collection of any tax and that it has no actual
knowledge that the proposed transferee: (i) has insufficient assets to pay any
taxes owed by such transferee as holder of the Class R Certificates; (ii) may
become insolvent or subject to a bankruptcy proceeding for so long as the Class
R Certificates remains outstanding; and (iii) is not a "Permitted Transferee".

                  16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

                  17. The Owner of the Class R-III Certificate, hereby agrees
that in the event that the Trust Fund created by the Pooling and Servicing
Agreement is terminated pursuant to Section 9.01 thereof, the undersigned shall
assign and transfer to the Holders of the Class CE Certificates any amounts in
excess of par received in connection with such termination. Accordingly, in the
event of such termination, the Trustee is hereby authorized to withhold any such
amounts in excess of par and to pay such amounts directly to the Holders of the
Class CE Certificates. This agreement shall bind and be enforceable against any
successor, transferee or assigned of the undersigned in the Class R-III
Certificate. In connection with any transfer of the Class R-III Certificate, the
Owner shall obtain an agreement substantially similar to this clause from any
subsequent owner.

<PAGE>

                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 20__.

                                          [OWNER]

                                          By:
                                             -----------------------------------
                                          Name:
                                          Title:       [Vice] President

ATTEST:

By:
   ----------------------------------
Name:
Title:    [Assistant] Secretary

                  Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.

                  Subscribed and sworn before me this ____ day of __________,
20__.

                                               _________________________________
                                                        Notary Public

                                               County of _______________________
                                               State of ________________________

                                               My Commission expires:

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT

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

                  ___________________________________, being duly sworn,
deposes, represents and warrants as follows:

                  1. I am a ____________________ of ____________________________
(the "Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.

                  2. The Owner is not transferring the [Class R-I][Class
R-II][Class R-III] (the "Residual Certificates") to impede the assessment or
collection of any tax.

                  3. The Owner has no actual knowledge that the Person that is
the proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

                  4. The Owner understands that the Purchaser has delivered to
the Trustee a transfer affidavit and agreement in the form attached to the
Pooling and Servicing Agreement as Exhibit F-2. The Owner does not know or
believe that any representation contained therein is false.

                  5. At the time of transfer, the Owner has conducted a
reasonable investigation of the financial condition of the Purchaser as
contemplated by Treasury Regulations Section 1.860E- 1(c)(4)(i) and, as a result
of that investigation, the Owner has determined that the Purchaser has
historically paid its debts as they became due and has found no significant
evidence to indicate that the Purchaser will not continue to pay its debts as
they become due in the future. The Owner understands that the transfer of a
Residual Certificate may not be respected for United States income tax purposes
(and the Owner may continue to be liable for United States income taxes
associated therewith) unless the Owner has conducted such an investigation.

                  6. Capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Pooling and Servicing Agreement.

<PAGE>

                  IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 20__.

                                          [OWNER]

                                          By:
                                             -----------------------------------
                                          Name:
                                          Title:       [Vice] President

ATTEST:

By:
   --------------------------------
Name:
Title:   [Assistant] Secretary

                  Personally appeared before me the above-named , known or
proved to me to be the same person who executed the foregoing instrument and to
be a [Vice] President of the Owner, and acknowledged to me that [he/she]
executed the same as [his/her] free act and deed and the free act and deed of
the Owner.

                  Subscribed and sworn before me this ____ day of __________,
20__.

                                               _________________________________
                                                        Notary Public

                                               County of _______________________
                                               State of ________________________

                                               My Commission expires:

<PAGE>

                                    EXHIBIT G
                                    ---------

            FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE

                                                _____________, 20__.

Salomon Brothers Mortgage                   Long Beach Mortgage Company
  Securities VII, Inc.                      1100 Town & Country Road
390 Greenwich Street, 4th Floor             Orange, California 92868
New York, New York  10013

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

                 Re:  Salomon Brothers Mortgage Securities VII, Inc.
                      Floating Rate Mortgage Pass-Through Certificates,
                      Series 2000-LB1, Class [M-1] [M-2] [M-3]
                      -------------------------------------------------

Dear Sirs:

                  __________________________________ (the "Transferee") intends
to acquire from _____________________ (the "Transferor") $____________ Initial
Certificate Principal Balance of Salomon Brothers Mortgage Securities VII, Inc.
Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1, Class [M-1]
[M-2] [M-3] (the "Certificates"), issued pursuant to a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") dated as of February 1, 2000
among Salomon Brothers Mortgage Securities VII, Inc. as depositor (the
"Depositor"), Long Beach Mortgage Company as master servicer (the "Master
Servicer") and Norwest Bank Minnesota, National Association as trustee (the
"Trustee"). Capitalized terms used herein and not otherwise defined shall have
the meanings assigned thereto in the Pooling and Servicing Agreement. The
Transferee hereby certifies, represents and warrants to, and covenants with the
Depositor, the Trustee and the Master Servicer that the following statements in
either (1) or (2) are accurate:

         _____ (1) The Certificates (i) are not being acquired by, and will not
         be transferred to, any employee benefit plan within the meaning of
         section 3(3) of the Employee Retirement Income Security Act of 1974, as
         amended ("ERISA"), or other retirement arrangement, including
         individual retirement accounts and annuities, Keogh plans and bank
         collective investment funds and insurance company general or separate
         accounts in which such plans, accounts or arrangements are invested,
         that is subject to Section 406 of ERISA or Section 4975 of the Internal
         Revenue Code of 1986 (the "Code") (any of the foregoing, a "Plan"),
         (ii) are not being acquired with "plan assets" of a Plan within the
         meaning of the Department of Labor ("DOL") regulation, 29 C.F.R. ss.
         2510.3-101, and (iii) will not be transferred to any entity that is
         deemed to be investing in plan assets within the meaning of the DOL
         regulation at 29 C.F.R. ss. 2510.3-101; or

<PAGE>

         _____ (2) The purchase of Certificates is permissible under applicable
         law, will not constitute or result in any prohibited transaction under
         ERISA or Section 4975 of the Code, will not subject the Depositor, the
         Trustee or the Master Servicer to any obligation in addition to those
         undertaken in the Pooling and Servicing Agreement and the transferee is
         an insurance company and (A) the source of funds used to purchase such
         Certificate is an "insurance company general account" (as such term is
         defined in PTCE 95-60), (B) the conditions set forth in PTCE 95-60 have
         been satisfied and (C) there is no Plan with respect to which the
         amount of such general account's reserves and liabilities for contracts
         held by or on behalf of such Plan and all other Plans maintained by the
         same employer (or any "affiliate" thereof, as defined in PTCE 95-60) or
         by the same employee organization, exceeds 10% of the total of all
         reserves and liabilities of such general account (as determined under
         PTCE 95-60) as of the date of the acquisition of such Certificates.

