Document:

<PAGE>
                                                                   EXHIBIT 10.32

                              EMPLOYMENT AGREEMENT

             THIS EMPLOYMENT AGREEMENT is entered into as of the 20th day of
February 2003 by and between TALX Corporation, a Missouri corporation (the
"Company"), and L. Keith Graves ("Executive").

                                    RECITALS

             A. The Company desires to employ Executive as Chief Accounting
Officer and Controller.

             B. In return for the compensation, bonuses and other consideration
provided for herein, Executive has agreed to become Chief Accounting Officer and
Controller pursuant to the terms and conditions of this Agreement.

             NOW THEREFORE, in consideration of the foregoing, and the
representations, warranties and covenants hereinafter, the parties hereto agree
as follows (the "Agreement"):

             1. Employment. At all times during the Employment Period (as
hereinafter defined), Company shall employ Executive in the capacity of Chief
Accounting Officer and Controller. In such capacity, Executive shall devote his
full time and professional efforts to such position, shall be assigned and
undertake only such duties and tasks as are appropriate for a person in the
position of Chief Accounting Officer and Controller, and shall exercise such
authority over all of Company's operations and employees as is customarily
exercised by a Chief Accounting Officer and Controller, subject to the overall
supervision of the Board of Directors of the Company (the "Board").

             2. Employment Period. The term of the Executive's employment under
this Agreement shall commence on February 20, 2003 (the "Commencement Date") and
shall expire, subject to earlier termination of employment as hereinafter
provided, on February 19, 2004 (the "Employment Period"); provided, however,
that on February 20, 2004 and each anniversary of such date, the Employment
Period shall automatically be extended for an additional one year period unless
prior thereto either party has given 90-days prior written notice to the other
that such party does not wish to extend the term of this Agreement.

             3. Compensation. Except as otherwise provided for herein,
throughout the Employment Period the Company shall pay or provide Executive with
the following, and Executive shall accept the same, as compensation for the
performance of his undertakings and the services to be rendered by his
throughout the Employment Period under this Agreement:

             (a) Annual Compensation.

                          (i) Base Salary: $175,000.00 per year ("Base Amount"),
             to be reviewed annually for increases only by the Management
             Compensation Committee ("Compensation Committee") of the

<PAGE>

             Company's Board of Directors and such Base Amount may not be
             reduced.

                          (ii) Annual Incentive Compensation Program: Executive
             will participate in an annual incentive compensation program the
             terms and conditions of which will have been reviewed by the
             Compensation Committee and upon the recommendation of such
             Compensation Committee will have been submitted to, and approved
             by, the Board.

             (b) Benefits. Executive shall be entitled to participate in all
benefit plans and other applicable programs, practices and arrangements
maintained by the Company for its employees generally, to the extent that such
plans, programs, practices and arrangements do not conflict with the terms of
this Agreement.

             4. Excise Tax Payments.

             (a) Notwithstanding anything contained in this Agreement to the
contrary, in the event that any payment (within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended or replaced (the
"Code"), or distribution to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his or her employment with
the Company (a "Payment" or "Payments"), would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, interest and
penalties collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all such taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments; provided,
that the Executive shall not be entitled to receive any additional payment
relating to any interest or penalties attributable to any action or omission by
the Executive in bad faith.

             (b) An initial determination shall be made by an accounting firm
mutually agreeable to the Company and the Executive and, if not agreed to within
three days after the Date of Termination, a national independent accounting firm
selected by the Executive (the "Accounting Firm"), as to whether a Gross-Up
Payment is required pursuant to this Section 4 and the amount of such Gross-Up
Payment. To permit the Accounting Firm to make the initial determination, the
Company shall furnish the Accounting Firm with all information reasonably
required for such firm to complete such determination as soon as practicable
after the Date of Termination, but in no event more than fifteen (15) days
thereafter. All fees, costs and expenses (including, but not limited to, the
cost of retaining experts) of the Accounting Firm shall be borne by the Company
and the Company shall pay such fees, costs and expenses as they become due. The
Accounting Firm shall provide detailed supporting calculations, reasonably
acceptable both to the Company and the Executive within thirty (30) days of the
Date of Termination, if applicable, or such other time as requested by the
Company or by the Executive (provided the Executive reasonably believes that any
of the Payments may be subject to the Excise Tax). The

                                       2
<PAGE>

Gross-Up Payment, if any, as determined pursuant to this Section 4(b) shall be
paid by the Company to the Executive within five (5) business days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect to a
Payment or Payments, it shall furnish the Executive with an opinion reasonably
satisfactory to the Executive that no Excise Tax will be imposed with respect to
any such Payment or Payments. Any such initial determination by the Accounting
Firm of the Gross-Up Payment shall be binding upon the Company and the Executive
subject to the application of Section 4(c).

             (c) As a result of the uncertainty in the application of Sections
4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a portion
thereof) will be paid which should not have been paid (an "Overpayment") or a
Gross-Up Payment (or a portion thereof) which should have been paid will not
have been paid (an "Underpayment"). An Underpayment shall be deemed to have
occurred upon a "Final Determination" (as hereinafter defined) that the tax
liability of the Executive (whether in respect of the then current taxable year
of the Executive or in respect of any prior taxable year of the Executive) will
be increased by reason of the imposition of the Excise Tax on a Payment or
Payments with respect to which the Company has failed to make a sufficient
Gross-Up Payment. An Overpayment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the Excise Tax shall not be imposed
(or shall be reduced) upon a Payment or Payments with respect to which the
Executive had previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when (i) in the case of an Overpayment, the
Executive has received from the applicable governmental taxing authority a
refund of taxes or other reduction in his or her tax liability imposed as a
result of a Payment or, in the case of an Underpayment, the Executive receives
notice from a competent governmental authority that his or her tax liability
imposed as a result of a Payment will be increased, and (ii) in the case of an
Overpayment or an Underpayment, upon either (x) the date a determination is made
by, or an agreement is entered into with, the applicable governmental taxing
authority which finally and conclusively binds the Executive and such taxing
authority, or in the event that a claim is brought before a court of competent
jurisdiction, the date upon which a final determination has been made by such
court and either all appeals have been taken and finally resolved or the time
for all appeals has expired or (y) the statute of limitations with respect to
the Executive's applicable tax return has expired. If an Underpayment occurs,
the Executive shall promptly notify the Company and the Company shall promptly
pay to the Executive an additional Gross-Up Payment equal to the amount of the
Underpayment plus any interest and penalties imposed on the Underpayment (other
than interest and penalties attributable to any action or omission by the
Executive in bad faith). If an Overpayment occurs, the amount of the Overpayment
shall be treated as a loan by the Company to the Executive and the Executive
shall, within ten (10) business days of the occurrence of such Overpayment, pay
the Company the amount of the Overpayment, without interest.

             (d) Notwithstanding anything contained in this Agreement to the
contrary, in the event it is determined that an Excise Tax will be imposed on
any Payment or Payments, the Company shall pay to the applicable governmental
taxing authorities as Excise Tax withholding, the amount of the Excise Tax that
the Company has actually withheld from the Payment or Payments.

                                       3
<PAGE>

             5. Expenses. During the Employment Period, the Company shall
promptly pay or reimburse Executive for all reasonable out-of-pocket expenses
incurred by Executive in the performance of duties hereunder in accordance with
the Company's policies and procedures then in effect.

             6. Conditions of Employment. Throughout the Employment Period, (a)
the Company shall not require or assign duties to Executive which would require
him to have the location of his principal business office or his principal place
of residence other than the County of St. Louis, Missouri, and (b) the Company
shall not require or assign duties to Executive which would require him to spend
more than ninety (90) consecutive days away from his office during, any
consecutive twelve-month period.

             7. Termination.

             (a) In addition to the termination rights in Section 2 of this
Agreement, this Agreement shall terminate upon the following circumstances:

             (i)          At any time at the election of Company for Cause.
                          "Cause" for this purpose shall mean (1) Executive
                          commits a material breach of this Agreement which has
                          not been cured within 10 days of written notice from
                          the Company that such material breach has occurred;
                          (2) Executive commits a crime against moral turpitude,
                          including, without limitation, committing an act of
                          fraud, dishonesty, disclosure of confidential
                          information or the commission of a felony, or direct
                          and deliberate acts constituting a breach of trust to
                          Company; (3) Executive willfully violates the
                          provisions of this Agreement, including, without
                          limitation, willfully or continuously refusing to
                          perform the duties reasonably assigned to him by the
                          Board which are consistent with the provisions of this
                          Agreement; or (4) Executive willfully engages in
                          conduct that damages the Company's business or
                          reputation or materially injures the Company.

             (ii)         At any time at the election of Executive for Good
                          Reason. "Good Reason" for this purpose shall mean (1)
                          a material breach of this Agreement by the Company
                          which has not been cured within 10 days of written
                          notice from Executive that such material breach has
                          occurred; (2) the reduction of salary, benefits or
                          other perquisites provided to Executive under this
                          Agreement; (3) failure by the Company to obtain a
                          successor's commitment to perform the Company's
                          obligations under this Agreement; or (4) the Company
                          providing written notice to Executive pursuant to
                          Section 2 hereof that it does not wish to extend the
                          term of this Agreement.

             (iii)        Executive's death or him being unable to render the
                          services required to be rendered by his during the
                          Employment Period for a period of one hundred eighty
                          (180) days during any twelve-month period
                          ("Disability").

                                       4
<PAGE>

             (b) In the event the Company or Executive intend to terminate this
Agreement for Cause or Good Reason, respectively, such termination may only be
accomplished upon compliance with the following procedures:

             (i)          The party seeking to terminate this Agreement (the
                          "Notifying Party") shall provide the other (the
                          "Defaulting Party") with written notice of its or his
                          belief that Cause or Good Reason, as the case may be,
                          exists. The parties shall for a period of 30 days from
                          the date of such notice attempt to resolve to their
                          mutual satisfaction whether or not Cause or Good
                          Reason exists, and, if so, the rights and obligations
                          of the parties.

             (ii)         In the event the parties are unable to reach a
                          mutually acceptable resolution during such 30-day
                          period, the Notifying Party shall afford the
                          Defaulting Party an additional 10 days or such longer
                          period as the Notifying Party in its or his sole
                          discretion may determine to cure the alleged breach.

             (iii)        In the event the Defaulting Party does not cure the
                          breach during the 10-day period, the Notifying Party
                          shall be required to institute an arbitration
                          proceeding to determine whether Cause or Good Reason
                          existed and has not been cured in accordance with
                          Section 18 herein.

             (iv)         This Agreement shall be terminated as of the date when
                          the Notifying Party institutes an arbitration
                          proceeding in accordance with subsection (iii)
                          preceding; provided, however, that in the event Good
                          Reason exists as a result of the application of
                          Section 7(a)(ii)(4), no further employment services
                          will be required or expected of Executive and
                          Executive and Company will coordinate the timing and
                          press releases, if any, of his departure. The sole
                          decision of the arbitrator in such proceeding shall be
                          to determine whether Cause (if initiated by Company)
                          or Good Reason (if initiated by Executive) exists.
                          Thereafter, the obligations of the parties to each
                          other shall be determined by applying the decision of
                          the arbitrator(s) in accordance with Exhibit A hereto.

             (v)          In the event the Company does not prevail in any such
                          proceeding initiated by it for Cause, Executive's
                          termination shall be deemed to have occurred for Good
                          Reason. In the event Executive does not prevail in any
                          such proceeding initiated by him for Good Reason,
                          Executive shall be considered as having voluntarily
                          terminated employment other than for Good Reason, and
                          his rights under this Agreement shall be determined as
                          if he had been terminated by Company for Cause.

                                       5
<PAGE>

             (c) Upon expiration or termination of this Agreement under Section
2 or Section 7 herein, Executive shall be entitled to receive compensation and
other benefits provided for herein in accordance with Exhibit A hereto. The
parties agree that, in the event of termination by Executive for Good Reason
under Section 7, such payments and benefits shall be deemed to constitute
liquidated damages for the breach of this Agreement by Company.

             8. Change of Control.

             (a) If (i) Executive terminates his employment for Good Reason
during the period commencing with the date of a Change of Control (as
hereinafter defined) and ending twelve months following the Change of Control
(the "Change of Control Period"), (ii) the Company terminates Executive's
employment without Cause during the Change of Control Period, or (iii) Company
terminates Executive's employment without Cause within six months prior to a
Change of Control and Executive can reasonably demonstrate that such termination
was in connection with or in anticipation of a Change of Control, the Executive
shall be entitled to receive compensation and other benefits ("Change of Control
Payments") described on Exhibit A under the column heading "Related to Change of
Control" and such Change of Control Payments shall be in lieu of any other
payments described in Section 7 herein. Notwithstanding anything to the contrary
contained herein, nothing in this Agreement shall relieve Employer of its
obligation of providing Employee with all retirement and deferred compensation
benefits in accordance with the terms of all retirement and deferred
compensation plans in which Employee participates.

             (b) The term "Change of Control" shall mean a change of control of
a nature that would be required to be reported in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the date hereof, pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 ("Exchange Act"), or any
comparable successor provisions. Without limiting the foregoing, a "Change of
Control" also means for purposes of this Agreement, regardless of its meaning
under the provisions of the Exchange Act:

             (i)          The purchase or other acquisition (other than from the
                          Company) by any person, entity or group of persons,
                          within the meaning of Section 13(d) or 14(d) of the
                          Exchange Act (excluding, for this purpose, the Company
                          or its subsidiaries or any employee benefit plan of
                          the Company or its subsidiaries), of beneficial
                          ownership, (within the meaning of Rule 13d-3
                          promulgated under the Exchange Act) of 25% or more of
                          either the then outstanding shares of common stock or
                          the combined voting power of the Company's then
                          outstanding voting securities entitled to vote in the
                          election of directors; or

             (ii)         Individuals who, as of the date hereof, constitute the
                          Board of Directors of the Company (as of the date
                          hereof, the "Incumbent Board") cease for any reason to
                          constitute at least two-thirds of the

                                       6
<PAGE>

                          Board, provided that any person (other than a person
                          whose election or nomination or whose initial
                          assumption of office is in connection with an actual
                          or threatened election contest relating to the
                          election of directors of the Company, as such terms
                          are used in Rule 14a-11 of Regulation 14A promulgated
                          under the Exchange Act) who becomes a director
                          subsequent to the date hereof whose election, or
                          nomination for election by the Company's shareholders,
                          was approved by a vote of at least three-quarters of
                          the directors then comprising the Incumbent Board
                          shall be, for purposes of this Agreement, considered
                          as though such person were a member of the Incumbent
                          Board; or

             (iii)        Approval by the shareholders of the Company of a
                          reorganization, merger, or consolidation, in each
                          case, with respect to which persons who were the
                          shareholders of the Company immediately prior to such
                          reorganization, merger or consolidation do not,
                          immediately thereafter, own more than 50% of the
                          combined power entitled to vote generally in the
                          election of directors of the reorganized, merged or
                          consolidated company's then outstanding voting
                          securities or a liquidation or dissolution of the
                          Company or of the sale of all or substantially all of
                          the assets of the Company.

             9. Non-Competition Agreement. Executive acknowledges, agrees and
recognizes that (i) the Company has spent substantial money, time and effort
over the years in developing and solidifying its relationships with its
customers and in developing its confidential, proprietary and trade secret
information; (ii) long-term customer relationships often can be difficult to
develop and require a significant investment of time, effort and expense; (iii)
the Company pays its employees to, among other things, develop and preserve the
Company's business, confidential and trade secret information, customer
goodwill, customer loyalty and customer contacts for and on behalf of the
Company; and (iv) the Company is hereby agreeing to hire Executive and pay
Executive based upon Executive's assurances and promises contained herein not to
divert the Executive's customers' goodwill or to put himself in a position
during or following the term of this Agreement in which the confidentiality of
the Company's information might somehow be compromised. Executive agrees that
during his employment by the Company and for the Restricted Period (as defined
below), Executive will not as an individual or as a partner, employee, agent,
advisor, consultant or in any other capacity of or to any person, firm,
corporation or other entity, on Executive's own behalf or on behalf of any other
person, firm corporation or entity, directly or indirectly:

             (a) carry on any business, become involved in any business
activity, or render any products or services to any business, competitive with
the business of the Company or any of its subsidiaries, affiliates or related
companies as such business or businesses are presently conducted and as such
business or businesses may evolve in the ordinary course during the Employment
Period anywhere in the United States or in any other jurisdiction in which the
Company shall conduct business during the Employment Period;

                                       7
<PAGE>

             (b) knowingly and intentionally hire, or assist anyone else to
hire, any employee or distributor of the Company or seek to persuade, or assist
anyone else to seek to persuade, any employee or distributor of the Company to
discontinue his or her employment with the Company or business relationship with
the Company, as the case may be;

             (c) knowingly and intentionally induce or attempt to induce, or
assist anyone else to induce or attempt to induce, any customer of the Company
to reduce or discontinue its business with the Company or disclose to anyone
else the name and/or requirements of any such customer; or

             (d) knowingly and intentionally interfere with any relationships
between the Company and its vendors, customers, strategic partners, distributors
or other persons with whom the Company has business relations.

The "Restricted Period" shall be during the term of the Executive's employment
with the Company, and for a period of one year after the termination of such
employment for whatever reason.

             Executive expressly agrees that the covenants set forth in this
Section 9 are reasonable and enforceable because, among other things, (i) the
nature of the markets in which the Company's products or services are marketed
and sold; (ii) the Executive will be exposed or have access to confidential
information; (iii) the Company would not have adequate protection if Executive
were permitted to work for any of its competitors since the Company would be
unable to verify whether its confidential information was being disclosed and/or
misused, and (iv) Executive's other businesses and background which are such
that the restraint will not impose any undue hardships upon Executive.
Furthermore, Executive recognizes and agrees that the restraints contained in
this Section 9 are reasonable and enforceable in view of the Company's
legitimate interests in protecting its confidential information and customer
goodwill and the limitations contained therein on the duration and geographic
scope of, and activities prohibited by, such restraints.