                                         Very truly yours,

                                         __________________________________

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

<PAGE>

                                    EXHIBIT H
                                    ---------

                           FORM OF CUSTODIAL AGREEMENT

                                    SEE TAB 7

<PAGE>

                               CUSTODIAL AGREEMENT

                  THIS CUSTODIAL AGREEMENT (as amended and supplemented from
time to time, the "Agreement"), dated as of February 25, 2000, by and among
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not individually, but solely as
Trustee (including its successors under the Pooling and Servicing Agreement
defined below, the "Trustee"), LONG BEACH MORTGAGE COMPANY (together with any
successor in interest or successor under the Pooling and Servicing Agreement
referred to below, the "Master Servicer"), SALOMON BROTHERS MORTGAGE SECURITIES
VII, INC. (the "Depositor") and CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
(together with any successor in interest or any successor appointed hereunder,
the "Custodian").

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

                  WHEREAS, the Master Servicer, the Trustee and the Depositor
have entered into a Pooling and Servicing Agreement, dated as of February 1,
2000, relating to the issuance of Salomon Brothers Mortgage Securities VII,
Inc., Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1 (as in
effect on the date of this Agreement, the "Pooling and Servicing Agreement", and
as amended and supplemented from time to time, the "Pooling and Servicing
Agreement"); and

                  WHEREAS, the Custodian has agreed to act as agent for the
Trustee for the purposes of receiving and holding certain documents and other
instruments delivered by the Depositor under the Pooling and Servicing
Agreement, all upon the terms and conditions and subject to the limitations
hereinafter set forth;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Trustee, the
Depositor, the Master Servicer and the Custodian hereby agree as follows:

                                    ARTICLE I

                                   Definitions

                  Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned in the Pooling and Servicing Agreement,
attached hereto as Appendix A, unless otherwise required by the context herein.

<PAGE>

                                        2

                                   ARTICLE II

                          Custody of Mortgage Documents

                  Section 2.1. CUSTODIAN TO ACT AS AGENT; ACCEPTANCE OF MORTGAGE
FILES. The Custodian, as the duly appointed agent and bailee of the Trustee for
these purposes, hereby accepts the agency contemplated hereunder and
acknowledges receipt as of the Closing Date of the documents listed in Section
2.1(a) and (b) and, as agent for the Trustee, agrees to verify receipt of the
following documents pertaining to each of the Mortgage Loans identified on the
Mortgage Loan Schedule attached to the Pooling and Servicing Agreement listed in
Section 2.1(c), (d), (e) and (f) in accordance with Section 2.2 hereof:

                (a) the original Mortgage Note, endorsed in blank or in the
         following form: "Pay to the order of Norwest Bank Minnesota, National
         Association, as Trustee under the applicable agreement, without
         recourse," with all prior and intervening endorsements showing a
         complete chain of endorsement from the originator to the Person so
         endorsing to the Trustee;

                (b) the original Mortgage with evidence of recording thereon,
         and a copy, certified by the appropriate recording office, of the
         recorded power of attorney, if the Mortgage was executed pursuant to a
         power of attorney, with evidence of recording thereon;

                (c) an original Assignment of the Mortgage in blank;

                (d) the original recorded Assignment or Assignments of the
         Mortgage showing a complete chain of assignment from the originator to
         the Person assigning the Mortgage to the Trustee as contemplated by the
         immediately preceding clause (c);

                (e) the original or copies of each assumption, modification,
         written assurance or substitution agreement, if any; and

                (f) the original lender's title insurance policy, together with
         all endorsements or riders which were issued with or subsequent to the
         issuance of such policy, insuring the priority of the Mortgage as a
         first lien on the Mortgaged Property represented therein as a fee
         interest vested in the Mortgagor, or in the event such original title
         policy is unavailable, a written commitment or uniform binder or
         preliminary report of title issued by the title insurance or escrow
         company.

                  In furtherance of facilitating the acknowledgment of such
receipt by the Custodian, the Trustee hereby instructs the Custodian to cause
the endorsement or execution, as the case may be, of the documents listed in
Section 2.1(a) and (c) to be completed by the Custodian in the forms prescribed
by Section 2.1(a) and (c).

<PAGE>

                                        3

                  The Master Servicer, in its capacity as Seller, shall promptly
(and in no event later than thirty (30) Business Days, subject to extension upon
a mutual agreement between the Master Servicer and the Trustee, following the
later of the Closing Date and the date of receipt by the Master Servicer of the
recording information for a Mortgage) submit or cause to be submitted for
recording, at no expense to the Trust Fund, the Trustee or the Depositor, in the
appropriate public office for real property records, each Assignment referred to
in Sections 2.1(c) and (d) above and shall execute each original Assignment in
the following form: "Norwest Bank Minnesota, National Association, as Trustee
under the applicable agreement." In the event that any such Assignment is lost
or returned unrecorded because of a defect therein, the Master Servicer, in its
capacity as Seller, shall promptly prepare or cause to be prepared a substitute
Assignment or cure or cause to be cured such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded. Notwithstanding the
foregoing, however, for administrative convenience and facilitation of servicing
and to reduce closing costs, the assignments of Mortgage shall not be required
to be completed and submitted for recording with respect to any Mortgage Loan
only if the Trustee and each Rating Agency has received an opinion of counsel,
satisfactory in form and substance to the Trustee and each Rating Agency, to the
effect that the recordation of such assignments in any specific jurisdiction is
not necessary to protect the Trustee's interest in the related Mortgage Note;
provided further, however, notwithstanding the delivery of any opinion of
counsel, each assignment of Mortgage shall be submitted for recording by the
Seller in the manner described above, at no expense to the Trust Fund or
Trustee, upon the earliest to occur of: (i) reasonable direction by Holders of
Certificates entitled to at least 25% of the Voting Rights, (ii) failure of the
Master Servicer Termination Test, (iii) the occurrence of a bankruptcy,
insolvency or foreclosure relating to the Seller, (iv) the occurrence of a
servicing transfer as described in Section 7.02 of the Pooling and Servicing
Agreement and (iv) if the Seller is not the Master Servicer and with respect to
any one assignment of Mortgage, the occurrence of a bankruptcy, insolvency or
foreclosure relating to the Mortgagor under the related Mortgage.
Notwithstanding the foregoing, if the Master Servicer is unable to pay the cost
of recording the Assignments of Mortgage, such expense will be paid by the
Trustee in accordance with Section 2.01 of the Pooling and Servicing Agreement.

                  If any of the documents referred to in Sections 2.1(ii), (iii)
or (iv) above has as of the Closing Date been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Depositor to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Custodian of a copy of each such
document certified by the Seller in the case of (x) above or the applicable
public recording office in the case of (y) above to be a true and complete copy
of the original that was submitted for recording and (2) if such copy is
certified by the Seller, delivery to the Custodian, promptly upon receipt
thereof of either the original or a copy of such document certified by the
applicable public recording office to be a true and complete copy of the
original. If the original lender's title insurance policy was not delivered
pursuant to Section 2.1(vi) above, the Depositor shall deliver or cause to be
delivered to the Custodian promptly after receipt thereof, the original lender's
title insurance policy. The Depositor shall deliver or cause to be delivered to
the Trustee, or to the appropriate Custodian on behalf of the Trustee, promptly
upon receipt thereof any other original documents constituting a part of a
Mortgage File received with

<PAGE>

                                        4

respect to any Mortgage Loan, including, but not limited to, any original
documents evidencing an assumption or modification of any Mortgage Loan.

                  In the event that any such original document is required
pursuant to the terms of this Section to be a part of a Mortgage File, such
document shall be delivered promptly to the Custodian.

                  Upon learning of the failure of any party to deliver any
document as provided above, the Custodian shall give prompt written notice of
such failure to the other parties to this Agreement. Once the Custodian has
given notice of such failure it is to continue to hold the Mortgage Loan and
Mortgage File unless otherwise directed.

                  The parties hereto agree and acknowledge that prior to the
transfer and sale of the Mortgage Loans pursuant to the Mortgage Loan Purchase
Agreement, all Mortgage Loan documents delivered to the Custodian for the
benefit of the Depositor and the possession by the Custodian of such Mortgage
Loan documents shall be at the will of the Depositor and such possession by the
Custodian shall be in a custodial capacity only.

                  Section 2.2. REVIEW OF MORTGAGE FILES. The Custodian agrees,
for the benefit of the Trustee and the Certificateholders, to review each
Mortgage File within five days after receipt of such Mortgage File (but in no
event later than two Business Days prior to the Closing Date) and to certify in
substantially the form attached hereto as Exhibit One that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule attached hereto (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in the
exception report annexed thereto as not being covered by such certification),
(i) all documents constituting part of such Mortgage File (other than such
documents described in Section 2.1(e)) required to be delivered to it pursuant
to this Agreement are in its possession, (ii) such documents have been reviewed
by it or such Custodian and are not mutilated, torn or defaced unless initialed
by the related borrower and relate to such Mortgage Loan and (iii) based on its
or the Custodian's examination and only as to the foregoing, the information set
forth in the Mortgage Loan Schedule attached hereto that corresponds to items
(i) through (iii), (vi), (ix), (x), (xiii), (xv) and (xvii) through (xx) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting such review,
the Custodian is under no duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine
whether they are genuine, enforceable, or appropriate for the represented
purpose (including with respect to Section 2.1(f) hereof, whether such title
insurance policy insures the priority of the Mortgage as a first lien) or
whether they have actually been recorded or that they are other than what they
purport to be on their face or (ii) to determine whether any Mortgage File
should include any of the documents specified in clause (e) of Section 2.1.

                  Prior to the first anniversary date of this Agreement the
Custodian shall deliver to the Depositor and the Master Servicer a final
certification in the form annexed hereto as Exhibit Two evidencing the
completeness of the Mortgage Files, with any applicable exceptions noted
thereon. Upon a reasonable request, the Custodian shall deliver to the Trustee
an electronic exception report.

<PAGE>

                                        5

                  If in the process of reviewing the Mortgage Files and making
or preparing, as the case may be, the certifications referred to above, the
Custodian finds any document or documents constituting a part of a Mortgage File
to be missing, mutilated, torn or defaced and not initialed by the related
borrower, at the conclusion of its review the Custodian shall so notify the
Trustee, the Depositor and the Master Servicer.

                  Section 2.3. NOTIFICATION OF EXCEPTIONS. Upon discovery by the
Custodian of a missing document or documents from Section 2.1 hereof or
non-compliance with Section 2.2 hereof with respect to a Mortgage File
(including without limitation a missing or defective document contained
therein), the Custodian shall give prompt written notice specifying such
exception to the Trustee.

                  Section 2.4. RELEASE OF MORTGAGE FILES. Upon (i) the payment
in full of any Mortgage Loan, or (ii) the purchase or repurchase of any Mortgage
Loan pursuant to Section 2.03 and Section 9.01 of the Pooling and Servicing
Agreement, or (iii) substitution of a Qualified Substitute Mortgage Loan for a
Deleted Mortgage Loan, and upon receipt by the Custodian of a certificate in the
form of Exhibit Three hereto signed by a Servicing Officer stating that all
amounts required by the Pooling and Servicing Agreement in connection with such
payment, repurchase or substitution have been deposited in the Collection
Account pursuant to Section 3.10 of the Pooling and Servicing Agreement, the
Custodian shall promptly release the related Mortgage File to the Depositor or
the Master Servicer, as the case may be.