             10. Confidential Information.

             (a) Without the express written consent of the Company, Executive
agrees, during the term of this Agreement and thereafter (including after the
termination of this Agreement for any reason) to keep secret and confidential,
and not to use or disclose to any third parties, any of the Company's and/or its
clients/customers' proprietary trade secret information or other confidential
information acquired by or disclosed to the Executive prior to, during the
course of, or in connection with, this Agreement.

             (b) The Company and its clients/customers consider and treat as
confidential, proprietary and trade secret, among other things, their respective
marketing data, plans and strategies, internal financial information, customer
lists, costs, margins, pricing and policies, component sourcing and supply
information, planning methods, systems, processes, computer software (whether in
object code, source code, applications, machine readable form, printouts, or
human readable form), computer programs and documentation, computer hardware
designs and configurations, systems, research and development plans and
activities, ideas, drawings,

                                       8
<PAGE>

photographs, models, prototypes, developments, constructions, computer firmware,
videotapes (including, but not limited to, original, work and/or finished master
tapes), manufacturing methods and techniques, quality control procedures and
methods, investigations, engineering, test methods and data, technical data,
security methods and procedures, designs, plans and specifications, and actual
and potential applications thereof, business acquisition and expansion plans,
product applications, information provided to the Company in confidence by its
clients and third parties, and the like (collectively the "Confidential
Information"), and Executive agrees to treat any and all such information as
secret, confidential and proprietary to the Company and/or, as applicable, its
customers/clients. Executive understands that confidential information may or
may not be labeled as "confidential" and will treat all information as
confidential whether or not labeled as such. Confidential information shall not
include information which (i) was already available to the general public at the
time of receipt by Executive, (ii) subsequently becomes known to the general
public through no fault or admission of Executive, (iii) is subsequently
disclosed by a third party which has the bona fide right to make such
disclosure; or (iv) is required to be disclosed by law or by any court or
authority.

             (c) Executive acknowledges that any and all notes, records,
sketches, computer diskettes, programs, and other documents or things obtained
by or provided to Executive, or otherwise made, produced, generated or compiled
during the course of Executive's employment by the Company, which contain any of
the Company's Confidential Information, regardless of the type of medium in
which it is preserved, are and shall remain the sole and exclusive property of
the Company and shall be surrendered by Executive to the Company upon the
termination of this Agreement and/or upon the request or demand of the Company.

             11. Effect of Breach of Sections 9 or 10. So long as any stock
options held by the Executive shall not have been exercised or shall not be
vested, the exercise of such stock options shall each be subject to Executive's
full compliance with the terms and conditions of Section 9 (which shall continue
to apply for this purpose) and Section 10 herein; provided, however, that any
such breach will not have any effect on stock options exercised prior to the
date of such breach. Notwithstanding any other provision is this Agreement,
Executive further agrees that a breach of Sections 9 or 10 cannot adequately be
compensated by money damages and, therefore, Company shall be entitled, in
addition to any other right or remedy available to it (including, but not
limited to, an action for damages), to an injunction restraining such breach or
a threatened breach and to specific performance of either such provision, and
Executive hereby consents to the issuance of such injunction and to the ordering
of specific performance. The purpose of this Section 11 is to, in certain
circumstances, limit the rights the Executive has with respect to his stock
options and nothing herein shall be construed to expand or create any rights
with respect to such Executive's stock options.

             12. Legal Expenses. The Company shall pay to Executive all
out-of-pocket expenses, including reasonable attorneys' fees, incurred by
Executive in connection with any claim or legal action or proceeding brought
under or involving this Agreement, whether brought by Executive or by or on
behalf of the Company or by another party; provided, however, the Company shall
not be obligated to pay to Executive out-of-pocket expenses, including
attorneys' fees, incurred by Executive in any claim or legal action or
proceeding involving Sections 7, 8, 9, 10 or 11 of this Agreement if Company
prevails in such litigation or arbitration.

                                       9
<PAGE>

             13. No Mitigation. The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or reduced by the
amount of any compensation or benefits provided to Executive in any subsequent
employment.

             14. Notices. All notices required or permitted under this Agreement
shall be in writing, may be made by personal delivery or facsimile transmission,
effective on the day of such delivery or receipt of such transmission, or may be
mailed by registered or certified mail, effective five (5) days after the date
of mailing, addressed as follows:

                  to Company:       TALX Corporation
                                    1850 Borman Court
                                    St. Louis, Missouri 63146
                                    Attention: William W. Canfield
                                    President and Chief Executive Officer
                                    Facsimile number:  (314) 214-7585

                  to Executive:     L. Keith Graves
                                    3432 Sutton Court
                                    St. Charles, MO 63301

or such other person or address as designated in writing to Executive at his
last known residence address or to such other addresses as designated by him in
writing to Company.

             15. Successors. This Agreement may not be assigned by the Company
(other than by merger or operation of law) without the express written consent
of Executive, and the obligations of the Company provided for in this Agreement
shall be binding legal obligations of any successor to the Company or the
principal business of Company by purchase, merger, consolidation, or otherwise.
This Agreement may not be assigned by Executive during his life, and upon his
death will be binding upon and inure to the benefit of his heirs, legatees and
the legal representatives of his estate.

             16. Waiver, Modification and Interpretation. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in a writing signed by Executive and an appropriate
officer of the Company empowered to sign same by the Board of Directors of the
Company. No waiver by either party at any time of any breach by the party of, or
compliance with, any condition or provision of this Agreement to be performed by
the other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same time or at any prior to subsequent time. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Missouri.

             17. Invalidity of Provisions. In the event that any provision of
this Agreement is adjudicated to be invalid or unenforceable under applicable
law in any jurisdiction, the validity or enforceability of the remaining
provisions thereof shall be unaffected as to such jurisdiction and such
adjudication shall not affect the validity or enforceability of such provision
in any other jurisdiction. To the extent that any provision of this Agreement is
adjudicated to be invalid or

                                       10
<PAGE>

unenforceable because it is over broad, that provision shall not be void but
rather shall be limited to the extent required by applicable law and enforced as
so limited. The parties expressly acknowledge and agree that this Section 17 is
reasonable in view of the parties' respective interests.

             18. Arbitration

             (a) Scope; Initiation. Resolution of any and all disputes arising
from or in connection with this Agreement, whether based on contract, tort,
statute or otherwise, including disputes over arbitrability and disputes in
connection with claims by third persons ("Disputes") shall be exclusively
governed by and settled in accordance with the provisions of this Section 18.
Either party to this Agreement (each a "Party" and together the "Parties") may
commence proceedings hereunder by delivery of written notice providing a
reasonable description of the Dispute to the other, including a reference to
this Section 18 (the "Dispute Notice").

             (b) Negotiations Between Parties. The Parties shall first attempt
in good faith to resolve promptly any Dispute by good faith negotiations. Not
later than three (3) business days after delivery of the Dispute Notice, the
Company shall appoint an executive to meet with the Executive or his or her
representative at a reasonably acceptable time and place, and thereafter as such
representatives deem reasonably necessary. The Parties shall exchange relevant
non-privileged information and endeavor to resolve the Dispute. Prior to any
such meeting, each Party or representative shall advise the other as to any
other individuals who will attend such meeting. All negotiations pursuant to
this Section 18(b) shall be confidential and shall be treated as compromise
negotiations for purposes of Rule 408 of the Federal Rules of Evidence and
similarly under other federal and state rules of evidence.

             (c) Binding Arbitration. The Parties hereby agree to submit all
Disputes to arbitration under the following provisions, which arbitration shall
be final and binding upon the Parties, their successors and assigns, and that
the following provisions constitute a binding arbitration clause under
applicable law.

             (i)          Either Party may initiate arbitration of a Dispute by
                          delivery of a demand therefor (the "Arbitration
                          Demand") to the other Party not sooner than five (5)
                          business days after the date of delivery of the
                          Dispute Notice but at any time thereafter.

             (ii)         The arbitration shall be conducted in the County of
                          St. Louis, Missouri, by three arbitrators (acting by
                          majority vote, the "Panel") selected by agreement of
                          the Parties not later than 10 days after delivery of
                          the Arbitration Demand or, failing such agreement,
                          appointed pursuant to the Commercial Arbitration Rules
                          of the American Arbitration Association, as amended
                          from time to time (the "AAA Rules"). If an arbitrator
                          becomes unable to serve, his or his successor(s) shall
                          be similarly selected or appointed.

             (iii)        The arbitration shall be conducted pursuant to the
                          Federal Arbitration Act and the Missouri Uniform
                          Arbitration Act, such

                                       11
<PAGE>

                          procedures as the Parties may agree or, in the absence
                          of or failing such agreement, pursuant to the AAA
                          Rules. Notwithstanding the foregoing: (w) each party
                          shall be allowed to conduct discovery through written
                          requests for information, document requests, requests
                          for stipulations of fact, and depositions; (x) the
                          nature and extent of such discovery shall be
                          determined by the Panel, taking into account the needs
                          of the Parties and the desirability of making
                          discovery expeditious and cost-effective; (y) the
                          Panel may issue orders to protect the confidentiality
                          of information, to be disclosed in discovery; and (z)
                          the Panel's discovery rulings may be enforced in any
                          court of competent jurisdiction.

             (iv)         All hearings shall be conducted on an expedited
                          schedule, and all proceedings shall be confidential.
                          Either Party may at its expense make a stenographic
                          record thereof.

             (v)          The Panel shall complete all hearings not later than
                          twenty (20) days after selection or appointment, and
                          shall make a final award not later than ten (10) days
                          thereafter. The award shall be in writing and shall
                          specify the factual and legal bases for the award, and
                          shall include a determination as to whether any claim
                          by the Executive of Good Reason was manifestly
                          unreasonable for purposes of the second-to-last
                          sentence of Section 5. Notwithstanding anything
                          contained in Section 8, in circumstances where a
                          Dispute has been asserted by the Executive or defended
                          against by the Executive on grounds that the Panel
                          deems manifestly unreasonable (whether related to a
                          claim of Good Reason or otherwise), the Panel may
                          assess all or part of the costs and expenses of the
                          arbitration, including the Panel's fees and expenses
                          and fees and expenses of experts and legal counsel
                          ("Arbitration Costs"), against the Executive and may
                          include in the award the Executive's and the Company's
                          attorney's fees and expenses in connection with any
                          and all proceedings under this Section 18.
                          Notwithstanding the foregoing, in no event may the
                          Panel award multiple, punitive or exemplary damages to
                          either party.

             (d) Confidentiality - Notice. Each Party shall notify the other
promptly, and in any event prior to disclosure to any third person, if it
receives any request for access to confidential information or proceedings
hereunder.

             (e) Injunctions. However, notwithstanding anything else in this
Section 18, the Company shall be entitled to seek a restraining order or
injunction in any court of competent jurisdiction to prevent any continuation of
any violation of this Agreement, and the Executive hereby consents that such
restraining order or injunction may be granted without the necessity of the
Company posting any bond. The expense of such arbitration shall be borne by the
Company.

                                       12
<PAGE>

             19. Headings. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
any provision of this Agreement.

             20. Entire Agreement. This Agreement (together with the Exhibit
hereto) constitutes the entire agreement between the parties, supersedes in all
respects any prior agreement between Company and Executive and may not be
changed except by a writing duly executed and delivered by Company and Executive
in the same manner as this Agreement; provided however, that the terms of any
securities of the Company (or any options, warrants or other securities
convertible into, or exchangeable or exercisable for, securities of the
Company), which are held by the Executive shall be governed by the agreements
entered into upon issuance of such securities (or such options, warrants or
other securities convertible into, or exchangeable or exercisable for,
securities of the Company).

             21. Counterparts. Company and Executive may execute this Agreement
in any number of counterparts, each of which shall be deemed to be an original
but all of which shall constitute but one instrument. In proving this Agreement,
it shall not be necessary to produce or account for more than one such
counterpart.

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

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
THE PARTIES.

                                    TALX CORPORATION

                                    By: /s/ WILLIAM W. CANFIELD
                                       ----------------------------------------
                                          William W. Canfield
                                          President and Chief Executive Officer

                                    Executive

                                        /s/ L. KEITH GRAVES
                                    -------------------------------------------
                                    L. Keith Graves

                                       13
<PAGE>

                                    Exhibit A

                         EFFECT OF AGREEMENT TERMINATION

                             REASON FOR TERMINATION

<Table>
<Caption>
    TYPE OF              NORMAL EXPIRATION DATE OF     BY EXECUTIVE FOR                        BY EMPLOYER FOR
    COMPENSATION         AGREEMENT OR RENEWAL PERIOD   "GOOD REASON"                           "CAUSE"
    /BENEFIT
    -------------------- ---------------------------- --------------------------------------- -----------------------
<S>                      <C>                          <C>                                     <C>
    Base Salary          Payable through end of       Receives Base Amount (as defined in     Payable through date
                         Employment Period (as        the Agreement) for a one year period    of early termination.
                         defined in Agreement)        commencing on the Executive's early
                                                      termination date (the "Continuation
                                                      Period"), payable ratably over such
                                                      Continuation Period.
    -------------------- ---------------------------- --------------------------------------- -----------------------
    Annual Incentive     Payable through Employment   Receives targeted incentive             Amount determined by
    Compensation         Period; amount recommended   compensation (based on estimated        Compensation
    Program              by Compensation Committee    targeted incentive compensation for     Committee in its sole
                         based on Company's and       year of termination) for the            discretion; would
                         Executive's performance.     Continuation Period, payable over the   likely be zero.
                                                      Continuation Period.

    -------------------- ---------------------------- --------------------------------------- -----------------------
    Other Employee       Continue through end of      Continue through end of Continuation    Continue through date
    Benefits             Employment Period, subject   Period, subject to legal and            of early termination,
    (excluding any       to legal and contractual     contractual rights in plans to          subject to legal and
    benefits related     rights in plans to convert   convert or extend coverages.            contractual rights in
    to securities of     or extend coverages.                                                 plans to convert or
    the Company or                                                                            extend coverages.
    options, warrants
    or convertible
    into or
    exercisable or
    exchangeable for
    securities of the
    Company)
    ==================== ============================ ======================================= =======================
</Table>

<Table>
<Caption>
    TYPE OF               RELATED TO                             DEATH OR DISABILITY
    COMPENSATION          CHANGE OF CONTROL                     (AS DEFINED IN AGREEMENT)
    /BENEFIT
    -------------------- -------------------------------------- -----------------------------
<S>                      <C>                                    <C>
    Base Salary          Receives 100% of the Base Amount in    Payable through end of
                         effect immediately prior to the        month in which death or
                         Change of Control, payable in one      disability occurs.
                         lump sum cash payment.
    -------------------- -------------------------------------- -----------------------------
    Annual Incentive     Receives 100% of the targeted          Amount earned (recommended
    Compensation         incentive compensation for the         by the Compensation
    Program              Continuation Period (based on          Committee based on the
                         estimated targeted incentive           Company's and Executive's
                         compensation for year of               performance for the year in
                         termination), payable in one lump      which death or disability
                         sum cash payment.                      occurs) will be prorated.
    -------------------- -------------------------------------- -----------------------------
    Other Employee       Continue through end of the            Continue through end of
    Benefits             Continuation Period, subject to        month in which death or
    (excluding any       legal and contractual rights in        disability occurs, subject
    benefits related     plans to convert or extend             to legal and contractual
    to securities of     coverages; provided, further, if       rights to convert or extend
    the Company or       extension of insurance coverage is     coverages.
    options, warrants    not permitted, the Company shall pay
    or convertible       the premiums for a new similar
    into or              insurance plan which would allow
    exercisable or       similar coverage of the Executive
    exchangeable for     through the Continuation Period.
    securities of the    Additionally, Executive entitled to
    Company)             reimbursement of reasonable
                         out-of-pocket expenses related to
                         outplacement services.
    ==================== ====================================== =============================
</Table><PAGE>

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

                                                                    Exhibit 4.1

                        ASSET BACKED FUNDING CORPORATION,
                                    Depositor

                            LITTON LOAN SERVICING LP,
                                    Servicer

                                       and

                              JPMORGAN CHASE BANK,
                                     Trustee

                         POOLING AND SERVICING AGREEMENT

                            Dated as of April 1, 2003

                              ABFC 2003-AHL1 Trust

                ABFC Asset-Backed Certificates, Series 2003-AHL1

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
ARTICLE I DEFINITIONS.............................................................................................4

   SECTION 1.01.      DEFINED TERMS...............................................................................4
   SECTION 1.02.      ACCOUNTING.................................................................................47

ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF .....................................................
                CERTIFICATES.....................................................................................48

   SECTION 2.01.      CONVEYANCE OF MORTGAGE LOANS...............................................................48
   SECTION 2.02.      ACCEPTANCE BY TRUSTEE......................................................................50
   SECTION 2.03.      REPURCHASE OR SUBSTITUTION OF MORTGAGE LOANS BY THE SELLER.................................51
   SECTION 2.04.      EXECUTION OF YIELD MAINTENANCE AGREEMENT...................................................55
   SECTION 2.05.      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SERVICER..................................55
   SECTION 2.06.      REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR............................................57
   SECTION 2.07.      ISSUANCE OF CERTIFICATES AND THE UNCERTIFICATED REGULAR INTERESTS..........................58

ARTICLE III ADMINISTRATION AND SERVICING OF THE TRUST FUND.......................................................59

   SECTION 3.01.      SERVICER TO ACT AS SERVICER................................................................59
   SECTION 3.02.      COLLECTION OF MORTGAGE LOAN PAYMENTS.......................................................61
   SECTION 3.03.      REALIZATION UPON DEFAULTED MORTGAGE LOANS..................................................62
   SECTION 3.04.      COLLECTION ACCOUNT, DISTRIBUTION ACCOUNT AND RESERVE ACCOUNT...............................63
   SECTION 3.05.      PERMITTED WITHDRAWALS FROM THE COLLECTION ACCOUNT..........................................66
   SECTION 3.06.      ESTABLISHMENT OF ESCROW ACCOUNTS; DEPOSITS IN ESCROW ACCOUNTS..............................67
   SECTION 3.07.      PERMITTED WITHDRAWALS FROM ESCROW ACCOUNT..................................................67
   SECTION 3.08.      PAYMENT OF TAXES, INSURANCE AND OTHER CHARGES; COLLECTIONS ..................................
                      THEREUNDER.................................................................................68
   SECTION 3.09.      TRANSFER OF ACCOUNTS.......................................................................68
   SECTION 3.10.      MAINTENANCE OF HAZARD INSURANCE............................................................68
   SECTION 3.11.      MAINTENANCE OF MORTGAGE IMPAIRMENT INSURANCE POLICY........................................69
   SECTION 3.12.      FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE..............................................70
   SECTION 3.13.      TITLE, MANAGEMENT AND DISPOSITION OF REO PROPERTY..........................................70
   SECTION 3.14.      DUE-ON-SALE CLAUSES; ASSUMPTION AND SUBSTITUTION AGREEMENTS................................72
   SECTION 3.15.      NOTIFICATION OF ADJUSTMENTS................................................................73
   SECTION 3.16.      OPTIONAL PURCHASES OF MORTGAGE LOANS BY SERVICER...........................................74
   SECTION 3.17.      TRUSTEE TO COOPERATE; RELEASE OF FILES.....................................................74
   SECTION 3.18.      SERVICING COMPENSATION.....................................................................75
   SECTION 3.19.      ANNUAL STATEMENT AS TO COMPLIANCE..........................................................75
   SECTION 3.20.      ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORTS...................................76
   SECTION 3.21.      ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE ...............................
                      MORTGAGE LOANS.............................................................................76
   SECTION 3.22.      REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION; ANNUAL ...............................
                      CERTIFICATION OF SECURITIES AND EXCHANGE COMMISSION FILING.................................76
   SECTION 3.23.      OBLIGATIONS OF THE SERVICER IN RESPECT OF COMPENSATING INTEREST............................79
   SECTION 3.24.      OBLIGATIONS OF THE SERVICER IN RESPECT OF MORTGAGE INTEREST RATES ...........................