                  From time to time as appropriate for the servicing or
foreclosure of any Mortgage Loan, the Custodian, shall, upon request of the
Master Servicer and delivery to the Custodian of a Request for Release, release
the related Mortgage File to the Master Servicer. Such Request for Release shall
obligate the Master Servicer to return each and every document previously
requested from the Mortgage File to the Custodian when the need therefor by the
Master Servicer no longer exists, unless: (i) the Mortgage Loan has been
liquidated and the Liquidation Proceeds relating to the Mortgage Loan have been
deposited in the Certificate Account; or (ii) the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public
official as required by law, for purposes of initiating or pursuing legal action
or other proceedings for the foreclosure of the Mortgaged Property either
judicially or non-judicially, and the Master Servicer has delivered to the
Custodian a certificate of a Servicing Officer certifying as to the name and
address of the Person to which such Mortgage File or such document was delivered
and the purpose or purposes of such delivery. The Master Servicer shall hold
such Mortgage Files in its possession in trust for the benefit of the
Certificateholders. Upon receipt of a certificate of a Servicing Officer stating
that such Mortgage Loan was liquidated and that all amounts received or to be
received in connection with such liquidation which are required to be deposited
into the Certificate Account have been so deposited, or that such Mortgage Loan
has become an REO Property, the related Mortgage File shall be released by the
Custodian to the Master Servicer.

                  The Custodian shall, at the expense of any Certificateholder
and upon such Certificateholder's request, provide a written report to such
Certificateholder of all Mortgage Files released and outstanding to the Master
Servicer for servicing purposes.

<PAGE>

                                        6

                  Section 2.5. AUDIT AND EXAMINATION OF MORTGAGE FILES. Within
48 hours notice to the Custodian, the Trustee, the Master Servicer, the
Depositor or any agent of any of them will be permitted, during the normal
business hours of the Custodian, to examine the Mortgage Files, documents,
records and other papers in possession of or under the control of the Custodian
relating to any or all of the Mortgage Loans. Any such examination shall be
subject to the procedures of the Custodian. The examining party shall indemnify
and hold Custodian harmless from all claims, costs, expenses and damages
incurred by Custodian as a result of the loss of any Custodial Files or
documents of papers contained in the Custodial Files while in the possession of
the examining party.

                  Section 2.6. COPIES OF MORTGAGE FILES. Within 48 hours notice
request of the Trustee, the Master Servicer or the Depositor, the Custodian
shall provide to the Trustee, the Master Servicer or the Depositor, as the case
may be, copies of the documents which constitute the Mortgage Files. The Trustee
shall pay all reasonable costs and expenses incurred by the Custodian in
preparing such copies, which shall be in accordance with the Custodian's
then-current fee schedule.

                  Section 2.7. SAFEKEEPING. The Custodian shall segregate the
Mortgage Files from all other mortgages and mortgage notes and similar records
in its possession, and agrees to hold the Mortgage Files as agent and bailee of
the Trustee for the use and benefit of all present and future Certificateholders
and to maintain accurate records pertaining to each Mortgage Note and Mortgage
in the Mortgage Files as will enable the Trustee to comply with the terms and
conditions of the Pooling and Servicing Agreement, and at all times to maintain
a current inventory thereof and to con duct periodic physical shelf inventories
of the Mortgage Files held by it under this Agreement in such a manner as shall
enable the Trustee to verify the accuracy of such inventory and record keeping.
The Custodian will promptly report to the Trustee any failure on its part to
hold the Mortgage Files as herein provided and promptly take appropriate action
to remedy any such failure.

                  Section 2.8. ADMINISTRATION; REPORTS. In general, the
Custodian shall provide the Trustee with notification of any material change in
status of any Mortgage File. In addition, the Custodian shall assist the other
parties hereto, who are preparing routine reports to Certificateholders, at the
request of any such party, or to regulatory bodies, to the extent necessitated
by the Custodian's custody of the Mortgage Files.

                                   ARTICLE III

                            Concerning the Custodian

                  Section 3.1. CUSTODIAN AS BAILEE AND AGENT OF THE TRUSTEE.
With respect to each Mortgage Note, Mortgage and other documents constituting
each Mortgage File which are delivered to the Custodian, the Custodian hereby
agrees to act as the agent and bailee of the Trustee, and to hold such documents
exclusively for all present and future Certificateholders and undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement. The Custodian may not delegate any of its duties hereunder without
the prior written consent of the

<PAGE>

                                        7

Trustee. The Custodian shall segregate and maintain all documents constituting
the Custodian's Mortgage File received by it for the benefit of the
Certificateholders in secure facilities in accordance with customary standards
for such custody. The Mortgage Note and Assignment of Mortgage shall be
maintained in secure fire resistant facilities. Except upon compliance with the
provisions of Sec tion 2.4 of this Agreement, no Mortgage Note, Mortgage or
other document constituting a part of a Mortgage File shall be delivered by the
Custodian to the Depositor, or the Master Servicer or otherwise released from
the possession of the Custodian.

                  Section 3.2. INDEMNIFICATION. The parties hereto acknowledge
that the Trustee, the Depositor and the Master Servicer shall not be liable for
the acts, delays or failures in performance of the Custodian hereunder. The
Custodian agrees to indemnify the Trustee, the Depositor and the Master Servicer
and any director, officer, employee or agent of the Trustee, the Depositor and
the Master Servicer for, and to hold them harmless against, any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever, including reasonable
attorney's fees (other than any special, indirect, punitive or consequential
damages, which shall not be paid by the Custodian), incurred by them arising out
of, or in connection with, any suit, claim or other action relating to the
Custodian's performance of this Agreement unless such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements were imposed on, incurred by or asserted against the Trustee, the
Depositor or the Master Servicer because of the breach by such party of their
obligations hereunder, or because of such party's negligence, lack of good faith
or willful misconduct on the part of such party or any of its directors,
officers, agents or employees. Such indemnification shall survive the
termination or discharge of this Agreement, and the resignation or removal of
the Custodian hereunder.

                  In the event that the Custodian fails to produce any document
contained in the Mortgage File or any other document related to a Mortgage Loan
that was in its possession pursuant to Section 2.1 within five (5) Business Days
after written request therefor by the Trustee, the Master Servicer or the
Depositor in accordance with the terms and conditions of this Agreement;
PROVIDED that (i) the Custodian previously delivered to the Trustee, the Master
Servicer and the Depositor a certification in the form attached hereto as
Exhibit One and/or Exhibit Two which did not list such document as an exception
on the date of such certification; (ii) such document is not outstanding
pursuant to a Request for Release in the form attached hereto as Exhibit Three;
and (iii) such document was held by the Custodian on behalf of the Trustee, the
Master Servicer or the Depositor, as applicable (a "Custodial Delivery
Failure"), then the Custodian shall (a) with respect to any missing Mortgage
Note, promptly deliver to the Trustee, the Master Servicer or the Depositor,
upon request, a Lost Note Affidavit in the form of Exhibit Eight hereto and (b)
with respect to any missing document related to such Mortgage Loan, including
but not limited to a missing Mortgage Note, indemnify the Trustee, the Master
Servicer or the Depositor in the same manner as set forth in the preceding
paragraph of this Section 3.2. In the event that such original Mortgage Note is
subsequently found and delivered to the Trustee, the Master Servicer or the
Depositor, as applicable, such party shall return the Lost Note Affidavit to the
Custodian.