                                      -i-

<PAGE>

                      AND MONTHLY PAYMENTS.......................................................................79
   SECTION 3.25.      INVESTMENT OF FUNDS IN THE COLLECTION ACCOUNT..............................................79
   SECTION 3.26.      LIABILITY OF SERVICER; INDEMNIFICATION.....................................................80
   SECTION 3.27.      REPORTS OF FORECLOSURE AND ABANDONMENT OF MORTGAGED
                      PROPERTIES.................................................................................81
   SECTION 3.28.      PROTECTION OF ASSETS.......................................................................81
   SECTION 3.29.      PREPAYMENT CHARGES.........................................................................81
   SECTION 3.30.      [RESERVED].................................................................................82
   SECTION 3.31.      NO PERSONAL SOLICITATION...................................................................82

ARTICLE IV FLOW OF FUNDS.........................................................................................83

   SECTION 4.01.      INTEREST DISTRIBUTIONS.....................................................................83
   SECTION 4.02.      DISTRIBUTIONS OF PRINCIPAL AND MONTHLY EXCESS CASHFLOW AMOUNTS.............................84
   SECTION 4.03.      ALLOCATION OF LOSSES.......................................................................88
   SECTION 4.04.      METHOD OF DISTRIBUTION.....................................................................89
   SECTION 4.05.      DISTRIBUTIONS ON BOOK-ENTRY CERTIFICATES...................................................89
   SECTION 4.06.      STATEMENTS.................................................................................89
   SECTION 4.07.      REMITTANCE REPORTS; ADVANCES...............................................................92
   SECTION 4.08.      REMIC DISTRIBUTIONS AND ALLOCATION OF LOSSES...............................................94

ARTICLE V THE CERTIFICATES.......................................................................................97

   SECTION 5.01.      THE CERTIFICATES...........................................................................97
   SECTION 5.02.      REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES......................................97
   SECTION 5.03.      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.........................................103
   SECTION 5.04.      PERSONS DEEMED OWNERS.....................................................................103
   SECTION 5.05.      APPOINTMENT OF PAYING AGENT...............................................................103

ARTICLE VI THE SERVICER AND THE DEPOSITOR.......................................................................104

   SECTION 6.01.      LIABILITY OF THE SERVICER AND THE DEPOSITOR...............................................104
   SECTION 6.02.      MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE OBLIGATIONS OF, ............................
                      THE SERVICER OR THE DEPOSITOR.............................................................104
   SECTION 6.03.      LIMITATION ON LIABILITY OF THE SERVICER AND OTHERS........................................104
   SECTION 6.04.      SERVICER NOT TO RESIGN....................................................................105
   SECTION 6.05.      DELEGATION OF DUTIES......................................................................106
   SECTION 6.06.      ADVANCE FACILITY..........................................................................106

ARTICLE VII DEFAULT.............................................................................................110

   SECTION 7.01.      SERVICER EVENTS OF TERMINATION............................................................110
   SECTION 7.02.      TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR..................................................112
   SECTION 7.03.      WAIVER OF DEFAULTS........................................................................113
   SECTION 7.04.      NOTIFICATION TO CERTIFICATEHOLDERS........................................................113
   SECTION 7.05.      SURVIVABILITY OF SERVICER LIABILITIES.....................................................113

ARTICLE VIII THE TRUSTEE........................................................................................113

   SECTION 8.01.      DUTIES OF TRUSTEE.........................................................................113
   SECTION 8.02.      CERTAIN MATTERS AFFECTING THE TRUSTEE.....................................................115
   SECTION 8.03.      TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS.....................................116

                                      -ii-

<PAGE>

   SECTION 8.04.      TRUSTEE MAY OWN CERTIFICATES..............................................................117
   SECTION 8.05.      TRUSTEE FEES AND EXPENSES.................................................................117
   SECTION 8.06.      ELIGIBILITY REQUIREMENTS FOR TRUSTEE......................................................118
   SECTION 8.07.      RESIGNATION OR REMOVAL OF TRUSTEE.........................................................118
   SECTION 8.08.      SUCCESSOR TRUSTEE.........................................................................119
   SECTION 8.09.      MERGER OR CONSOLIDATION OF TRUSTEE........................................................119
   SECTION 8.10.      APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.............................................120
   SECTION 8.11.      LIMITATION OF LIABILITY...................................................................121
   SECTION 8.12.      TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF CERTIFICATES.............................121
   SECTION 8.13.      SUITS FOR ENFORCEMENT.....................................................................121
   SECTION 8.14.      WAIVER OF BOND REQUIREMENT................................................................122
   SECTION 8.15.      WAIVER OF INVENTORY, ACCOUNTING AND APPRAISAL REQUIREMENT.................................122

ARTICLE IX REMIC AND GRANTOR TRUST ADMINISTRATION...............................................................122

   SECTION 9.01.      REMIC ADMINISTRATION......................................................................122
   SECTION 9.02.      PROHIBITED TRANSACTIONS AND ACTIVITIES....................................................125
   SECTION 9.03.      INDEMNIFICATION WITH RESPECT TO CERTAIN TAXES AND LOSS OF REMIC .............................
                      STATUS....................................................................................126
   SECTION 9.04.      REO PROPERTY..............................................................................126
   SECTION 9.05.      GRANTOR TRUST ADMINISTRATION..............................................................127

ARTICLE X TERMINATION...........................................................................................127

   SECTION 10.01.     TERMINATION...............................................................................127
   SECTION 10.02.     ADDITIONAL TERMINATION REQUIREMENTS.......................................................129

ARTICLE XI MISCELLANEOUS PROVISIONS.............................................................................130
   SECTION 11.01.     AMENDMENT.................................................................................130
   SECTION 11.02.     RECORDATION OF AGREEMENT; COUNTERPARTS....................................................131
   SECTION 11.03.     LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS................................................131
   SECTION 11.04.     GOVERNING LAW; JURISDICTION...............................................................132
   SECTION 11.05.     NOTICES...................................................................................132
   SECTION 11.06.     SEVERABILITY OF PROVISIONS................................................................133
   SECTION 11.07.     ARTICLE AND SECTION REFERENCES............................................................133
   SECTION 11.08.     NOTICE TO THE RATING AGENCIES.............................................................133
   SECTION 11.09.     FURTHER ASSURANCES........................................................................134
   SECTION 11.10.     BENEFITS OF AGREEMENT.....................................................................134
   SECTION 11.11.     ACTS OF CERTIFICATEHOLDERS................................................................134

</TABLE>

                                     -iii-

<PAGE>

                                    EXHIBITS:
                                    ---------

Exhibit A-1    Form of Class AI Certificates
Exhibit A-2    Form of Class AII Certificates
Exhibit B      [Reserved]
Exhibit C-1    Form of Class R Certificate
Exhibit C-2    Form of Class M-1 Certificates
Exhibit C-3    Form of Class M-2 Certificates
Exhibit C-4    Form of Class M-3 Certificates
Exhibit C-5    Form of Class M-4 Certificates
Exhibit C-6    Form of Class M-5 Certificates
Exhibit C-7    Form of Class X Certificates
Exhibit C-8    Form of Class N Certificates
Exhibit D-1    Group I Mortgage Loan Schedule
Exhibit D-2    Group II Mortgage Loan Schedule
Exhibit E      Form of Request for Release
Exhibit F-1    Form of Custodian's Initial Certification
Exhibit F-2    Form of Custodian's Final Certification
Exhibit G      Mortgage Loan Purchase Agreement
Exhibit H      Form of Affidavit of Lost Note
Exhibit I      Form of ERISA Representation
Exhibit J-1    Form of Investment Letter (Non-Rule 144A)
Exhibit J-2    Form of Investment Letter (Rule 144A)
Exhibit K      Form of Residual Certificate Transfer Affidavit
Exhibit L      Form of Transferor Certificate
Exhibit M      Monthly Information Provided by Servicer
Exhibit N      Form of Yield Maintenance Agreement
Exhibit O      [Reserved]
Exhibit P      [Reserved]
Exhibit Q      Form of Sarbanes-Oxley Certification
Exhibit R-1    Form of Certification of the Trustee to be Provided to Depositor
Exhibit R-2    Form of Certification of the Servicer to be Provided to Depositor
Schedule I     Prepayment Charge Schedule

                                      -iv-

<PAGE>

         This Pooling and Servicing Agreement is dated as of May 8, 2003 (the
"Agreement"), among ASSET BACKED FUNDING CORPORATION, as depositor (the
"Depositor"), LITTON LOAN SERVICING LP, as servicer (the "Servicer"), and
JPMORGAN CHASE BANK, as trustee (the "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 the Trust
Fund created hereunder. The Certificates will consist of ten Classes of
Certificates, designated as (i) the Class AI and Class AII Certificates, (ii)
the Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates, (iii)
the Class X Certificates, (iv) the Class N Certificates and (v) the Class R
Certificate. The descriptions of REMIC 1, REMIC 2 and the Class N and X
Certificates that follow are part of the Preliminary Statement.

                                     REMIC 1
                                     -------

         As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement (but exclusive of the Yield Maintenance
Agreement, the Reserve Fund, the Cap Carryover Arrangement, the Prepayment
Charges, the Servicer Prepayment Charge Payment Amounts and the Transferor
Prepayment Charge Payment Amount) as a real estate investment conduit (a
"REMIC") for federal income tax purposes, and such segregated pool of assets
will be designated as "REMIC 1." The Class R-1 Interest will represent the sole
class of "residual interests" in REMIC 1 for purposes of the REMIC Provisions
under federal income tax law. The following table irrevocably sets forth the
designation, the Uncertificated REMIC 1 Pass-Through Rate, the initial
Uncertificated Principal 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 1 Regular Interests. None of the REMIC 1 Regular Interests
will be certificated.

<TABLE>
<CAPTION>

                             Uncertificated REMIC                Initial                  Latest Possible
         Designation           Pass-Through Rate         Uncertificated Balance         Maturity Date(1)
        --------------      ------------------------  ---------------------------   ---------------------
        <S>                 <C>                       <C>                           <C>
           LT1AA                   Variable(2)              $181,183,545.73                March 2033

           LT1AI                   Variable(2)                  $546,970.00                March 2033

          LT1AII                   Variable(2)                  $959,810.00                March 2033

           LT1M1                   Variable(2)                  $120,170.00                March 2033

           LT1M2                   Variable(2)                   $97,065.00                March 2033

           LT1M3                   Variable(2)                   $50,840.00                March 2033

           LT1M4                   Variable(2)                   $18,490.00                March 2033

           LT1M5                   Variable(2)                   $31,430.00                March 2033

           LT1ZZ                   Variable(2)                $1,872,848.38                March 2033

          LT1SUB                   Variable(2)                    $2,483.15                March 2033

          LT1GRP                   Variable(2)                   $13,422.55                March 2033

<PAGE>

          LT2SUB                   Variable(2)                    $4,357.48                March 2033

          LT2GRP                   Variable(2)                   $23,553.68                March 2033

           LT1XX                   Variable(2)              $184,837,352.25                March 2033
</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 1
         Regular Interest.
(2)      Calculated in accordance with the definition of "Uncertificated REMIC 1
         Pass-Through Rate" herein.

                                     REMIC 2
                                     -------

         As provided herein, the Trustee shall make an election to treat the
segregated pool of assets consisting of the REMIC 1 Regular Interests as a REMIC
for federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC 2." The Class R-2 Interest represents the sole class of
"residual interests" in REMIC 2 for purposes of the REMIC Provisions. The
following table sets forth the Class designation, Pass-Through Rate and Original
Class Certificate Principal Balance for each Class of Certificates that
represents one or more of the "regular interests" in REMIC 2 created hereunder:

<TABLE>
<CAPTION>

                                                                   Original Class
                                                                Certificate Principal            Assumed Final
         Class Designation           Pass-Through Rate                 Balance                 Maturity Date(1)
        -------------------        ----------------------     ------------------------       ---------------------
<S>                                <C>                        <C>                           <C>
Class AI...................            3.684%(2)(3)              $109,394,000.00                  March 2033

Class AII..................             Variable(3)              $191,962,000.00                  March 2033

Class M-1..................             Variable(3)               $24,034,000.00                  March 2033

Class M-2..................             Variable(3)               $19,413,000.00                  March 2033

Class M-3..................             Variable(3)               $10,168,000.00                  March 2033

Class M-4..................             Variable(3)                $3,698,000.00                  March 2033

Class M-5..................             Variable(3)                $6,286,000.00                  March 2033

Class X/N Interest.........             Variable(4)                      (5)                      March 2033
</TABLE>

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

(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date following the maturity date for the
         Mortgage Loan with the latest maturity date has been designated as the
         "latest possible maturity date" for each Class of Certificates that
         represents one or more of the "regular interests" in REMIC 2.
(2)      The Class AI Fixed Rate will increase to 4.184% per annum for Interest
         Accrual Periods relating to Distribution Dates after the Optional
         Termination Date.
(3)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(4)      The Class X/N Interest will accrue interest at its variable
         Pass-Through Rate on the Notional Amount of the Class X/N Interest
         outstanding from time to time which shall equal the aggregate of the
         Uncertificated Principal Balances of the REMIC 1 Regular Interests. The
         Class X/N Interest will not accrue interest on its Class Certificate
         Principal Balance.
(5)      The Class X/N Interest will have a principal amount measurable as the
         Overcollateralization Amount, which initially is $4,807,338.19.

                                      -2-
<PAGE>

         In addition to the above Certificates, the Trust Fund shall issue two
additional Classes of Certificates, designated as the Class N Certificates and
the Class X Certificates. For federal income tax purposes, in the event that the
beneficial ownership of the Class N Certificates and the Class X Certificates is
held by separate persons for tax purposes and such persons do not hold the Class
X and the Class N Certificates proportionally, the Trustee shall take the
position that the Class N Certificates and the Class X Certificates will be
treated as interests in a partnership for federal income tax purposes and shall
not treat either such Class of Certificates as an interest in any REMIC created
hereunder. In the event that the beneficial ownership of the Class N
Certificates and the Class X Certificates is held by the same person for federal
income tax purposes or is held proportionally by different persons for federal
income tax purposes, the Trustee shall treat such holder of the Class N
Certificates and the Class X Certificates as beneficially owning (i) the Class
X/N Interest, which will represent a "regular interest" in REMIC 2, (ii) the
Yield Maintenance Agreement, (iii) the Reserve Account, (iv) the Cap Carryover
Arrangement and (v) the Prepayment Charges, Servicer Prepayment Charge Payment
Amounts and Transferor Prepayment Charge Payment Amounts. The following table
irrevocably sets forth the designation, the Pass-Through Rate, the Class N
Principal Amount for the Class N Certificates and the Class X Certificates.

<TABLE>
<CAPTION>

                                                                                                 Assumed Final
      Class Designation              Pass-Through Rate        Initial Principal Balance        Maturity Date(1)
      -----------------              -----------------        -------------------------        ----------------
<S>                                  <C>                      <C>                              <C>

Class N....................           9.32% per annum               $ 26,275,000                March 25, 2033
Class X....................             Variable(1)                      N/A                    March 25, 2033
</TABLE>

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

(1)      The Class X Certificates are entitled to all amounts remaining
         following distributions on the Class N Certificates in accordance with
         Section 4.02(b)(xix).

                                      -3-
<PAGE>

                                   ARTICLE I

                                   DEFINITIONS

         Section 1.01.  Defined Terms.
                        -------------

         Whenever used in this Agreement or in the Preliminary Statement, the
following words and phrases, unless the context otherwise requires, shall have
the meanings specified in this Article. Interest on all Classes of REMIC 1
Regular Interests and Certificates (other than the Class AII, Class M-1, Class
M-2, Class M-3, Class M-4 and Class M-5 Certificates) will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Interest on the
Class AII, Class M-1, Class M-2, Class M-3, Class M-4 and Class M-5 Certificates
will be calculated on the basis of the actual number of days in the related
Interest Accrual Period and a 360-day year.

         "1933 Act":  The Securities Act of 1933, as amended.