<PAGE>

                                        8

                  The Custodian shall not be responsible for delays or failures
in performance resulting from acts beyond its control. Such acts shall include
but not be limited to acts of God, strikes, lockouts, riots, acts of war or
terrorism, epidemics, nationalization, expropriation, currency restrictions,
governmental regulations superimposed after the fact, fire (not including any
damage to the Mortgage Files), communication line failures, computer viruses,
power failures, earthquakes, energy or natural resource difficulty or shortage,
and inability to obtain materials, equipment or transportation or other
disasters.

                  The Trustee agrees to indemnify and hold the Custodian and its
directors, officers, agents and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever, including
reasonable attorney's fees, that may be imposed on, incurred by, or asserted
against it or them in any way relating to or arising out of this Custodial
Agreement or any action taken or not taken by it or them hereunder unless such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements were imposed on, incurred by or asserted
against the Custodian because of the Custodian's negligence, lack of good faith
or willful misconduct on the part of the Custodian or any of its directors,
officers, agents or employees. The Master Servicer agrees to indemnify and hold
the Custodian and its directors, officers, agents and employees harmless against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever, including reasonable attorney's fees, that may be imposed on,
incurred by, or asserted against it or them in any way relating to or arising
out of this Custodial Agreement or any action taken or not taken by it or them
hereunder unless such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements were imposed on,
incurred by or asserted against the Custodian because of a Custodial Delivery
Failure or the Custodian's gross negligence, lack of good faith or willful
misconduct on the part of the Custodian or any of its directors, officers,
agents or employees.
The foregoing indemnification shall survive any termination or assignment of
this Custodial Agreement.

                  Section 3.3. CUSTODIAN MAY OWN CERTIFICATES. The Custodian in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Custodian.

                  Section 3.4. TRUSTEE TO PAY CUSTODIAN'S FEES AND EXPENSES. The
Trustee covenants and agrees to pay to the Custodian monthly on each
Distribution Date, and the Custodian shall be entitled to, a fee of 1/12 of
0.0035% per annum multiplied by the aggregate Scheduled Principal Balance of the
Mortgage Loans and any REO Properties as of the second preceding Due Date (or,
in the case of the first Distribution Date, as of the Cut-off Date) as
compensation for all services rendered by it in the exercise and performance of
any of the powers and duties hereunder of the Custodian, and the Trustee will
pay or reimburse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith.

<PAGE>

                                        9

                  Section 3.5. CUSTODIAN MAY RESIGN; TRUSTEE MAY REMOVE
CUSTODIAN. The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as Custodian
of the Mortgage Loans by giving 60 days written notice thereof to the Depositor,
the Master Servicer and the Trustee. Upon receiving such notice of resignation,
the Trustee shall either: (1) take custody of the Mortgage Files itself and give
prompt notice thereof to the Depositor, the Master Servicer, and the Custodian
or (2) promptly appoint a successor Custodian by written instrument, in
duplicate, which instrument shall be delivered to the resigning Custodian and to
the successor Custodian. If the Trustee shall not have taken custody of the
Mortgage Files and no successor Custodian shall have been so appointed and have
accepted appointment within 60 days after the giving of such notice of
resignation, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor Custodian.

                  The Trustee may remove the Custodian at any time. In such
event, the Trustee shall appoint, or petition a court of competent jurisdiction
to appoint, a successor Custodian hereunder. Any successor Custodian shall be a
depository institution or a trust company subject to supervision by federal or
state authority and shall be able to satisfy the other requirements contained in
Section 3.7.

                  Any resignation or removal of the Custodian and appointment of
a successor Custodian pursuant to any of the provisions of this Section 3.5
shall become effective upon acceptance of appointment by the successor
Custodian. The Trustee shall give prompt notice to the Depositor and the Master
Servicer of the appointment of any successor Custodian. No successor Custodian
shall be appointed by the Trustee without the prior approval of the Depositor.

                  In the event of the removal or resignation of the Custodian,
the Custodian shall transfer all files to the successor Custodian within 60 days
after receipt of tender of notice of removal or resignation.

                  Section 3.6. MERGER OR CONSOLIDATION OF CUSTODIAN. Any Person
into which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, provided such Person shall be able to satisfy the requirements in
Section 3.7, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

                  Section 3.7. REPRESENTATIONS OF THE CUSTODIAN. The Custodian
hereby represents that it is a depository institution or a trust company subject
to supervision by a federal or state authority, has a combined capital and
surplus of at least $10,000,000 and is qualified to do business in the
jurisdiction in which it will hold any Mortgage File.

                  Section 3.8. LIABILITY OF THE CUSTODIAN. In the absence of bad
faith on the part of the Custodian, the Custodian may conclusively rely, as to
the truth of the statements and the correctness of the opinions expressed
therein, upon any request, instructions, certificate, opinion or

<PAGE>

                                       10

other document furnished to the Custodian, reasonably believed by the Custodian
to be genuine and to have been signed or presented by the proper party or
parties and conforming to the requirements of this Custodial Agreement; but in
the case of any loan document or other request, instruction, document or
certificate which by any provision hereof is specifically required to be
furnished to the Custodian, the Custodian shall be under a duty to examine the
same in accordance with Section 2.2 of this Custodial Agreement.

                  Neither the Custodian nor any of its directors, officers,
agents or employees, shall be liable for any action taken or omitted to be taken
by it or them hereunder or in connection herewith in good faith and believed by
it or them to be within the purview of this Custodial Agreement, except for its
or their breach of its or their obligations hereunder, or by its or their own
negligence, lack of good faith or willful misconduct. In no event shall the
Custodian or its directors, officers, agents and employees be held liable for
any special, indirect or consequential damages resulting from any action taken
or omitted to be taken by it or them hereunder or in connection herewith in good
faith and reasonably believed by it or them to be within the purview of this
Custodial Agreement, even if advised of the possibility of such damages.