         "60+ Day Delinquent Loan": Each Mortgage Loan (including each Mortgage
Loan in foreclosure and each Mortgage Loan for which the Mortgagor has filed for
bankruptcy after the Closing Date) with respect to which any portion of a
Monthly Payment is, as of the last day of the prior Collection Period, two
months or more past due and each Mortgage Loan relating to an REO Property. Any
Mortgage Loan which, on a 3-month rolling average basis, has made its scheduled
principal and interest payments will not be considered to be a 60+ Day
Delinquent Loan.

         "Account": Any of the Collection Account, the Distribution Account, the
Reserve Account or the Escrow Account.

         "Accrued Certificate Interest": With respect to each Distribution Date
and Class of Class A and Class M Certificates and the Class N Certificates, an
amount equal to the interest accrued at the applicable rate set forth or
described opposite such Class in the table in the Preliminary Statement during
the related Interest Accrual Period on the Certificate Principal Balance of such
Class of Certificates (or on the Class N Principal Amount in the case of the
Class N Certificates), reduced (in the case of the Class A and Class M
Certificates) by such Class's Interest Percentage of (a) Allocated Prepayment
Interest Shortfall and (b) Relief Act Interest Shortfalls, for such Distribution
Date.

         "Adjustable-Rate Mortgage Loan": A Mortgage Loan which has a rate at
which interest accrues that adjusts based on the Index plus a related Gross
Margin, as set forth and subject to the limitations in the related Mortgage
Note.

         "Adjustment Date": With respect to each Adjustable-Rate Mortgage Loan,
each adjustment date, on which the Mortgage Interest Rate of an Adjustable-Rate
Mortgage Loan changes pursuant to the related Mortgage Note. The first
Adjustment Date following the Cut-off Date as to each Adjustable-Rate Mortgage
Loan is set forth in the Mortgage Loan Schedules.

                                      -4-
<PAGE>

         "Advance": As to any Mortgage Loan, any advance made by the Servicer in
respect of any Distribution Date pursuant to Section 4.07.

         "Advance Facility":  As defined in Section 6.06(a) hereof.

         "Advance Facility Notice":  As defined in Section 6.06(b) hereof.

         "Advance Financing Person":  As defined in Section 6.06(a) hereof.

         "Advance Reimbursement Amounts":  As defined in Section 6.06(b) hereof.

         "Adverse REMIC Event":  As defined in Section 9.01(f) hereof.

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

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

         "Allocated Prepayment Interest Shortfall": For any Distribution Date,
the amount by which (a) the aggregate amount of all Prepayment Interest
Shortfalls incurred with respect to such Distribution Date, exceeds (b) the
amount of the Compensating Interest payment required to be made by the Servicer
in respect of such Distribution Date.

         "Applicable Regulations": As to any Mortgage Loan, all federal, state
and local laws, statutes, rules and regulations applicable thereto.

         "Applied Realized Loss Amount": With respect to each Distribution Date,
the excess, if any, of (a) the aggregate of the Certificate Principal Balances
of the Certificates (after giving effect to all distributions on such
Distribution Date) over (b) the Pool Balance as of the end of the related
Collection Period.

         "Assignment": An assignment of Mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage.

         "Assumed Final Maturity Date": As to each Class of Certificates, the
date set forth as such in the Preliminary Statement.

         "Available Funds": As to any Distribution Date, an amount equal to the
excess of (i) the sum of (a) the aggregate amount of the Monthly Payments due
and received during the related Collection Period and remitted to the Trustee by
the Servicer one Business Day prior to the related Distribution Date, (b)
Liquidation Proceeds, Insurance Proceeds, Condemnation Proceeds, Principal
Prepayments, Substitution Adjustment Amounts, the Purchase Price for any
repurchased Mortgage Loan, the Termination Price with respect to the termination
of the Trust

                                      -5-
<PAGE>

pursuant to Section 10.01 hereof and other unscheduled recoveries of principal
and interest (excluding Prepayment Charges and Servicer Prepayment Charge
Payment Amounts) in respect of the Mortgage Loans during the related Prepayment
Period, (c) the aggregate of any amounts received in respect of an REO Property
deposited in the Collection Account for such Distribution Date, (d) any
Compensating Interest for such Distribution Date, and (e) the aggregate of any
Advances made by the Servicer for such Distribution Date over (ii) the sum of
(a) amounts reimbursable or payable to the Servicer pursuant to Sections 3.05 or
6.03, (b) amounts reimbursable or payable to the Trustee pursuant to Section
8.05 (other than Trustee Fees) and Section 9.01(c), (c) Stayed Funds, (d) the
Servicing Fee and (e) amounts deposited in the Collection Account or the
Distribution Account, as the case may be, in error.

         "Balloon Mortgage Loan": A Mortgage Loan that provides for the payment
of the unamortized principal balance of such Mortgage Loan in a single payment
at the maturity of such Mortgage Loan that is substantially greater than the
preceding monthly payment.

         "Balloon Payment": A payment of the unamortized principal balance of a
Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is
substantially greater than the preceding Monthly Payment.

         "Bankruptcy Code":  Title 11 of the United States Code, as amended.

         "Book-Entry Certificates": Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a "Depository
Participant," or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 5.02 hereof). On the Closing
Date, the Class AI, Class AII, Class M-1, Class M-2, Class M-3, Class M-4 and
Class M-5 Certificates shall be Book-Entry Certificates.

         "Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in the State of Texas, the State of New York, the
State of California 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.

         "Cap":  Any of the Group I Cap, the Group II Cap or the Mezzanine Cap.

         "Cap Carryover Amount": For any Distribution Date, if on such
Distribution Date or any prior Distribution Date, the Accrued Certificate
Interest for any Senior or Mezzanine Certificates is based upon a Cap, the sum
of (i) the excess of (a) the amount of interest that would have accrued on such
Class in respect of such Distribution Date based on the related Class AI Fixed
Rate or the applicable Formula Rate, as applicable, over (b) the amount of
interest actually accrued on such Class in respect of such Distribution Date
based on the related Cap, plus (ii) the unpaid portion of any such excess from
prior Distribution Dates (and interest accrued thereon at the Class AI Fixed
Rate or the then applicable Formula Rate, as applicable, on such Certificate).

         "Cap Carryover Arrangement": The right of the Class A and Mezzanine
Certificates to receive payments of amounts otherwise payable to the Class X/N
Interest and the right of the Class X/N Interest to amounts remaining after
payment of the Cap Carryover Amount and any

                                      -6-
<PAGE>

amounts remaining in the Reserve Fund, each as specified in Sections
4.02(b)(xvii), 4.02(b)(xix), and 3.04(g), respectively.

         "Certificate": Any Regular Certificate, Class N Certificate, Class X
Certificate or Class R Certificate.

         "Certificate Custodian": Initially, JPMorgan Chase Bank; thereafter any
other Certificate Custodian acceptable to the Depository and selected by the
Trustee.

         "Certificate Owner": With respect to each Book-Entry Certificate, any
beneficial owner thereof.

         "Certificate Principal Balance": With respect to any Class of
Certificates (other than the Class N, Class X and Class R Certificates) and any
Distribution Date, the Original Class Certificate Principal Balance reduced by
the sum of (i) all amounts actually distributed in respect of principal of such
Class on all prior Distribution Dates and (ii) Applied Realized Loss Amounts
allocated thereto. The Class N, Class X and Class R Certificates do not have a
Certificate Principal Balance. With respect to any Certificate (other than a
Class N, Class X or Class R Certificate) of a Class and any Distribution Date,
the portion of the Certificate Principal Balance of such Class represented by
such Certificate equal to the product of the Percentage Interest evidenced by
such Certificate and the Certificate Principal Balance of such Class.

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

         "Certificateholder" or "Holder": The Person in whose name a Certificate
is registered in the Certificate Register, except that a Disqualified
Organization or non-U.S. Person shall not be a Holder of the Class R Certificate
for any purpose hereof.

         "Certification":  As defined in Section 3.32(b) hereof.

         "Class": Collectively, Certificates or REMIC Regular Interests which
have the same priority of payment and bear the same class designation and the
form of which is identical except for variation in the Percentage Interest
evidenced thereby.

         "Class AI Allocation Percentage": With respect to any Distribution Date
and the Class AI Certificates, the percentage equivalent of a fraction, the
numerator of which is the Principal Remittance Amount allocable to the Group I
Mortgage Loans for such Distribution Date, and the denominator of which is the
Principal Remittance Amount for such Distribution Date.

         "Class AI Fixed Rate": 3.684% per annum, or 4.184% per annum for any
Distribution Date after the Optional Termination Date.

         "Class AI Pass-Through Rate": For each Distribution Date, a rate per
annum equal to the lesser of (a) the Class AI Fixed Rate or (b) the Group I Cap.

                                      -7-
<PAGE>

         "Class AI Principal Distribution Amount": For any Distribution Date,
the product of (a) the related Class AI Allocation Percentage and (b) the
related Class A Principal Distribution Amount.

         "Class AII Allocation Percentage": With respect to any Distribution
Date, the percentage equivalent of a fraction, the numerator of which is the
Principal Remittance Amount allocable to the Group II Mortgage Loans for such
Distribution Date, and the denominator of which is the Principal Remittance
Amount for such Distribution Date.

         "Class AII Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 0.33% per annum, and (ii) following the
Optional Termination Date, 0.66% per annum.

         "Class AII Formula Rate": For each Distribution Date, a rate per annum
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class AII Certificate Margin and (b) the Group II Maximum Cap
Rate.

         "Class AII Pass-Through Rate": For any Distribution Date, a rate per
annum equal to the lesser of (a) the related Class AII Formula Rate and (b) the
Group II Cap.

         "Class AII Principal Distribution Amount": For any Distribution Date,
the product of (a) the related Class AII Allocation Percentage and (b) the
related Class A Principal Distribution Amount.

         "Class A Certificate": Any one of the Certificates with an "A"
designated on the face thereof substantially in the form annexed hereto as
Exhibits A-1 and A-2 executed by the Trustee on behalf of the Trust and
authenticated and delivered by the Certificate Registrar, representing the right
to distributions as set forth herein and therein.

         "Class A Certificateholders": Collectively, the Holders of the Class A
Certificates.

         "Class A Principal Distribution Amount": For any Distribution Date on
or after the Stepdown Date and as long as a Trigger Event is not in effect, the
excess of (x) the sum of the Certificate Principal Balances of the Class A
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 63.00% and (ii) the Pool Balance as of the last day of
the related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the product of (i) 0.50% and (ii) the Cut-off
Date Aggregate Principal Balance.

         "Class M Certificate": Any one of the Certificates with an "M"
designated on the face thereof substantially in the form annexed hereto as
Exhibit C-2, Exhibit C-3, Exhibit C-4, Exhibit C-5 and Exhibit C-6, executed by
the Trustee on behalf of the Trust and authenticated and delivered by the
Certificate Registrar, representing the right to distributions as set forth
herein and therein.

         "Class M Certificateholders": Collectively, the Holders of the Class M
Certificates.

                                      -8-
<PAGE>

         "Class M-1 Applied Realized Loss Amount": As to the Class M-1
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-1 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the Applied Realized Loss Amount as
of such Distribution Date over (ii) the sum of the Class M-2 Applied Realized
Loss Amount, the Class M-3 Applied Realized Loss Amount, the Class M-4 Applied
Realized Loss Amount and the Class M-5 Applied Realized Loss Amount, in each
case as of such Distribution Date.

         "Class M-1 Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 0.85% per annum, and (ii) following the
Optional Termination Date, 1.275% per annum.

         "Class M-1 Formula Rate": For each Distribution Date, a per annum rate
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class M-1 Certificate Margin and (b) the Mezzanine Maximum Cap
Rate.

         "Class M-1 Pass-Through Rate": For any Distribution Date, a per annum
rate equal to the lesser of (a) the related Class M-1 Formula Rate and (b) the
Mezzanine Cap.

         "Class M-1 Principal Distribution Amount": For any Distribution Date on
or after the Stepdown Date and as long as a Trigger Event is not in effect, the
excess of (x) the sum of (i) the Certificate Principal Balances 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 Pool Balance as of the last day of the related Collection Period and (B) the
Pool Balance as of the last day of the related Collection Period minus the
product of 0.50% and the Cut-off Date Aggregate Principal Balance.

         "Class M-1 Realized Loss Amortization Amount": As to the Class M-1
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-1 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (iii) hereof, in each
case for such Distribution Date.

         "Class M-2 Applied Realized Loss Amount": As to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-2 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the related Applied Realized Loss
Amount as of such Distribution Date over (ii) the sum of the Class M-3 Applied
Realized Loss Amount, the Class M-4 Applied Realized Loss Amount and the Class
M-5 Applied Realized Loss Amount as of such Distribution Date.

         "Class M-2 Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 1.85% per annum, and (ii) following the
Optional Termination Date, 2.775% per annum.

                                      -9-
<PAGE>

         "Class M-2 Formula Rate": For each Distribution Date, a per annum rate
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class M-2 Certificate Margin and (b) the Mezzanine Maximum Cap
Rate.

         "Class M-2 Pass-Through Rate": For any Distribution Date, a per annum
rate equal to the lesser of (a) the related Class M-2 Formula Rate and (b) the
Mezzanine Cap.

         "Class M-2 Principal Distribution Amount": For any Distribution Date on
or after the Stepdown Date and as long as a Trigger Event is not in effect, the
excess of (x) the sum of (i) the Certificate Principal Balances 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 Pool Balance as of the last day of the related Collection
Period and (B) the Pool Balance as of the last day of the related Collection
Period minus the product of 0.50% and the Cut-off Date Aggregate Principal
Balance.

         "Class M-2 Realized Loss Amortization Amount": As to the Class M-2
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-2 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (vi) hereof, in each case
for such Distribution Date.

         "Class M-3 Applied Realized Loss Amount": As to the Class M-3
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-3 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the related Applied Realized Loss
Amount as of such Distribution Date over (ii) the sum of the Class M-4 Applied
Realized Loss Amount and the Class M-5 Applied Realized Loss Amount as of such
Distribution Date.

         "Class M-3 Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 3.00% per annum, and (ii) following the
Optional Termination Date, 4.50% per annum.

         "Class M-3 Formula Rate": For each Distribution Date, a per annum rate
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class M-3 Certificate Margin and (b) the Mezzanine Maximum Cap
Rate.

         "Class M-3 Pass-Through Rate": For any Distribution Date, a per annum
rate equal to the lesser of (a) the Class M-3 Formula Rate and (b) the Mezzanine
Cap.

         "Class M-3 Principal Distribution Amount": As of any Distribution Date
on or after the Stepdown Date and as long as a Trigger Event is not in effect,
the excess of (x) the sum of (i) the sum of the Certificate Principal Balances
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

                                      -10-
<PAGE>

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) 92.00% and (ii) the Pool Balance as of the last day of
the related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the product of 0.50% and the Cut-off Date
Aggregate Principal Balance.

         "Class M-3 Realized Loss Amortization Amount": As to the Class M-3
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-3 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (ix) hereof, in each case
for such Distribution Date.

         "Class M-4 Applied Realized Loss Amount": As to the Class M-4
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-4 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the excess of (i) the related Applied Realized Loss
Amount as of such Distribution Date over (ii) the Class M-5 Applied Realized
Loss Amount as of such Distribution Date.

         "Class M-4 Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 3.50% per annum, and (ii) following the
Optional Termination Date, 5.25% per annum.

         "Class M-4 Formula Rate": For each Distribution Date, a per annum rate
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class M-4 Certificate Margin and (b) the Mezzanine Maximum Cap
Rate.

         "Class M-4 Pass-Through Rate": For any Distribution Date, a per annum
rate equal to the lesser of (a) the related Class M-4 Formula Rate and (b) the
Mezzanine Cap.

         "Class M-4 Principal Distribution Amount": As of any Distribution Date
on or after the Stepdown Date and as long as a Trigger Event is not in effect,
the excess of (x) the sum of (i) the sum of the Certificate Principal Balances
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), (iv) the Certificate Principal Balance of the
Class M-3 Certificates (after taking into account the payment of the Class M-3
Principal Distribution Amount on such Distribution Date) and (v) the Certificate
Principal Balance of the Class M-4 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 94.00% and (ii)
the Pool Balance as of the last day of the related Collection Period and (B) the
Pool Balance as of the last day of the related Collection Period minus the
product of 0.50% and the Cut-off Date Aggregate Principal Balance.

                                      -11-
<PAGE>

         "Class M-4 Realized Loss Amortization Amount": As to the Class M-4
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-4 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xii) hereof, in each
case for such Distribution Date.

         "Class M-5 Applied Realized Loss Amount": As to the Class M-5
Certificates and as of any Distribution Date, the lesser of (x) the Certificate
Principal Balance thereof (after taking into account the distribution of the
Principal Distribution Amount on such Distribution Date, but prior to the
application of the Class M-5 Applied Realized Loss Amount, if any, on such
Distribution Date) and (y) the related Applied Realized Loss Amount as of such
Distribution Date.

         "Class M-5 Certificate Margin": For each Distribution Date (i) on or
prior to the Optional Termination Date, 3.25% per annum, and (ii) following the
Optional Termination Date, 4.875% per annum.

         "Class M-5 Formula Rate": For each Distribution Date, a per annum rate
equal to the lesser of (a) One-Month LIBOR as of the related LIBOR Determination
Date, plus the Class M-5 Certificate Margin and (b) the Mezzanine Maximum Cap
Rate.

         "Class M-5 Pass-Through Rate": For any Distribution Date, a per annum
rate equal to the lesser of (a) the related Class M-5 Formula Rate and (b) the
Mezzanine Cap.

         "Class M-5 Principal Distribution Amount": As of any Distribution Date
on or after the Stepdown Date and as long as a Trigger Event is not in effect,
the excess of (x) the sum of (i) the sum of the Certificate Principal Balances
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), (iv) the Certificate Principal Balance of the
Class M-3 Certificates (after taking into account the payment of the Class M-3
Principal Distribution Amount on such Distribution Date), (v) the Certificate
Principal Balance of the Class M-4 Certificates (after taking into account the
payment of the Class M-4 Principal Distribution Amount on such Distribution
Date) and (vi) the Certificate Principal Balance of the Class M-5 Certificates
immediately prior to such Distribution Date over (y) the lesser of (A) the
product of (i) 97.40% and (ii) the Pool Balance as of the last day of the
related Collection Period and (B) the Pool Balance as of the last day of the
related Collection Period minus the product of 0.50% and the Cut-off Date
Aggregate Principal Balance.