                  Section 3.9. INSURANCE. The Custodian shall, at its own
expense, maintain in full force and effect at all times during the existence of
this Agreement the following:

                           (a)      fidelity insurance;
                           (b)      theft of documents insurance; and
                           (c)      errors and omissions insurance.

All such insurance shall be in amounts with standard coverage and subject to
deductibles as is customary for insurance typically maintained by depository
institutions or trust companies which act as custodians, which insurance may be
self-insurance. The minimum coverage under any such insurance shall be at least
equal to the corresponding amounts required by FNMA in the FNMA Mortgage-Backed
Securities Selling and Servicing Guide or by FHLMC in the FHLMC Sellers' &
Servicers' Guide. The Custodian shall, upon written request, provide to the
Depositor or the Trustee a copy of any policy or certificate of insurance
required to be maintained by the Custodian pursuant to this Agreement.

                                   ARTICLE IV

                            Miscellaneous Provisions

                  Section 4.1. NOTICES. All notices, requests, consents and
demands and other communications required under this Agreement or pursuant to
any other instrument or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered personally, by telegram
or telex, or by first class mail, postage prepaid, or by express delivery ser
vice, at the addresses shown on the signature page hereof, or such other address
as may hereafter be furnished to the other parties by like notice. Any such
demand, notice or communication hereunder

<PAGE>

                                       11

shall be deemed to have been received on the date delivered to or received at
the premises of the addressee.

                  Section 4.2. AUTHORIZED REPRESENTATIVES. Each representative
of the Trustee, the Depositor, the Master Servicer, the Custodian who is named
on Exhibit Four, Exhibit Five, Exhibit Six and Exhibit Seven hereto,
respectively (each, an "Authorized Representative"), is authorized to give and
receive notices, requests and instructions and to deliver certificates and
documents in connection with this Agreement on behalf of the Depositor, the
Trustee, the Master Servicer and the Custodian, as the case may be. From time to
time, the Depositor, the Trustee, the Master Servicer and the Custodian may, by
delivering to the others a revised exhibit, change the information previously
given, but each of the other parties hereto shall be entitled to rely
conclusively on the last exhibit until receipt of a superseding exhibit.

                  Section 4.2. AMENDMENTS. No modification or amendment of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto, and none of the Depositor, the Master
Servicer nor the Trustee shall enter into any amendment hereof except as
permitted by the Pooling and Servicing Agreement. The Trustee shall give prompt
notice to the Custodian of any amendment or supplement to the Pooling and
Servicing Agreement and furnish the Custodian with written copies thereof.

                  Section 4.3. GOVERNING LAW. This Agreement shall be deemed a
contract made under the laws of the State of New York and shall be construed and
enforced in accordance with and governed by the laws of the State of New York.

                  Section 4.4. COUNTERPARTS. For purpose of facilitating the
recordation of this Agreement as herein provided and for other purposes, this
Agreement may be executed simultaneously in any number of counterparts, each of
which counterparts shall be deemed to be an original, and such counterparts
shall constitute but one and the same instrument.

                  Section 4.5. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.

<PAGE>

                  IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.

                                           NORWEST BANK MINNESOTA,
                                           NATIONAL ASSOCIATION,
                                           as Trustee
Address:
                                           By:
                                              ----------------------------------
11000 Broken Land Parkway                  Name:
Columbia, Maryland 21044                   Title:
Attention:  Randall S. Reider

                                           CHASE BANK OF TEXAS, NATIONAL
                                           ASSOCIATION,
                                           as Custodian
Address:
                                           By:
                                              ----------------------------------
1111 Fannin, Suite 1200                    Name:
Houston, Texas 77002                       Title:
Attention:  Sandy Berry

                                           LONG BEACH MORTGAGE COMPANY
                                           as Master Servicer
Address:
                                           By:
                                              ----------------------------------
1100 Town & Country Road, Suite 1650       Name:
Orange, California 92868                   Title:
Attention:  General Counsel

                                           SALOMON BROTHERS MORTGAGE
                                           SECURITIES VII, INC.,
                                           as Depositor
Address:
                                           By:
                                              ----------------------------------
390 Greenwich Street, 4th Floor            Name:
New York, New York 10013                   Title:  Assistant Vice President
Attention:  Mortgage Finance

<PAGE>

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

                  On the 25th day of February, 2000 before me, a notary public
in and for said State, personally appeared Matthew R. Bollo, known to me to be
an Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc.,
one of the corporations that executed the within instrument, and also known to
me to be the person who executed it on behalf of said corporation, and
acknowledged to me that such corporation executed the within instrument.

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

                                             -----------------------------------
                                                         Notary Public

[Notarial Seal]

<PAGE>

STATE OF _________________  )
                            ) ss.:
COUNTY OF ________________  )

                  On the ___ day of February, 2000 before me, a notary public in
and for said State, personally appeared __________________, known to me to be a
____________________ of Long Beach Mortgage Company, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                             -----------------------------------
                                                         Notary Public

[Notarial Seal]

<PAGE>

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

                  On the 25th day of February, 2000 before me, a notary public
in and for said State, personally appeared Randall S. Reider, known to me to be
an Officer of Norwest Bank Minnesota, N.A., one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                             -----------------------------------
                                                         Notary Public

[Notarial Seal]

<PAGE>

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

                  On the ____th day of February, 2000 before me, a notary public
in and for said State, personally appeared Sandy Berry, known to me to be a Vice
President of Chase Bank of Texas, National Association, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

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

                                             -----------------------------------
                                                         Notary Public

[Notarial Seal]

<PAGE>

                     EXHIBIT ONE TO THE CUSTODIAL AGREEMENT

                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                             February __, 2000

Salomon Brothers Mortgage
Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, New York  10013

Long Beach Mortgage Company
1100 Town & Country Road
Orange, California 92868

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

       Re:  Custodial Agreement, dated as of February __, 2000, among Salomon
            Brothers Mortgage Securities VII, Inc., Long Beach Mortgage Company,
            Norwest Bank Minnesota, N.A. and Chase Bank of Texas, National
            Association Floating Rate Mortgage Pass-Through Certificates, Series
            2000-LB1