         "Class M-5 Realized Loss Amortization Amount": As to the Class M-5
Certificates and as of any Distribution Date, the lesser of (x) the Unpaid
Realized Loss Amount for the Class M-5 Certificates as of such Distribution Date
and (y) the excess of (i) the Monthly Excess Cashflow Amount over (ii) the sum
of the amounts described in Section 4.02(b)(i) through (xv) hereof, in each case
for such Distribution Date.

                                      -12-
<PAGE>

         "Class N Certificate": Any one of the Certificates with a "N"
designated on the face thereof substantially in the form annexed hereto as
Exhibit C-8, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Certificate Registrar, representing the right to
distributions as set forth herein and therein.

         "Class N Pass-Through Rate":  9.32% per annum.

         "Class N Principal Amount": As of any date, an amount equal to the
Original Class N Principal Amount reduced by the distributions made to the Class
N Certificates pursuant to Section 4.02(b)(xviii)(C).

         "Class R Certificate": The Class R Certificate executed by the Trustee
on behalf of the Trust, and authenticated and delivered by the Certificate
Registrar, substantially in the form annexed hereto as Exhibit C-1 and
evidencing the ownership of the Residual Interest in each of REMIC 1 and REMIC
2. The Class R Certificate represents the ownership of the Class R-1 Interest
and Class R-2 Interest.

         "Class R-1 Interest":  The uncertificated residual interest in REMIC 1.

         "Class R-2 Interest":  The uncertificated residual interest in REMIC 2.

         "Class X Certificates": Any one of the Class X Certificates as
designated on the face thereof substantially in the form annexed hereto as
Exhibit C-7, executed by the Trustee on behalf of the Trust and authenticated
and delivered by the Certificate Registrar, representing the right to
distributions as set forth herein and therein.

         "Class X/N Interest": An uncertificated interest in the Trust held by
the Trustee on behalf of the holders of the Class X and Class N Certificates,
representing an interest in REMIC 2 and entitled to the Class X/N Interest
Pass-Through Rate calculated on its Notional Amount less the amount (without
duplication) of Cap Carryover Amounts pursuant to Sections 4.02(b)(xvii) and
3.04(g) and certain principal distributions as specified in Section 4.08(d).

          "Class X Distributable Amount": With respect to any Distribution Date,
the excess of (i) the aggregate of amounts distributable on the Class X/N
Interest for such Distribution Date, over (ii) the aggregate of amounts
distributable to the Class N Certificates pursuant to Section 4.02(b).

         "Closing Date":  May 8, 2003.

         "Code": The Internal Revenue Code of 1986, as it may be amended from
time to time.

         "Collection Account": The account or accounts created and maintained by
the Servicer pursuant to Section 3.04, which shall be entitled "Collection
Account, Litton Loan Servicing LP, as Servicer for the Trust under the Pooling
and Servicing Agreement dated as of April 1, 2003 among Asset Backed Funding
Corporation, as Depositor, Litton Loan Servicing LP, as Servicer, and JPMorgan
Chase Bank, as Trustee, in trust for registered Holders of ABFC 2003-AHL1 Trust,
ABFC Asset-Backed Certificates, Series 2003-AHL1," and which must be an Eligible
Account.

                                      -13-
<PAGE>

         "Collection Period": With respect to any Distribution Date, the period
from the second day of the calendar month preceding the month in which such
Distribution Date occurs through the first day of the month in which such
Distribution Date occurs.

         "Compensating Interest":  As defined in Section 3.23 hereof.

         "Condemnation Proceeds": All awards or settlements in respect of a
taking of a Mortgaged Property by exercise of the power of eminent domain or
condemnation.

         "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 4 New York Plaza, 6th Floor,
New York, New York, 10004-2477, Attention Institutional Trust
Services/Structured Finance; ABFC 2003-AHL1 or at such other address as the
Trustee may designate from time to time by notice to the Certificateholders, the
Depositor and the Servicer.

         "Corresponding Classes": With respect to REMIC 1 and REMIC 2, the
following Classes shall be Corresponding Classes:

         CORRESPONDING REMIC 1 CLASSES          CORRESPONDING REMIC 2 CLASSES

                     LT1AI                         Class AI Certificates

                    LT1AII                         Class AII Certificates

                     LT1M1                         Class M-1 Certificates

                     LT1M2                         Class M-2 Certificates

                     LT1M3                         Class M-3 Certificates

                     LT1M4                         Class M-4 Certificates

                     LT1M5                         Class M-5 Certificates

         "Credit Enhancement Percentage": For any Distribution Date, the
percentage obtained by dividing (x) the sum of (i) the aggregate Certificate
Principal Balances of the Mezzanine Certificates and (ii) the
Overcollateralization Amount, in each case after taking into account the
distribution of the Principal Distribution Amount on such Distribution Date by
(y) the Pool Balance as of the last day of the related Collection Period.

         "Cumulative Loss Trigger Event": With respect to any Distribution Date
on or after the Distribution Date occurring in May 2006, a Cumulative Loss
Trigger Event shall exist if the aggregate Realized Losses incurred from and
after the Closing Date divided by the Cut-off Date Aggregate Principal Balance
exceeds the applicable percentage with respect to such Distribution Date (the
"Cumulative Loss Trigger Percentage"). The Cumulative Loss Trigger Percentage
for certain Distribution Dates is set forth below. The Cumulative Loss Trigger
Percentage will

                                      -14-
<PAGE>

increase each month and is calculated using straight line interpolation
methodology between the Cumulative Loss Trigger Percentage for the particular
Distribution Dates specified in the table below.

                                                    CUMULATIVE LOSS
          DISTRIBUTION DATE OCCURRING IN          TRIGGER PERCENTAGE
          ------------------------------          ------------------
          May 2006                                       5.00%
          May 2007                                       7.50%
          May 2008                                      10.00%
          May 2009 and thereafter                       11.50%

         "Cut-off Date":  April 1, 2003.

         "Cut-off Date Aggregate Principal Balance": The aggregate of the
Cut-off Date Principal Balances of the Mortgage Loans.

         "Cut-off Date Principal Balance": With respect to any Mortgage Loan,
the unpaid principal balance thereof as of the Cut-off Date after application of
funds received or advanced on or before such date (or as of the applicable date
of substitution with respect to an Eligible Substitute Mortgage Loan).

         "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.

         "Defective Mortgage Loan": A Mortgage Loan replaced or to be replaced
by one or more Eligible Substitute Mortgage Loans.

         "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 5.02(c) hereof.

         "Delinquent": Any Mortgage Loan with respect to which the Monthly
Payment due on a Due Date is not made by the close of business on the next
scheduled Due Date for such Mortgage Loan.

         "Depositor": Asset Backed Funding Corporation, a Delaware corporation,
or any successor in interest.

         "Depository": The initial depository shall be The Depository Trust
Company, whose nominee is Cede & Co., or any other organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act. The Depository
shall initially be the registered Holder of the

                                      -15-
<PAGE>

Book-Entry Certificates. 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.

         "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.

         "Determination Date": With respect to any Distribution Date, 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.

         "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 the Trust other than through an
Independent Contractor; provided, however, that the Trustee (or the Servicer
under this Agreement) shall not be considered to Directly Operate an REO
Property solely because the Trustee (or the Servicer under this Agreement)
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": A "disqualified organization" under
Section 860E of the Code, which as of the Closing Date is any of: (i) the United
States, any state or political subdivision thereof, any possession of the United
States, any foreign government, any international organization, or any agency or
instrumentality of any of the foregoing, (ii) any organization (other than a
cooperative described in Section 521 of the Code) which is exempt from the tax
imposed by Chapter 1 of the Code unless such organization is subject to the tax
imposed by Section 511 of the Code, (iii) any organization described in Section
1381(a)(2)(C) of the Code, or (iv) any other Person so designated by the Trustee
based upon an Opinion of Counsel provided by nationally recognized counsel to
the Trustee that the holding of an ownership interest in the Class R Certificate
by such Person may cause the Trust Fund or any Person having an ownership
interest in any Class of Certificates (other than such Person) to incur
liability for any federal tax imposed under the Code that would not otherwise be
imposed but for the transfer of an ownership interest in the Class R Certificate
to such Person. A corporation will not be treated as an instrumentality of the
United States or of any state or political subdivision thereof if all of its
activities are subject to tax and a majority of its board of directors is not
selected by a governmental unit. The term "United States," "state" and
"international organization" shall have the meanings set forth in Section 7701
of the Code.

         "Distribution Account": The trust account or accounts created and
maintained by the Trustee pursuant to Section 3.04(b) which shall be entitled
"Distribution Account, JPMorgan Chase Bank, as Trustee, in trust for the
registered Holders of ABFC 2003-AHL1 Trust, ABFC Asset-Backed Certificates,
Series 2003-AHL1" and which must be an Eligible Account.

         "Distribution Date": The 25th day of any calendar month, or if such
25th day is not a Business Day, the Business Day immediately following such 25th
day, commencing in May 2003.

                                      -16-
<PAGE>

         "Distribution Date Statement":  As defined in Section 4.06(a) hereof.

         "Due Date": With respect to each Mortgage Loan and any Distribution
Date, the day of the calendar month in which such Distribution Date occurs on
which the Monthly Payment for such Mortgage Loan was due, exclusive of any grace
period.

         "Eligible Account": Any of (i) an account or accounts maintained with a
federal or state chartered depository institution or trust company the
short-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the short-term unsecured debt obligations of such holding company) are
rated "A-1+" by S&P, "P-1" by Moody's and "F-1" by Fitch (or comparable ratings
if S&P, Moody's and Fitch are not the Rating Agencies) by each of the Rating
Agencies at the time any amounts are held on deposit therein, (ii) an account or
accounts the deposits in which are fully insured by the FDIC, (iii) a trust
account or accounts maintained with the trust department of a federal or state
chartered depository institution, national banking association or trust company
acting in its fiduciary capacity or (iv) an account otherwise acceptable to each
Rating Agency without reduction or withdrawal of their then current ratings of
the Certificates as evidenced by a letter from each Rating Agency to the
Trustee. Eligible Accounts may bear interest.

         "Eligible Substitute Mortgage Loan": A mortgage loan substituted for a
Defective 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, and not more than 5% less
than, the outstanding principal balance of the Defective Mortgage Loan as of the
Due Date in the calendar month during which the substitution occurs, (ii) have a
Mortgage Interest Rate, with respect to a Fixed-Rate Mortgage Loan, not less
than the Mortgage Interest Rate of the Defective Mortgage Loan and not more than
1% in excess of the Mortgage Interest Rate of such Defective Mortgage Loan,
(iii) have the same Due Date as the Defective Mortgage Loan; (iv) if an
Adjustable-Rate Mortgage Loan, have a Maximum Mortgage Interest Rate not less
than the Maximum Mortgage Interest Rate for the Defective Mortgage Loan, (v) if
an Adjustable-Rate Mortgage Loan, have a Minimum Mortgage Interest Rate not less
than the Minimum Mortgage Interest Rate of the Defective Mortgage Loan, (vi) if
an Adjustable-Rate Mortgage Loan, have a Gross Margin equal to or greater than
the Gross Margin of the Defective Mortgage Loan, (vii) if an Adjustable-Rate
Mortgage Loan, have the same Index as the Defective Mortgage Loan (viii) if an
Adjustable-Rate Mortgage Loan, have a next Adjustment Date not more than two
months later than the next Adjustment Date on the Defective Mortgage Loan, an
Eligible Substitute Mortgage Loan must have all Adjustment Dates occurring
during the same Interest Accrual Period during which Adjustment Dates occur with
respect to the substituted Mortgage Loan, (ix) have a remaining term to maturity
not greater than (and not more than one year less than) that of the Defective
Mortgage Loan, (x) be current as of the date of substitution, (xi) have a
Loan-to-Value Ratio as of the date of substitution equal to or lower than the
Loan-to-Value Ratio of the Defective Mortgage Loan as of such date, (xii) have a
risk grading determined by the Seller at least equal to the risk grading
assigned on the Defective Mortgage Loan, (xiii) have been underwritten or
reunderwritten in accordance with the same underwriting criteria and guidelines
as the Defective Mortgage Loan and (xiv) conform to each representation and
warranty set forth in Section 3.01 of the Mortgage Loan Purchase Agreement
applicable to the Defective Mortgage Loan. In the event that one or more
mortgage loans are

                                      -17-
<PAGE>

substituted for one or more Defective Mortgage Loans, the amounts described in
clause (i) hereof shall be determined on the basis of aggregate principal
balances, the Mortgage Interest Rates described in clause (ii) hereof shall be
determined on the basis of weighted average Mortgage Interest Rates, the risk
gradings described in clause (xii) hereof shall be satisfied as to each such
mortgage loan, the terms described in clause (ix) hereof shall be determined on
the basis of weighted average remaining term to maturity, the Loan-to-Value
Ratios described in clause (xi) 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 (xiv) hereof must be
satisfied as to each Eligible Substitute Mortgage Loan or in the aggregate, as
the case may be. Any Defective Mortgage Loan that is a Group I Mortgage Loan or
Group II Mortgage Loan must be replaced by an Eligible Substitute Mortgage Loan
that will be a Group I or Group II Mortgage Loan, as applicable.

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

         "ERISA-Restricted Certificates": Any of the Class X, Class N and Class
R Certificates; and any Class of Certificates that no longer satisfies the
applicable ratings requirement of Prohibited Transaction Exemption 2002-41, 67
Fed. Reg. 54487 (August 22, 2002).

         "Escrow Account": The account or accounts created and maintained
pursuant to Section 3.06.

         "Escrow Payments": The amounts constituting ground rents, taxes,
assessments, water rates, mortgage insurance premiums, fire and hazard insurance
premiums and other payments required to be escrowed by the Mortgagor with the
mortgagee pursuant to any Mortgage Loan.

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

         "Exchange Act": The Securities Exchange Act of 1934, as amended.

         "Expense Fee Rate": The sum of (i) the Trustee Fee Rate and (ii) the
Servicing Fee Rate.

         "Extended Period": As defined in Section 9.04(b).

         "Extra Principal Distribution Amount": As of any Distribution Date, the
lesser of (x) the Monthly Excess Cashflow Amount for such Distribution Date and
(y) the Overcollateralization Deficiency for such Distribution Date.

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

         "FHA": The Federal Housing Administration, an agency within HUD.

         "FHA Approved Mortgagee": Those institutions which are approved by FHA
to act as servicer and mortgagee of record pursuant to FHA Regulations.

         "FHA Insurance Contract" or "FHA Insurance": The contractual obligation
of FHA respecting the insurance of an FHA Loan pursuant to the National Housing
Act, as amended.

                                      -18-
<PAGE>

         "FHA Loan": A Mortgage Loan which is the subject of an FHA Insurance
Contract as evidenced by a Mortgage Insurance Certificate.

         "FHA Regulations": Regulations promulgated by HUD under the National
Housing Act, codified in 24 Code of Federal Regulations, and other HUD issuances
relating to FHA Loans, including the related handbooks, circulars, notices and
mortgagee letters.

         "Fidelity Bond":  Shall have the meaning assigned thereto in Section
3.12.

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

         "Fitch": Fitch Ratings and its successors, and if such company shall
for any reason no longer perform the functions of a securities rating agency,
"Fitch" shall be deemed to refer to any other "nationally recognized statistical
rating organization" as set forth on the most current list of such organizations
released by the Securities and Exchange Commission.

         "Fixed-Rate Mortgage Loan": A Mortgage Loan which has a constant annual
rate at which interest accrues in accordance with the provisions of the related
Mortgage Note.

         "Foreclosure Price": The amount reasonably expected to be received from
the sale of the related Mortgaged Property net of any expenses associated with
foreclosure proceedings.

         "Grantor Trust": That portion of the Trust exclusive of REMIC 1 and
REMIC 2 which holds (a) any Prepayment Charges received in respect of the
Mortgage Loans, any Servicer Prepayment Charge Payment Amounts or any Transferor
Prepayment Charge Payment Amounts and the right of the Class N and Class X
Certificateholders to receive such Prepayment Charges, Servicer Prepayment
Charge Payment Amounts or any Transferor Prepayment Charge Payment Amounts, (b)
the right of the Offered Certificates to receive Cap Carryover Amounts, (c) the
Yield Maintenance Agreement, the Reserve Account and the beneficial interest of
the Class N and Class X Certificates with respect thereto, subject to the
obligation to pay Cap Carryover Amounts and (d) the obligation of the Class X/N
Interest to pay such Cap Carryover Amounts.

         "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 Interest Rate for such Mortgage
Loan.

         "Group I Basic Principal Distribution Amount": With respect to any
Distribution Date, the excess of (i) the Principal Remittance Amount allocable
to the Group I Mortgage Loans for such Distribution Date over (ii) the product
of (a) the Overcollateralization Release Amount, if any, for such Distribution
Date and (b) the Class AI Allocation Percentage.

                                      -19-
<PAGE>

         "Group I Cap": As of any Distribution Date and the Class AI
Certificates, a per annum rate equal to the Weighted Average Net Mortgage Rate
for the Group I Mortgage Loans. For federal income tax purposes, the economic
equivalent of such rate shall be expressed as the weighted average of the
Uncertificated REMIC 1 Pass-Through Rate on REMIC 1 Regular Interest LT1GRP,
weighted on the basis of the Uncertificated Principal Balance of such REMIC 1
Regular Interest.

         "Group I Interest Remittance Amount": As of any Distribution Date, the
sum, without duplication, of (i) that portion of the Available Funds for such
Distribution Date attributable to all interest collected or advanced with
respect to the related Collection Period on the Group I Mortgage Loans, (ii) all
Compensating Interest paid by the Servicer with respect to such Distribution
Date with respect to the Group I Mortgage Loans and (iii) the portion of any
payment in connection with any Principal Prepayment, Substitution Adjustment
Amount, Purchase Price, Termination Price, Net Liquidation Proceeds or Insurance
Proceeds, relating to interest with respect to the Group I Mortgage Loans
received during the related Prepayment Period.