Ladies and Gentlemen:

                  In accordance with Section 2.2 of the above-referenced
Custodial Agreement, the undersigned, as Custodian, hereby certifies, subject to
the exceptions noted on the attached report, that as to each Mortgage Loan
listed in the Mortgage Loan Schedule attached hereto, (other than any Mortgage
Loan paid in full or any Mortgage Loan specifically identified in the exception
report as not being covered by this certification), it has reviewed the Mortgage
File and determined that (i) all documents constituting part of such Mortgage
File (other than such documents described in Section 2.1(e)) required to be
delivered to it pursuant to the Custodial Agreement are in its possession, (ii)
such documents have been reviewed by it and appear regular on their face and
relate to such Mortgage Loan, (iii) based on its examination and only as to the
foregoing, the information set forth in the Mortgage Loan Schedule attached
hereto that corresponds to items (i) through (iii), (vi), (ix), (x), (xiii),
(xv) and (xvii) through (xx) of the definition of "Mortgage Loan Schedule" in
the Pooling and Servicing Agreement accurately reflects information set forth in
the Mortgage File.

<PAGE>

                                        2

                  The Custodian has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in the above-referenced Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan, or (iii) whether any Mortgage File included any of the documents specified
in clause (e) of Section 2.1 of the Custodial Agreement.

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

                                           CHASE BANK OF TEXAS, NATIONAL
                                           ASSOCIATION

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

<PAGE>

                     EXHIBIT TWO TO THE CUSTODIAL AGREEMENT
                     --------------------------------------

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                  [Date]

Salomon Brothers Mortgage
Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, New York  10013
Attention: Susan Mills

Long Beach Mortgage Company
1100 Town & Country Road
Orange, California 92868

Norwest Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479

       Re:  Custodial Agreement, dated as of February __, 2000, among Salomon
            Brothers Mortgage Securities VII, Inc., Long Beach Mortgage Company,
            Norwest Bank Minnesota, N.A. and Chase Bank of  Texas, National
            Association Floating Rate Mortgage Pass-Through Certificates, Series
            2000-LB1

Ladies and Gentlemen:

                  In accordance with Section 2.2 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it has received:

                         (i) the original Mortgage Note, endorsed in blank or in
         the following form: "Pay to the order of Norwest Bank Minnesota,
         National Association, as Trustee for the registered holders of Salomon
         Brothers Mortgage Securities VII, Inc., under the applicable agreement,
         without recourse," with all prior and intervening endorsements showing
         a complete chain of endorsement from the Seller to the Person so
         endorsing to the Trustee;

<PAGE>

                                        2

                        (ii) the original Mortgage with evidence of recording
         thereon, and a copy, certified by the appropriate recording office, of
         the recorded power of attorney, if the Mortgage was executed pursuant
         to a power of attorney, with evidence of recording thereon;

                       (iii) the original recorded Assignment or Assignments of
         the Mortgage showing a complete chain of assignment from the originator
         to the Person assigning the Mortgage to the Trustee or in blank, or a
         certified copy of such Assignments in those instances where the public
         recording retains the original or where original has been lost; and

                       (iv) the original lender's title insurance policy.

                  The Custodian has made no independent examination of any
documents contained in each Mortgage File beyond the review specifically
required in accordance with the Custodial Agreement. The Custodian makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in the Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the
collectability, insurability, effectiveness or suitability of any such Mortgage
Loan.

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

                                         CHASE BANK OF TEXAS, NATIONAL
                                         ASSOCIATION

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

<PAGE>

                    EXHIBIT THREE TO THE CUSTODIAL AGREEMENT
                    ----------------------------------------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

Loan Information
----------------

         Name of Mortgagor:   ________________________________

         Master Servicer      ________________________________
         Loan No.:            ________________________________

Trustee/Custodian
-----------------

         Name:                ________________________________

         Address:             ________________________________
                              ________________________________

         Trustee/Custodian
         Mortgage File No.:   ________________________________

Depositor
---------

         Name:             SALOMON BROTHERS MORTGAGE
                               SECURITIES VII, INC.

         Address:             ________________________________
                              ________________________________

         Certificates:        Floating Rate Mortgage Pass-Through
                              Certificates, Series 2000-LB1.

<PAGE>

                                        4

                  The undersigned Master Servicer hereby acknowledges that it
has received from _______________________, as Trustee for the Holders of
Floating Rate Mortgage Pass-Through Certificates, Series 2000-LB1, the documents
referred to below (the "Documents"). All capitalized terms not otherwise defined
in this Request for Release shall have the meanings given them in the Pooling
and Servicing Agreement, dated as of February 1, 2000, among the Trustee, the
Depositor and the Master Servicer (the "Pooling and Servicing Agreement").

( )      Promissory Note dated _______________, 20__, in the original principal
         sum of $__________, made by _____________________, payable to, or
         endorsed to the order of, the Trustee.

( )      Mortgage recorded on _________________________ as instrument no.
         ____________________ in the County Recorder's Office of the County of
         _________________, State of __________________ in book/reel/docket
         _________________ of official records at page/image _____________.

( )      Deed of Trust recorded on ___________________ as instrument no.
         ________________ in the County Recorder's Office of the County of
         _________________, State of ____________________ in book/reel/docket
         _________________ of official records at page/image ______________.

( )      Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
         ___________________ as instrument no. _________ in the County
         Recorder's Office of the County of _______________, State of
         _______________________ in book/reel/docket ____________ of official
         records at page/image ____________.

( )      Other documents, including any amendments, assignments or other
         assumptions of the Mortgage Note or Mortgage.

( )      ---------------------------------------------

( )      ---------------------------------------------

( )      ---------------------------------------------

( )      ---------------------------------------------

                  The undersigned Master Servicer hereby acknowledges and agrees
as follows:

                  (1) The Master Servicer shall hold and retain possession of
         the Documents in trust for the benefit of the Trustee, solely for the
         purposes provided in the Agreement.

                  (2) The Master Servicer shall not cause or permit the
         Documents to become subject to, or encumbered by, any claim, liens,
         security interest, charges, writs of attachment

<PAGE>

                                       2

         or other impositions nor shall the Master Servicer assert or seek to
         assert any claims or rights of setoff to or against the Documents or
         any proceeds thereof.