         "Group I Mortgage Loan": Each Mortgage Loan listed on Exhibit D-1
hereto. Each Group I Mortgage Loan was, as of the Cut-off Date, a Fixed-Rate
Mortgage Loan.

         "Group I Principal Distribution Amount": With respect to any
Distribution Date, the sum of (i) the Group I Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Class AI
Allocation Percentage.

          "Group II Basic Principal Distribution Amount": With respect to any
Distribution Date, the excess of (i) the Principal Remittance Amount allocable
to the Group II Mortgage Loans for such Distribution Date over (ii) the product
of (a) the Overcollateralization Release Amount, if any, for such Distribution
Date and (b) the Class AII Allocation Percentage.

         "Group II Cap": As of any Distribution Date and for the Class AII
Certificates, a per annum rate equal to the Weighted Average Net Mortgage Rate
for the Group II Mortgage Loans, adjusted by multiplying such rate by a
fraction, the numerator of which is 30, and the denominator of which is equal to
the number of days in the related Interest Accrual Period. For federal income
tax purposes, the economic equivalent of such rate shall be expressed as the
weighted average of the Uncertificated REMIC 1 Pass-Through Rate on REMIC 1
Regular Interest LT2GRP, weighted on the basis of the Uncertificated Principal
Balance of such REMIC 1 Regular Interest.

         "Group II Interest Remittance Amount": As of any Distribution Date, the
sum, without duplication, of (i) that portion of the Available Funds for such
Distribution Date attributable to all interest collected or advanced with
respect to the related Collection Period on the Group II Mortgage Loans, (ii)
all Compensating Interest paid by the Servicer with respect to such Distribution
Date with respect to the Group II Mortgage Loans and (iii) the portion of any
payment in connection with any Principal Prepayment, Substitution Adjustment
Amount, Purchase Price, Termination Price, Net Liquidation Proceeds (net of
certain expenses) or

                                      -20-
<PAGE>

Insurance Proceeds, relating to interest with respect to the Group II Mortgage
Loans received during the related Prepayment Period.

         "Group II Maximum Cap Rate": With respect to any Distribution Date for
the Class AII Certificates, a per annum rate equal to the average of the Net
Maximum Mortgage Interest Rates for the Group II Mortgage Loans weighted on the
basis of the Principal Balances of the Group II Mortgage Loans as of the first
day of the related Collection Period, adjusted by multiplying such rate by a
fraction, the numerator of which is 30, and the denominator of which is equal to
the number of days in the related Interest Accrual Period.

         "Group II Mortgage Loan": Each Mortgage Loan listed on Exhibit D-2
hereto. Each Group II Mortgage Loan was, as of the Cut-off Date, an
Adjustable-Rate Mortgage Loan.

         "Group II Principal Distribution Amount": With respect to any
Distribution Date, the sum of (i) the Group II Basic Principal Distribution
Amount for such Distribution Date and (ii) the product of (a) the Extra
Principal Distribution Amount for such Distribution Date and (b) the Class AII
Allocation Percentage.

         "HUD": The United States Department of Housing and Urban Development,
or any successor thereto and including the Federal Housing Commissioner and the
Secretary of Housing and Urban Development where appropriate under the FHA
Regulations.

         "Independent": When used with respect to any specified Person, any such
Person who (i) is in fact independent of the Depositor, the Servicer and their
respective Affiliates, (ii) does not have any direct financial interest in or
any material indirect financial interest in the Depositor or the Servicer or any
Affiliate thereof, and (iii) is not connected with the Depositor or the 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 or the
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
Servicer or any Affiliate thereof, as the case may be.

         "Independent Contractor": Either (i) any Person (other than the
Servicer) that would be an "independent contractor" with respect to the Trust
Fund within the meaning of Section 856(d)(3) of the Code if the Trust Fund 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 percent or more of any Class of Certificates), so long as the
Trust Fund does not receive or derive any income from such Person and provided
that the relationship between such Person and the Trust Fund 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 Servicer) if the Trustee has received an Opinion of
Counsel, which Opinion of Counsel shall be an expense of the Trust Fund, 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.

                                      -21-
<PAGE>

         "Index": With respect to each Adjustable-Rate Mortgage Loan and with
respect to each related Adjustment Date, the index as specified in the related
Mortgage Note.

         "Initial Certificate Principal Balance": With respect to any
Certificate of a Class other than a Class N, Class X or Class R Certificate, the
amount designated "Initial Certificate Principal Balance" on the face thereof.

         "Initial Class N Principal Amount": With respect to a Class N
Certificate, the amount designated "Initial Class N Principal Amount" on the
face thereof.

         "Initial Overcollateralization Amount":  $4,807,338.00.

         "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 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
(i) the Class AII, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5 and
Class N Certificates, the period from the preceding Distribution Date to the day
prior to the current Distribution Date (or, in the case of the first
Distribution Date, the period from the Closing Date through May 26, 2003), and
(ii) the Class AI and Class X Certificates and the REMIC Regular Interests, the
calendar month immediately preceding the month in which such Distribution Date
occurs.

         "Interest Percentage": With respect to any Class of Certificates and
any Distribution Date, the ratio (expressed as a decimal carried to six places)
of the Accrued Certificate Interest for such Class to the sum of the Accrued
Certificate Interest for all Classes, in each case with respect to such
Distribution Date, without regard to Relief Act Interest Shortfalls.

         "Interest Remittance Amount": As of any Determination Date, the sum of
the Group I Interest Remittance Amount and the Group II Interest Remittance
Amount.

         "Late Collections": With respect to any Mortgage Loan, all amounts
received subsequent to the Determination Date immediately following any related
Collection Period, whether as late payments of Monthly Payments or as Insurance
Proceeds, Condemnation 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 on a contractual basis for such Collection Period and not
previously recovered.

         "Lender": As defined in Section 6.06(b) hereof.

         "LIBOR Business Day": Any day on which banks in London, England and The
City of New York are open and conducting transactions in foreign currency and
exchange.

         "LIBOR Determination Date": With respect to the Offered Certificates
(other than the Class AI Certificates) and the Class M-5 Certificates, (i) for
the first Distribution Date, the

                                      -22-
<PAGE>

second LIBOR Business Day preceding the Closing Date and (ii) for each
subsequent Distribution Date, the second LIBOR Business Day prior to the
immediately preceding Distribution Date.

         "Liquidated Mortgage Loan": As to any Distribution Date, any Mortgage
Loan in respect of which the Servicer has determined, in accordance with the
servicing procedures specified herein, as of the end of the related Prepayment
Period, that all Liquidation Proceeds, Condemnation Proceeds and Insurance
Proceeds which it expects to recover with respect to the liquidation of the
Mortgage Loan or disposition of the related REO Property have been recovered.

         "Liquidation Proceeds": The amount (other than amounts received in
respect of the rental of any REO Property prior to REO Disposition) received by
the 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 or (ii) the
liquidation of a defaulted Mortgage Loan by means of a trustee's sale,
foreclosure sale or otherwise.

         "Liquidation Report": The report with respect to a Liquidated Mortgage
Loan in such form as is agreed to by the Servicer and the Trustee listing (i)
the sale price of the related Mortgaged Property or amount of the REO
Disposition, (ii) the amount of any Realized Loss (or gain) with respect to such
Liquidated Mortgage Loan, (iii) the expenses relating to the liquidation of such
Liquidated Mortgage Loan and (iv) such other information as is agreed to by the
Servicer and the Trustee.

         "Loan Group": Any of Loan Group I or Loan Group II, as the context
requires.

         "Loan Group I": The Group I Mortgage Loans.

         "Loan Group II": The Group II Mortgage Loans.

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

         "Losses": As defined in Section 9.03.

         "Lost Note Affidavit": With respect to any Mortgage Loan as to which
the original Mortgage Note has been permanently lost or destroyed and has not
been replaced, an affidavit from the Seller certifying that the original
Mortgage Note has been lost, misplaced or destroyed (together with a copy of the
related Mortgage Note and indemnifying the Trust against any loss, cost or
liability resulting from the failure to deliver the original Mortgage Note) in
the form of Exhibit H hereto.

         "Majority Certificateholders": The Holders of Certificates evidencing
at least 51% of the Voting Rights.

         "Majority Class X Certificateholders": The Holders of Class X
Certificates representing at least 51% of the Notional Amount of such Class.

                                      -23-
<PAGE>

         "Marker Rate": With respect to the Class X/N Interest and any
Distribution Date, a per annum rate equal to two (2) times the weighted average
of the Uncertificated REMIC Pass-Through Rates for REMIC 1 Regular Interest
LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1
Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest
LT1M4, REMIC 1 Regular Interest LT1M5 and REMIC 1 Regular Interest LT1ZZ, (i)
with the rate on REMIC 1 Regular Interests LT1AI subject to a cap equal to the
Class AI Fixed Rate for the purposes of this calculation, (ii) with the rate on
REMIC 1 Regular Interest LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular
Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4
and REMIC 1 Regular Interest LT1M5 subject to a cap equal to the Formula Rate of
its Corresponding Class for the purposes of this calculation and (iii) with the
rate on REMIC 1 Regular Interest LT1ZZ subject to a cap of zero for the purpose
of this calculation; provided, however, that for this purpose, calculations of
the Uncertificated REMIC 1 Pass-Through Rate and the related caps with respect
to REMIC 1 Regular Interest LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1
Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest
LT1M4 and REMIC 1 Regular Interest LT1M5 shall be multiplied by a fraction, the
numerator of which is the actual number of days in the Interest Accrual Period
and the denominator of which is 30.

         "Maximum LT1ZZ Uncertificated Accrued Interest Deferral Amount": With
respect to any Distribution Date, the excess of (a) accrued interest at the
Uncertificated REMIC 1 Pass-Through Rate applicable to REMIC 1 Regular Interest
LT1ZZ for such Distribution Date on a balance equal to the Uncertificated
Principal Balance of REMIC 1 Regular Interest LT1ZZ minus the REMIC 1
Overcollateralized Amount, in each case for such Distribution Date, over (b)
Uncertificated Accrued Interest on REMIC 1 Regular Interest LT1AI (1) with the
rate on REMIC 1 Regular Interest LT1AI subject to a cap equal to the Class AI
Fixed Rate for the purpose of this calculation, (2) Uncertificated Accrued
Interest on REMIC 1 Regular Interest LT1AII, LT1M1, REMIC 1 Regular Interest
LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4 and REMIC
1 Regular Interest LT1M5 each subject to a cap equal to the Formula Rate of the
related Corresponding Class for the purpose of this calculation; provided,
however, that for this purpose, calculations of the Uncertificated REMIC 1
Pass-Through Rate and the related caps with respect to REMIC 1 Regular Interest
LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1
Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4 and REMIC 1 Regular
Interest LT1M5 shall be multiplied by a fraction, the numerator of which is the
actual number of days in the Accrual Period and the denominator of which is 30.

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

         "MERS": Mortgage Electronic Registration Systems, Inc., a Delaware
corporation, or any successor to it.

         "MERS Designated Mortgage Loan": Mortgage Loans for which (a) the
Responsible Party has designated or will designate MERS as, and has taken or
will take such action as is necessary to cause MERS to be, the mortgage of
record, as nominee for the Responsible Party, in

                                      -24-
<PAGE>

accordance with MERS Procedure Manual and (b) the Responsible Party has
designated or will designate the Trust as the Investor on the MERS(R) System.

         "MERS Procedure Manual": The MERS Procedures Manual, as it may be
amended, supplemented or otherwise modified from time to time.

         "MERS(R) System": MERS mortgage electronic registry system, as more
particularly described in the MERS Procedures Manual.

         "Mezzanine Cap": As of any Distribution Date, with respect to the Class
M Certificates, a per annum rate equal to the product of (i) the average of the
Weighted Average Net Mortgage Rates of the Group I Mortgage Loans and the Group
II Mortgage Loans, respectively, weighted proportionally between the two loan
groups in the proportion that (a) the difference between (1) the aggregate
Principal Balance of the Group I Mortgage Loans as of the beginning of such
Collection Period and (2) the Certificate Principal Balance of the Class AI
Certificates before such Distribution Date, bears to (b) the difference between
(1) the aggregate Principal Balance of the Group II Mortgage Loans as of the
beginning of such Collection Period and (2) the Certificate Principal Balance of
the Class AII Certificates before such Distribution Date, and (ii) 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. For federal income tax
purposes, the economic equivalent of such rate shall be expressed as the
weighted average of the Uncertificated REMIC 1 Pass-Through Rates on (a) REMIC 1
Regular Interest LT1SUB, subject to a cap and a floor equal to the Net Mortgage
Interest Rates of the Group I Loans and (b) REMIC 1 Regular Interest LT2SUB,
subject to a cap and a floor equal to the Net Mortgage Interest Rates of the
Group II Loans, weighted on the basis of the Uncertificated Principal Balance of
each such REMIC 1 Regular Interest.

         "Mezzanine Certificates": The Class M Certificates.

         "Mezzanine Maximum Cap Rate": With respect to any Distribution Date and
for the Class M Certificates, a per annum rate equal to the average of the Net
Maximum Mortgage Interest Rates for the Group II Mortgage Loans and the Net
Mortgage Interest Rates for the Group I Mortgage Loans, weighted proportionally
between the two loan groups in the proportion that (a) the difference between
(1) the aggregate Principal Balance of the Group I Mortgage Loans as of the
beginning of such Collection Period and (2) the Certificate Principal Balance of
the Class AI Certificates before such Distribution Date, bears to (b) the
difference between (1) the aggregate Principal Balance of the Group II Mortgage
Loans as of the beginning of such Collection Period and (2) the Certificate
Principal Balance of the Class AII Certificates before such Distribution Date,
adjusted by multiplying such rate by a fraction equal to 30 over the number of
days in the related Interest Accrual Period.

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

         "Monthly Excess Cashflow Amount": The sum of the Monthly Excess
Interest Amount, the Overcollateralization Release Amount and (without
duplication) any portion of the Principal

                                      -25-
<PAGE>

Distribution Amount remaining after principal distributions on the Offered
Certificates and the Class M-5 Certificates.

         "Monthly Excess Interest Amount": With respect to each Distribution
Date, the amount, if any, by which the Interest Remittance Amount for such
Distribution Date exceeds the aggregate amount distributed on such Distribution
Date pursuant to paragraphs (i) through (x) under Section 4.01.

         "Monthly Form 8-K": As defined in Section 3.32(a) hereof.

         "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 or similar state laws; (b) without giving effect to any extension
granted or agreed to by the Servicer pursuant to Section 3.01; 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., and its successors, and if
such company shall for any reason no longer perform the functions of a
securities rating agency, "Moody's" shall be deemed to refer to any other
"nationally recognized statistical rating organization" as set forth on the most
current list of such organizations released by the Securities and Exchange
Commission.

         "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 Interest 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 (i) in
the case of each Fixed-Rate Mortgage Loan shall remain constant at the rate set
forth in the applicable Mortgage Loan Schedule as the Mortgage Interest Rate in
effect immediately following the Cut-off Date and (ii) in the case of 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 applicable Mortgage Loan Schedule as the Mortgage Interest 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, to
equal the sum, rounded as provided in the Mortgage Note, of the Index,
determined as set forth in the related Mortgage Note, plus the related Gross
Margin subject to the limitations set forth in the related Mortgage Note. With
respect to each Mortgage Loan that becomes an REO Property, as of any date of
determination, the annual rate determined in accordance with the immediately
preceding sentence as of the date such Mortgage Loan became an REO Property.

                                      -26-
<PAGE>

         "Mortgage Loan": Each mortgage loan transferred and assigned to the
Trustee pursuant to Section 2.01 or Section 2.03(d) as from time to time held as
a part of the Trust Fund, the Mortgage Loans so held being identified in the
Mortgage Loan Schedules.

         "Mortgage Loan Purchase Agreement": The agreement between the Seller
and the Depositor, dated as of May 8, 2003, regarding the transfer of the
Mortgage Loans by the Seller to or at the direction of the Depositor.

         "Mortgage Loan Schedule": As of any date with respect to the Mortgage
Loans, the lists of such Mortgage Loans included in the Trust Fund on such date,
separately identifying the Fixed-Rate Mortgage Loans and the Adjustable-Rate
Mortgage Loans, attached hereto as Exhibits D-1 and D-2. The Mortgage Loan
Schedules shall set forth the following information with respect to each
Mortgage Loan:

         (1)   the Mortgage Loan identifying number;

         (2)   the state and zip code of the Mortgaged Property;

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

         (4)   the occupancy status of the Mortgaged Property at origination;

         (5)   the original months to maturity;

         (6)   the date of origination;

         (7)   the first payment date;

         (8)   the stated maturity date;

         (9)   the stated remaining months to maturity;

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

         (11)  the Principal Balance of each Mortgage Loan as of the Cut-off
               Date;

         (12)  the initial Mortgage Interest Rate;

         (13)  the Mortgage Interest Rate of the Mortgage Loan as of the Cut-off
               Date;

         (14)  the current principal and interest payment of the Mortgage Loan
               as of the Cut-off Date;

         (15)  the contractual interest paid to date of the Mortgage Loan;

         (16)  the Loan-to-Value Ratio at origination and as of the Cut-off
               Date;

         (17)  a code indicating the loan performance status of the Mortgage
               Loan as of the Cut-off Date;

                                      -27-
<PAGE>

         (18)  a code indicating the Index that is associated with such Mortgage
               Loan;

         (19)  the Gross Margin;

         (20)  the Periodic Rate Cap;

         (21)  the Minimum Mortgage Interest Rate;

         (22)  the Maximum Mortgage Interest Rate;

         (23)  a code indicating whether the Mortgage Loan has a Prepayment
               Charge and the type of Prepayment Charge and the term;

         (24)  the first Adjustment Date immediately following the Cut-off Date;

         (25)  the rate adjustment frequency;

         (26)  the payment adjustment frequency;

         (27)  the MERS identification number;

         (28)  a code indicating whether the Mortgage Loan is a Group I Mortgage
               Loan or a Group II Mortgage Loan; and

         (29)  the purpose of the Mortgage Loan.

         The Mortgage Loan Schedules shall set forth the following information,
as of the Cut-off Date, with respect to the Mortgage Loans in the aggregate, for
the Fixed-Rate Mortgage Loans and for the Adjustable-Rate Mortgage Loans: (1)
the number of Mortgage Loans; (2) the current Principal Balance of the Mortgage
Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans;
and (4) the weighted average maturity of the Mortgage Loans. The Mortgage Loan
Schedules shall be amended from time to time in accordance with the provisions
of this Agreement. With respect to any Eligible Substitute Mortgage Loan,
Cut-off Date shall refer to the applicable date of substitution.

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

         "Mortgage Pool": The pool of Mortgage Loans, identified on Exhibits D-1
and D-2 from time to time, and any REO Properties acquired in respect thereof.

         "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 Liquidation Proceeds": With respect to any Liquidated Mortgage
Loan or any other disposition of related Mortgaged Property (including REO
Property) the related Liquidation Proceeds net of unreimbursed Advances,
unreimbursed Servicing Advances, Servicing Fees and

                                      -28-
<PAGE>

any other accrued and unpaid servicing fees received and retained in connection
with the liquidation of such Mortgage Loan or Mortgaged Property.

         "Net Maximum Mortgage Interest Rate": With respect to any
Adjustable-Rate Mortgage Loan, the applicable Maximum Mortgage Interest Rate
minus the Expense Fee Rate.

         "Net Mortgage Interest Rate": With respect to any Mortgage Loan, the
Mortgage Interest Rate borne by such Mortgage Loan minus the Expense Fee Rate.

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

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

         "Notional Amount": With respect to the Class X/N Interest, immediately
prior to any Distribution Date, the aggregate of the Uncertificated Principal
Balances of the REMIC 1 Regular Interests.

         "Offered Certificates": The Class AI, Class AII, Class M-1, Class M-2,
Class M-3 and Class M-4 Certificates.

         "Officers' Certificate": A certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the President or a vice president
(however denominated), and by the Treasurer, the Secretary, or one of the
assistant treasurers or assistant secretaries of the Servicer, the Seller or the
Depositor, as applicable.

         "One-Month LIBOR": With respect to each Interest Accrual Period, the
rate determined by the Trustee on the related LIBOR Determination Date on the
basis of the offered rate for one-month United States dollar deposits, as such
rate appears on the Telerate Page 3750, as of 11:00 a.m. (London time) on such
LIBOR Determination Date. If no such quotations are available on an LIBOR
Determination Date, One-Month LIBOR for the related Interest Accrual Period will
be established by the Trustee as follows:

               (i)   If on such LIBOR 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 0.001%);

               (ii)  If on such LIBOR Determination Date fewer than two
         Reference Banks provide such offered quotations, One-Month LIBOR for
         the related Interest Accrual Period shall be the arithmetic mean of
         the rates quoted by one or more major banks in New York City, selected
         by the Trustee after consultation with the Depositor, as of 11:00
         A.M., New York City time, on such date for loans in U.S. Dollars to
         leading

                                      -29-
<PAGE>

         European banks for a period of one month in amounts approximately
         equal to the aggregate Certificate Principal Balance of the Offered
         Certificates; and

               (iii) If no such quotations can be obtained, One-Month LIBOR for
         the related Interest Accrual Period shall be One-Month LIBOR for the
         prior Distribution Date.

         "Opinion of Counsel": A written opinion of counsel, who may, without
limitation, be a salaried counsel for the Depositor or the Servicer except that
any opinion of counsel relating to (a) the qualification of any REMIC as a REMIC
or (b) compliance with the REMIC Provisions must be an opinion of Independent
counsel.

         "Optional Termination Date": The first Distribution Date on which the
Servicer or any affiliate of the Servicer may opt to terminate the Mortgage Pool
pursuant to Section 10.01.

         "Original Class Certificate Principal Balance": With respect to each
Class of Certificates (other than the Class N, Class X and Class R
Certificates), the Certificate Principal Balance thereof on the Closing Date, as
set forth opposite such Class in the Preliminary Statement. The Class N, Class X
and Class R Certificates do not have an Original Class Certificate Principal
Balance.

         "Original Class N Principal Amount": The principal amount of the Class
N Certificates on the Closing Date, as set forth opposite such Class in the
Preliminary Statement.

         "Overcollateralization Amount": As of any Distribution Date, the
excess, if any, of (x) the Pool Balance as of the last day of the related
Collection Period over (y) the aggregate Certificate Principal Balances of all
Classes of Offered Certificates and the Class M-5 Certificates (in each case,
after taking into account all distributions of principal on such Distribution
Date).

         "Overcollateralization Deficiency": As of any Distribution Date, the
excess, if any, of (x) the Targeted Overcollateralization Amount for such
Distribution Date over (y) the Overcollateralization Amount for such
Distribution Date, calculated for this purpose after taking into account the
reduction on such Distribution Date of the Certificate Principal Balances of all
Classes of Certificates resulting from the distribution of the Principal
Distribution Amount (but not the Extra Principal Distribution Amount) on such
Distribution Date, but prior to taking into account any Applied Realized Loss
Amounts on such Distribution Date.

         "Overcollateralization Release Amount": With respect to any
Distribution Date on and after the Stepdown Date on which a Trigger Event is not
in effect, the excess, if any, of (i) the Overcollateralization Amount for such
Distribution Date, assuming that 100% of the Principal Remittance Amount is
applied as a principal payment on the Offered Certificates on such Distribution
Date, over (ii) the Targeted Overcollateralization Amount for such Distribution
Date. With respect to any Distribution Date on which a Trigger Event is in
effect, the Overcollateralization Release Amount will be zero.

         "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.

                                      -30-
<PAGE>

         "Pass-Through Rate": Any of the Class AI Pass-Through Rate, the Class
AII Pass-Through Rate, the Class M-1 Pass-Through Rate, the Class M-2
Pass-Through Rate, Class M-3 Pass-Through Rate, the Class M-4 Pass-Through Rate
and the Class M-5 Pass-Through Rate. With respect to the Class X/N Interest and
any Distribution Date, a per annum rate equal to the percentage equivalent of a
fraction, the numerator of which is the sum of the amounts calculated pursuant
to clauses (A) through (I) below, and the denominator of which is the aggregate
of the Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA,
REMIC 1 Regular Interest LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1 Regular
Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3,
REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5 and REMIC 1
Regular Interest LT1ZZ. For purposes of calculating the Pass-Through Rate for
the Class X/N Interest, the numerator is equal to the sum of the following
components:

              (A)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1AA minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1AA;

              (B)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1AI minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1AI;

              (C)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1AII minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1AII.

              (D)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1M1 minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1M1;

              (E)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1M2 minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1M2;

              (F)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1M3 minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1M3;

              (G)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1M4 minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1M4;

              (H)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1M5 minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1M5; and

                                      -31-
<PAGE>

              (I)   the Uncertificated REMIC 1 Pass-Through Rate for REMIC 1
         Regular Interest LT1ZZ minus the Marker Rate, applied to an amount
         equal to the Uncertificated Principal Balance of REMIC 1 Regular
         Interest LT1ZZ.

         "Paying Agent": Any paying agent appointed pursuant to Section 5.05.

         "Percentage Interest": With respect to any Certificate (other than a
Class X, Class N or Class R Certificate), a fraction, expressed as a percentage,
the numerator of which is the Initial Certificate Principal Balance, as the case
may be, represented by such Certificate and the denominator of which is the
Original Class Certificate Principal Balance of the related Class. With respect
to a Class N Certificate, the undivided percentage interest obtained by dividing
the Initial Class N Principal Amount evidenced by such Certificate by the
Original Class N Principal Amount. With respect to a Class X or Residual
Certificate, the portion of the Class evidenced thereby, expressed as a
percentage, as stated on the face of such Certificate; provided, however, that
the sum of all such percentages for each such Class totals 100%.

         "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 Interest Rate
for such Mortgage Loan may increase or decrease (without regard to the Maximum
Mortgage Interest Rate or the Minimum Mortgage Interest Rate) on such Adjustment
Date from the Mortgage Interest 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 or managed by the Depositor, the Servicer, the Trustee or any
of their respective Affiliates or for which an Affiliate of the Trustee serves
as an advisor:

              (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)  (A) demand and time deposits in, certificates of deposit of,
         bankers' acceptances issued by or federal funds sold by any depository
         institution or trust company (including the Trustee or its agents
         acting in their respective commercial capacities) incorporated under
         the laws of the United States of America or any state thereof and
         subject to supervision and examination by federal and/or state
         authorities, so long as, at the time of such investment or contractual
         commitment providing for such investment, such depository institution
         or trust company or its ultimate parent has a short-term uninsured debt
         rating in one of the two highest available rating categories of S&P and
         Moody's and the highest available rating category of Fitch and provided
         that each such investment has an original maturity of no more than 365
         days and (B) any other demand or time deposit or deposit which is fully
         insured by the FDIC;

              (iii) repurchase obligations with a term not to exceed 30 days
         with respect to any security described in clause (i) above and entered
         into with a depository institution or trust company (acting as
         principal) rated A or higher by S&P and Fitch and A2 or higher

                                      -32-
<PAGE>

         by Moody's, provided, however, that collateral transferred pursuant to
         such repurchase obligation must be of the type described in clause (i)
         above and must (A) be valued daily at current market prices plus
         accrued interest or (B) pursuant to such valuation, be equal, at all
         times, to 105% of the cash transferred by the Trustee in exchange for
         such collateral and (C) be delivered to the Trustee or, if the Trustee
         is supplying the collateral, an agent for the Trustee, in such a
         manner as to accomplish perfection of a security interest in the
         collateral by possession of certificated securities;

              (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 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 in its
         highest short-term unsecured debt rating available at the time of such
         investment;

              (vi)  units of money market funds registered under the Investment
         Company Act of 1940 (including funds managed or advised by the Trustee
         or affiliates thereof) having the highest rating category by the
         applicable Rating Agency; and

              (vii) 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 in writing
         as a permitted investment of funds backing securities having ratings
         equivalent to its highest initial rating of the Class A Certificates;

provided, 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 Class R Certificate other
than a Disqualified Organization, a non-U.S. Person or a U.S. Person with
respect to whom income on the Class R Certificate is attributable to a foreign
permanent establishment or fixed base, within the meaning of an applicable
income tax treaty, of such Person or any other U.S. Person.

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

         "Pool Balance": As of any date of determination, the aggregate
Principal Balance of the Mortgage Loans.

                                      -33-
<PAGE>

         "Prepayment Charge": With respect to any Prepayment Period, any
prepayment premium, penalty or charge collected by the Servicer from a Mortgagor
in connection with any voluntary Principal Prepayment in full pursuant to the
terms of the related Mortgage Note as from time to time held as a part of the
Trust Fund, the Prepayment Charges so held being identified in the Mortgage Loan
Schedules (other than any Servicer Prepayment Charge Payment Amount or
Transferor Prepayment Charge Payment Amount).

         "Prepayment Charge Schedule": As of any date, the list of Prepayment
Charges included in the Trust Fund on such date, attached hereto as Schedule I
(including the prepayment charge summary attached thereto) as supplemented by
each schedule of Eligible Substitute Mortgage Loans which by their terms have
related Prepayment Charges. The Prepayment Charge Schedule shall set forth the
following information with respect to each Prepayment Charge:

         (a)   the Mortgage Loan identifying number;

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

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

         (d)   the term of the Prepayment Charge;

         (e)   the original Principal Balance of the related Mortgage Loan; and

         (f)   the Cut-off Date Principal Balance of the related Mortgage Loan.

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 that was applied by the Servicer to reduce the
outstanding principal balance of such loan on a date preceding the related Due
Date, an amount equal to interest at the applicable Mortgage Interest Rate (net
of the Servicing Fee Rate) on the amount of such Principal Prepayment 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.

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

         "Principal Balance": As to any Mortgage Loan and any day, other than a
Liquidated Mortgage Loan, the related Cut-off Date Principal Balance, minus the
sum of (i) all collections and other amounts credited against the principal
balance of any such Mortgage Loan, (ii) the principal portion of Advances, (iii)
any Deficient Valuation and (iv) any principal reduction resulting from a
Servicer Modification. For purposes of this definition, a Liquidated Mortgage
Loan shall be deemed to have a Principal Balance equal to the Principal Balance
of the related Mortgage Loan as of the final recovery of related Liquidation
Proceeds and a Principal Balance of zero thereafter. As to any REO Property and
any day, the Principal Balance of the related

                                      -34-
<PAGE>

Mortgage Loan immediately prior to such Mortgage Loan becoming REO Property
minus any REO Principal Amortization received with respect thereto on or prior
to such day.

         "Principal Distribution Amount": As to any Distribution Date, the sum
of (i) the Group I Principal Distribution Amount for such Distribution Date and
(ii) the Group II Principal Distribution 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 accompanied by an amount of interest representing the full amount
of scheduled interest due on any Due Date in any month or months subsequent to
the month of prepayment.

         "Principal Remittance Amount": With respect to any Distribution Date,
the sum (less amounts available for reimbursement of Advances and Servicing
Advances pursuant to Section 3.05 and expenses reimbursable pursuant to Section
6.03) of: (i) each scheduled payment of principal on a Mortgage Loan due during
the related Collection Period and received by the Servicer on or prior to the
related Determination Date, and any Advances with respect thereto, (ii) all full
and partial Principal Prepayments received by the Servicer during the related
Prepayment Period, (iii) the Net Liquidation Proceeds allocable to principal
actually collected by the Servicer during the related Prepayment Period, (iv)
with respect to Defective Mortgage Loans repurchased with respect to such
Prepayment Period, the portion of the Purchase Price allocable to principal, (v)
the principal portion of any Substitution Adjustment Amounts received on or
prior to the previous Determination Date and not yet distributed and (vi) on the
Distribution Date on which the Trust is to be terminated in accordance with
Section 10.01 hereof, that portion of the Termination Price in respect of
principal.

         "Private Certificates": Any of the Class M-5, Class X, Class N and
Class R Certificates.

         "Property Insurance Proceeds": Proceeds of any title policy, hazard
policy or other insurance policy covering a Mortgage Loan, to the extent such
proceeds are received by the Servicer and are not to be applied to the
restoration of the related Mortgaged Property or released to the Mortgagor in
accordance with the Servicer's servicing procedures, subject to the terms and
conditions of the related Mortgage Note and Mortgage.

         "Prospectus Supplement": That certain Prospectus Supplement dated May
6, 2003 relating to the public offering of the Offered Certificates.

         "Purchase Price": With respect to any Mortgage Loan or REO Property to
be purchased pursuant to or as contemplated by Section 2.03 or 10.01, an amount
equal to the sum of (i) 100% of the Principal Balance thereof as of the date of
purchase (or such other price as provided in Section 10.01), (ii) in the case of
(x) a Mortgage Loan, accrued interest on such Principal Balance at the
applicable Mortgage Interest 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 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, accrued
interest at the applicable Mortgage Interest Rate on its fair market value,
determined in good faith by the Servicer, (iii) any unreimbursed Servicing
Advances and

                                      -35-
<PAGE>

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 3.13, (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 Servicer or the Trustee in
respect of the breach or defect giving rise to the purchase obligation, and (vi)
any costs and damages incurred by the Trust in connection with any violation by
such Mortgage Loan of any predatory or abusive lending law.

         "Qualified Insurer": Any insurance company acceptable to Fannie Mae or
Freddie Mac.

         "Rating Agency or Rating Agencies": Fitch, Moody's and S&P, or their
respective successors. If such agencies or their successors are no longer in
existence, "Rating Agencies" shall be such nationally recognized statistical
rating organizations as set forth on the most current list of such organizations
released by the Securities and Exchange Commission and designated by the
Depositor, notice of which designation shall be given to the Trustee and the
Servicer.

         "Realized Loss": (a) With respect to a Liquidated Mortgage Loan, the
amount by which the remaining unpaid principal balance of the Mortgage Loan
exceeds the amount of Net Liquidation Proceeds from such Mortgage Loan and the
related Mortgaged Property which are applied to reduce the principal balance of
the related Mortgage Loan; (b) with respect to any Mortgage Loan, a Deficient
Valuation with respect thereto; and (c) with respect to any Mortgage Loan, a
reduction in the Principal Balance thereof resulting from a Servicer
Modification.

         "Realized Loss Amortization Amount": Any of the Class M-1 Realized Loss
Amortization Amount, the Class M-2 Realized Loss Amortization Amount, the Class
M-3 Realized Loss Amortization Amount, the Class M-4 Realized Loss Amortization
Amount and the Class M-5 Realized Loss Amortization Amount.

         "Record Date": With respect to all of the Certificates (other than the
Class AI Certificates, the Class X Certificate and the Class R Certificate), the
Business Day immediately preceding such Distribution Date; provided, however,
that if any such Certificate becomes a Definitive Certificate, the Record Date
for such Certificate shall be the last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs. With respect
to the Class AI Certificates, the Class X Certificate and the Class R
Certificate, the last Business Day of the month immediately preceding the month
in which the related Distribution Date occurs (or the Closing Date, in the case
of the first Distribution Date).

         "Reference Banks": Those three (3) banks (i) with an established place
of business in London, England, (ii) not controlling, under the control of or
under common control with the Depositor or the Trustee and (iii) which have been
designated as such by the Trustee after consultation with the Servicer;
provided, however, that if fewer than two of such banks provide a One-Month
LIBOR rate, then any leading banks selected by the Trustee which are engaged in
transactions in United States dollar deposits in the international Eurocurrency
market.

         "Regular Certificate": Any of the Offered Certificates and the Class
M-5 Certificates.

         "Related Documents": With respect to any Mortgage Loan, the related
Mortgage Notes, Mortgages and other related documents.