                  (3) The Master Servicer shall return each and every Document
         previously requested from the Mortgage File to the Trustee when the
         need therefor no longer exists, unless the Mortgage Loan relating to
         the Documents has been liquidated and the proceeds thereof have been
         remitted to the Collection Account and except as expressly provided in
         the Agreement.

                  (4) The Documents and any proceeds thereof, including any
         proceeds of proceeds, coming into the possession or control of the
         Master Servicer shall at all times be earmarked for the account of the
         Trustee, and the Master Servicer shall keep the Documents and any
         proceeds separate and distinct from all other property in the Master
         Servicer's possession, custody or control.

Dated:

                                          [MASTER SERVICER]

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

<PAGE>

                               REQUEST FOR RELEASE
                          [Mortgage Loans Paid in Full]

                     OFFICERS' CERTIFICATE AND TRUST RECEIPT
                FLOATING RATE MORTGAGE PASS-THROUGH CERTIFICATES
                                 SERIES 2000-LB1

____________________________________________________ HEREBY CERTIFIES THAT
HE/SHE IS AN OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH
BENEATH HIS/HER SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

ALL PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY), AND INTEREST HAVE BEEN MADE.

LOAN NUMBER:_______________________         BORROWER'S NAME:____________________

COUNTY:

WE HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
WHICH ARE REQUIRED TO BE DEPOSITED IN THE COLLECTION ACCOUNT PURSUANT TO SECTION
3.10 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

___________________________________         DATED:______________________________

/  /   VICE PRESIDENT

/  /   ASSISTANT VICE PRESIDENT

<PAGE>

                     EXHIBIT FOUR TO THE CUSTODIAL AGREEMENT
                     ---------------------------------------

                     AUTHORIZED REPRESENTATIVES OF DEPOSITOR
                     ---------------------------------------

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

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

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

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

<PAGE>

                     EXHIBIT FIVE TO THE CUSTODIAL AGREEMENT
                     ---------------------------------------

                      AUTHORIZED REPRESENTATIVES OF TRUSTEE
                      -------------------------------------

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

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

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

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

<PAGE>

                     EXHIBIT SIX TO THE CUSTODIAL AGREEMENT
                     --------------------------------------

                  AUTHORIZED REPRESENTATIVES OF MASTER SERVICER
                  ---------------------------------------------

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

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

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

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

<PAGE>

                    EXHIBIT SEVEN TO THE CUSTODIAL AGREEMENT
                    ----------------------------------------

                     AUTHORIZED REPRESENTATIVES OF CUSTODIAN
                     ---------------------------------------

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

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

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

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

<PAGE>

                    EXHIBIT EIGHT TO THE CUSTODIAL AGREEMENT
                    ----------------------------------------

                           FORM OF LOST NOTE AFFIDAVIT

         I, as ___________________________ (title) (hereinafter called
"Deponent") of _______________________ (the "Custodian"), am authorized to make
this Lost Note Affidavit (this "Affidavit") on behalf of the Custodian. In
connection with the administration of the Mortgage Loans held by the Custodian
on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the "Depositor"),
Deponent being duly sworn, deposes and says that:

         1. Custodian's address is:

         [CUSTODIAN'S Address]

         2. Custodian previously delivered to the Depsotior a certification with
respect to that certain Mortgage Note made by ___________________ in an original
principal balance of $___________, secured by a Mortgage on a property located
at______________________________________________, which did not indicate such
Mortgage Note is missing;

         3. Such Mortgage Note was assigned or sold to the Depositor by
[__________] pursuant to the terms and provisions of a Pooling and Servicing
Agreement dated and effective as of February 1, 2000;

         4. Such Mortgage Note is not outstanding pursuant to a Request for
Release;

         5. Aforesaid Mortgage Note (hereinafter called the "Original") has been
lost;

         6. Deponent has made or has caused to be made a diligent search for the
Original and has been unable to find or recover same;

         7. The Custodian was the Custodian of the Original at the time of loss;

         8. Deponent agrees that, if said Original should ever come into the
Custodian's possession, custody or power, the Custodian will immediately and
without consideration surrender the Original to the Depositor;

         9. Attached hereto is a true and correct copy of (i) the Mortgage Note,
endorsed in blank by the Mortgagee, as provided by _________________________ or
its designee and (ii) the Mortgage which secures the Mortgage Note;

         10. Deponent hereby agrees that the Custodian (a) shall indemnify and
hold harmless the Trustee, the Master Servicer and the Depositor, their
successors, and assigns, against any loss, liability or damage, including
reasonable attorney's fees, resulting from the unavailability of any Originals,
including but not limited to any loss, liability or damage arising from (i) any
false

<PAGE>

                                       2

statement contained in this Affidavit, (ii) any claim of any party that it has
already purchased a mortgage loan evidenced by the Originals or any interest in
such mortgage loan, (iii) any claim of any borrower with respect to the
existence of terms of a Mortgage Loan evidenced by the Originals, (iv) the
issuance of a new instrument in lieu thereof and (v) any claim whether or not
based upon or arising from honoring or refusing to honor the Original when
presented by anyone (items (i) through (iv) above are hereinafter referred to as
the "Losses"); and

         11. This Affidavit is intended to be relied on by the Trustee, the
Master Servicer and the Depositor, their successors, and assigns and the
Custodian represents and warrants that it has the authority to perform its
obligations under this Affidavit.

         EXECUTED THIS ____ day of _______, ____, on behalf of the Custodian by:

                                     -----------------------------------
                                     Signature

                                     -----------------------------------
                                     Typed Name

         On this _________ day of _______________________, ______, before me
appeared ____________________________________________, to me personally know,
who being duly sworn did say that she/he is the ______________________________
of ----------------------, and that said Lost Note Affidavit was signed and
sealed on behalf of such corporation and said _____________________________
acknowledged this instrument to be the free act and deed of said corporation.

-------------------------------------
Notary Public in and for the
State of ____________________________.

My Commission expires: _______________.

<PAGE>

                                   APPENDIX A

<PAGE>

                                   Schedule 1

                             MORTGAGE LOAN SCHEDULE

                                 FILED BY PAPER

<PAGE>

                                   Schedule 2

                           PREPAYMENT CHARGE SCHEDULE

                           TO BE PROVIDED UPON REQUEST

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