                                      -36-
<PAGE>

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

         "Relief Act Interest Shortfall": With respect to any Distribution Date,
for any Mortgage Loan with respect to which there has been a reduction in the
amount of interest collectible thereon for the most recently ended Collection
Period as a result of the application of the Relief Act or similar state laws,
the amount by which (i) interest collectible on such Mortgage Loan during such
Collection Period is less than (ii) one month's interest on the Principal
Balance of such Mortgage Loan at the Mortgage Interest Rate for such Mortgage
Loan before giving effect to the application of the Relief Act or similar state
laws.

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

         "REMIC 1 Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) 50% of the sum of
the aggregate Principal Balance of the Mortgage Loans and related REO Properties
then outstanding and (ii) the Uncertificated REMIC 1 Pass-Through Rate for REMIC
1 Regular Interest LT1AA minus the Marker Rate, divided by (b) 12.

         "REMIC 1 Marker Allocation Percentage": 50% of any amount payable or
loss attributable from the Mortgage Loans, which shall be allocated to REMIC 1
Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI, REMIC 1 Regular Interest
LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1
Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest
LT1M5 and REMIC 1 Regular Interest LT1ZZ.

         "REMIC 1 Overcollateralization Target Amount": 0.50% of the Targeted
Overcollateralization Amount.

         "REMIC 1 Overcollateralized Amount": With respect to any date of
determination, (i) 0.50% of the aggregate Uncertificated Principal Balances of
the REMIC 1 Regular Interests minus (ii) the aggregate of the Uncertificated
Principal Balances of REMIC 1 Regular Interest LT1AI, REMIC 1 Regular Interest
LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1
Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4 and REMIC 1 Regular
Interest LT1M5, in each case as of such date of determination.

         "REMIC 1 Principal Loss Allocation Amount": With respect to any
Distribution Date, an amount equal to (a) the product of (i) 50% of the
aggregate Principal Balance of the Mortgage Loans and related REO Properties
then outstanding and (ii) one (1) minus a fraction, the numerator of which is
two times the aggregate of the Uncertificated Principal Balances of REMIC 1
Regular Interest LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1 Regular
Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3,
REMIC 1 Regular Interest LT1M4 and REMIC 1 Regular Interest LT1M5 and the
denominator of which is the aggregate of the Uncertificated Principal Balances
of REMIC 1 Regular Interest LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1
Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest
LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5 and REMIC
1 Regular Interest LT1ZZ.

                                      -37-
<PAGE>

         "REMIC 1 Regular Interest LT1AA": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AA shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1AI": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AI shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1AII": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1AII shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance asset forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1M1": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M1 shall accrue
interest at the related Uncertificated REMIC 1 Pass- Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1M2": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M2 shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1M3": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M3 shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1M4": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M4 shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of

                                      -38-
<PAGE>

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

         "REMIC 1 Regular Interest LT1M5": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1M5 shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1SUB": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1SUB shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1GRP": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1GRP shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT2SUB": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT2SUB shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT2GRP": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT2GRP shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1XX": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in REMIC 1. REMIC 1 Regular Interest LT1XX shall accrue
interest at the related Uncertificated REMIC 1 Pass-Through 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 Principal Balance as set forth in the Preliminary Statement
hereto.

         "REMIC 1 Regular Interest LT1ZZ": One of the separate uncertificated
beneficial ownership interests in REMIC 1 issued hereunder and designated as a
Regular Interest in

                                      -39-
<PAGE>

REMIC 1. REMIC 1 Regular Interest LT1ZZ shall accrue interest at the related
Uncertificated REMIC 1 Pass- Through 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 Principal
Balance as set forth in the Preliminary Statement hereto.

         "REMIC 1 Regular Interests": REMIC 1 Regular Interest LT1AA, REMIC 1
Regular Interest LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1 Regular
Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3,
REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest LT1M5, REMIC 1 Regular
Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular Interest
LT2SUB, REMIC 1 Regular Interest LT2GRP, REMIC 1 Regular Interest LT1XX and
REMIC 1 Regular Interest LT1ZZ.

         "REMIC 1 Sub WAC Allocation Percentage": 50% of any amount payable from
or loss attributable to the Mortgage Loans, which shall be allocated to REMIC 1
Regular Interest LT1SUB, REMIC 1 Regular Interest LT1GRP, REMIC 1 Regular
Interest LT2SUB, REMIC 1 Regular Interest LT2GRP and REMIC 1 Regular Interest
LT1XX.

         "REMIC 1 Subordinated Balance Ratio": The ratio among the
Uncertificated Principal Balances of each REMIC 1 Regular Interest ending with
the designation "SUB," equal to the ratio among, with respect to each such REMIC
1 Regular Interest, the excess of (x) the aggregate Principal Balance of the
Mortgage Loans in the related Loan Group over (y) the current Certificate
Principal Balance of the Class A Certificates in the related Loan Group.

         "REMIC 2 Uncertificated Regular Interests": The Class X/N Interest.

         "REMIC Provisions": Provisions of the federal income tax law relating
to real estate mortgage investment conduits which appear at Section 860A through
860G of Subchapter M of Chapter 1 of the Code, and related provisions, and
regulations and rulings promulgated thereunder, as the foregoing may be in
effect from time to time.

         "REMIC Regular Interests": The REMIC 1 Regular Interests and the REMIC
2 Uncertificated Regular Interests.

         "Remittance Report": A report prepared by the Servicer and delivered to
the Trustee pursuant to Section 4.07, containing the information attached hereto
as Exhibit M.

         "Rents from Real Property": With respect to any REO Property, gross
income of the character described in Section 856(d) of the Code.

         "REO Disposition": The sale or other disposition of an REO Property on
behalf of the Trust.

         "REO Imputed Interest": As to any REO Property, for any Collection
Period, an amount equivalent to interest (at the Net Mortgage Interest Rate that
would have been applicable to the related Mortgage Loan had it been outstanding)
for such Collection Period on the unpaid Principal Balance of the Mortgage Loan
as of the date of acquisition.

                                      -40-
<PAGE>

         "REO Principal Amortization": With respect to any REO Property, for any
calendar month, 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 10.01 that is allocable to such REO Property) or
otherwise, net of any portion of such amounts (i) payable pursuant to Section
3.13 in respect of the proper operation, management and maintenance of such REO
Property or (ii) payable or reimbursable to the Servicer pursuant to Section
3.13 for unpaid Servicing Fees in respect of the related Mortgage Loan and
unreimbursed Servicing Advances and Advances in respect of such REO Property or
the related Mortgage Loan.

         "REO Property": A Mortgaged Property acquired by the Servicer on behalf
of the Trust through foreclosure or deed-in-lieu of foreclosure, as described in
Section 3.13.

         "Request for Release": A release signed by a Servicing Officer, in the
form of Exhibit E attached hereto.

         "Reserve Account": The trust account created and maintained by the
Trustee pursuant to Section 3.04(g) which shall be entitled "Reserve Account,
JPMorgan Chase Bank, as Trustee, in trust for registered Holders of ABFC
2003-AHL1 Trust, ABFC Asset-Backed Certificates, Series 2003-AHL1" and which
must be an Eligible Account. Amounts on deposit in the Reserve Account shall not
be invested. The Reserve Account shall not be an asset of any REMIC formed under
this Agreement.

         "Residential Dwelling": Any one of the following: (i) a detached
one-family dwelling, (ii) a detached two- to four-family dwelling, (iii) a
one-family dwelling unit in a Fannie Mae eligible condominium project, (iv) a
manufactured home, or (v) a detached one-family dwelling in a planned unit
development, none of which is a co-operative or mobile home.

         "Residual Interest": The sole Class of "residual interests" in each of
REMIC 1 and REMIC 2 within the meaning of Section 860G(a)(2) of the Code,
represented by the Class R-1 Interest and the Class R-2 Interest, respectively.

         "Responsible Officer": When used with respect to the Trustee, any
officer assigned to the Corporate Trust Division (or any successor thereto),
including any Vice President, Assistant Vice President, Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and in each case having direct responsibility for the
administration of this Agreement.

         "S&P": Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., and its successors, and if such company shall for
any reason no longer perform the functions of a securities rating agency, "S&P"
shall be deemed to refer to any other "nationally recognized statistical rating
organization" as set forth on the most current list of such organizations
released by the Securities and Exchange Commission.

         "Seller": Bank of America, N.A., or its successor in interest, in its
capacity as seller under the Mortgage Loan Purchase Agreement.

                                      -41-
<PAGE>

         "Senior Certificates": The Class AI and the Class AII Certificates.

         "Servicer": Litton Loan Servicing LP, a Delaware limited partnership,
or any successor servicer appointed as herein provided, in its capacity as
Servicer hereunder.

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

         "Servicer Modification": A modification to the terms of a Mortgage
Loan, in accordance with the terms of Section 3.01, as to which the Mortgagor is
in default or as to which, in the judgment of the Servicer, default is
reasonably foreseeable.

         "Servicer Prepayment Charge Payment Amount": The amount payable by the
Servicer in respect of any waived Prepayment Charges pursuant to Section
3.29(b), which amount shall be equal to the difference between the amount of
Prepayment Charge due by a Mortgagor before any waiver and the actual amount of
the Prepayment Charge that was paid by the Mortgagor.

         "Servicer Remittance Date": With respect to any Distribution Date, one
Business Day prior to such Distribution Date.

         "Servicer's Assignee": As defined in Section 6.06(b).

         "Servicing Advances": All customary, reasonable and necessary "out of
pocket" costs and expenses incurred by the Servicer (including reasonable
attorneys' fees and disbursements) in the performance of its servicing
obligations, including, but not limited to, the cost of (i) the preservation,
restoration, inspection and protection of the Mortgaged Property, (ii) any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of the REO Property and (iv) compliance with the
obligations under Section 3.08.

         "Servicing Fee": With respect to each Mortgage Loan (including each REO
Property) and for any calendar month, an amount equal to one month's interest
(or in the event of any payment of interest which accompanies a Principal
Prepayment in full made by the Mortgagor during such calendar month, interest
for the number of days covered by such payment of interest) at the Servicing Fee
Rate on the same principal amount on which interest on such Mortgage Loan
accrues for such calendar month.

         "Servicing Fee Rate": With respect to each Mortgage Loan, 0.50% per
annum.

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

         "Servicing Rights Pledgee": One or more lenders, selected by the
Servicer, to which the Servicer will pledge and assign all of its right, title
and interest in, to and under this Agreement, including Wachovia Bank, National
Association, as the representative of certain lenders.

         "Servicing Standard": The standards set forth in Section 3.01.

                                      -42-
<PAGE>

         "SPV": As defined in Section 6.06(a) hereof.

         "Startup Day": As defined in Section 9.01(b) hereof.

         "Stayed Funds": Any payment required to be made under the terms of the
Certificates and this Agreement but which is not remitted by the Servicer
because the Servicer is the subject of a proceeding under the Bankruptcy Code
and the making of such remittance is prohibited by Section 362 of the Bankruptcy
Code.

         "Stepdown Date": The earlier to occur of (i) the Distribution Date on
which the aggregate Certificate Principal Balance of the Class A Certificates is
reduced to zero and (ii) the later to occur of (x) the Distribution Date in May,
2006 and (y) the Distribution Date on which the Credit Enhancement Percentage
(after taking into account distributions of principal on such Distribution Date)
is greater than or equal to 37.00%.

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

         "Targeted Overcollateralization Amount": As of any Distribution Date,
(x) prior to the Stepdown Date, 1.30% of the Cut-off Date Aggregate Principal
Balance and (y) on and after the Stepdown Date, (i) if a Trigger Event has not
occurred, the greater of (A) 2.60% of the Pool Balance as of the last day of the
related Collection Period and (B) 0.50% of the Cut-off Date Aggregate Principal
Balance and (ii) if a Trigger Event has occurred, the Targeted
Overcollateralization Amount for the immediately preceding Distribution Date.

         "Tax Matters Person": The tax matters person appointed pursuant to
Section 9.01(e) hereof.

         "Tax Returns": The federal income tax returns 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 the REMIC Taxable Income or Net Loss Allocation, or any successor
forms, to be filed on behalf of the Trust for each of the seven REMICs created
pursuant to this Agreement 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 page currently so designated on the
Bridge Telerate Service (or such other page as may replace the Telerate Page
3750 page on that service for the purpose of displaying London interbank offered
rates of major banks).

         "Termination Price": As defined in Section 10.01(a) hereof.

         "Transfer Agreement": Collectively, the Flow Sale and Interim Servicing
Agreement, dated as of February 1, 2003, and the related Memorandum of Sale,
dated as of February 21, 2003, each by and between the Seller and the
Transferor.

         "Transferor": Accredited Home Lenders, Inc.

                                      -43-
<PAGE>

         "Transferor Prepayment Charge Payment Amount": The amount payable by
the Transferor in respect of certain Prepayment Charges that are not collected
from the Mortgagor pursuant to Section 4.21 of the Transfer Agreement.

         "Trigger Event": With respect to any Distribution Date, a Trigger Event
shall exist if (i) the three-month rolling average percentage of Pool Balance,
as of the end of each of the preceding three Collection Periods, represented by
the aggregate Principal Balance of all 60+ Day Delinquent Loans, equals or
exceeds 44.00% of the Credit Enhancement Percentage or (ii) the aggregate amount
of Realized Losses incurred since the Cut-off Date through the last day of the
related Collection Period divided by the Cut-off Date Aggregate Principal
Balance exceeds the applicable percentages with respect to such Distribution
Date (the "Trigger Loss Percentage"). The Trigger Loss Percentage for certain
Distribution Dates is set forth below. The Trigger Loss Percentage will increase
each month and is calculated using straight line interpolation methodology
between the Trigger Loss Percentages for the particular Distribution Dates
specified in the table below.

           DISTRIBUTION DATE OCCURRING IN       TRIGGER LOSS PERCENTAGE
           ------------------------------       -----------------------
           May 2006                                      2.50%
           May 2007                                      3.75%
           May 2008                                      5.00%
           May 2009 and thereafter                       5.75%

         "Trust": ABFC 2003-AHL1 Trust, the trust created hereunder.

         "Trust Fund": The segregated pool of assets subject hereto,
constituting the primary trust created hereby and to be administered hereunder,
with respect to a portion of which two REMIC elections are to be made, such
entire Trust Fund consisting of: (i) such Mortgage Loans 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), (v) the Depositor's
rights under the Transfer Agreement which were assigned to the Depositor by the
Seller, (vi) the Trustee's rights under the Yield Maintenance Agreement and
(vii) the Collection Account, the Distribution Account and the Reserve 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.

         "Trustee": JPMorgan Chase Bank, a national banking association, or any
successor Trustee appointed as herein provided.

         "Trustee Fee": With respect to any Distribution Date, the product of
(x) one-twelfth of the Trustee Fee Rate and (y) the aggregate of the Principal
Balances of all Mortgage Loans as of the opening of business on the first day of
the related Collection Period.

                                      -44-
<PAGE>

         "Trustee Fee Rate": With respect to any Distribution Date, 0.005% per
annum.

         "Uncertificated Accrued Interest": With respect to each REMIC 1 Regular
Interest on each Distribution Date, an amount equal to one month's interest at
the related Uncertificated Pass-Through Rate on the Uncertificated Principal
Balance of such REMIC 1 Regular Interest. In each case, Uncertificated Accrued
Interest will be reduced by any Prepayment Interest Shortfalls and Relief Act
Interest Shortfalls (allocated to such REMIC 1 Regular Interests based on their
respective entitlements to interest irrespective of any Prepayment Interest
Shortfalls and Relief Act Interest Shortfalls for such Distribution Date).

         "Uncertificated Principal Balance": The amount of any REMIC 1 Regular
Interest outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Principal Balance of each REMIC 1 Regular Interest shall
equal the amount set forth in the Preliminary Statement hereto as its initial
uncertificated balance. On each Distribution Date, the Uncertificated Principal
Balance of each REMIC 1 Regular Interest shall be reduced by all distributions
of principal made on such REMIC 1 Regular Interest on such Distribution Date
pursuant to Section 4.08 and, if and to the extent necessary and appropriate,
shall be further reduced on such Distribution Date by Prepayment Interest
Shortfalls, Relief Act Shortfalls and Realized Losses as provided in Section
4.08(b) and (c). The Uncertificated Principal Balance of REMIC 1 Regular
Interest LT1ZZ shall be increased by interest deferrals as provided in Section
4.08(a). The Uncertificated Principal Balance of each REMIC 1 Regular Interest
shall never be less than zero.

         "Uncertificated REMIC 1 Pass-Through Rate": With respect to REMIC 1
Regular Interest LT1AA, REMIC 1 Regular Interest LT1AI, REMIC 1 Regular Interest
LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1
Regular Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular Interest
LT1M5, REMIC 1 Regular Interest LT1ZZ, REMIC 1 Regular Interest LT1SUB, REMIC 1
Regular Interest LT2SUB and REMIC 1 Regular Interest LT1XX, the weighted average
of the Net Mortgage Interest Rates of the Mortgage Loans. With respect to REMIC
1 Regular Interest LT1GRP, the weighted average of the Net Mortgage Interest
Rates of the Group I Mortgage Loans. With respect REMIC 1 Regular Interest
LT2GRP, the weighted average of the Net Mortgage Interest Rates of the Group II
Mortgage Loans

         "United States Person" or "U.S. Person": (i) A citizen or resident of
the United States, (ii) a corporation, partnership or other entity treated as a
corporation or partnership for United States federal income tax purposes
organized in or under the laws of the United States or any state thereof or the
District of Columbia (unless, in the case of a partnership, Treasury regulations
provide otherwise), (iii) an estate the income of which is includible in gross
income for United States tax purposes, regardless of its source, or (iv) 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
authority to control all substantial decisions of the trust. Notwithstanding the
preceding sentence, to the extent provided in Treasury regulations, certain
Trusts in existence on August 20, 1996, and treated as United States persons
prior to such date, that elect to continue to be treated as United States
persons will also be a U.S. Person; provided, that for purposes of the
definition of a "Permitted Transferee," a U.S. Person shall not include

                                      -45-
<PAGE>

any person whose income is attributable to a foreign permanent establishment or
fixed base, within the meaning of an applicable income tax treaty, of such
Person or any other Person.

         "Unpaid Interest Shortfall Amount": For any Class of Certificates (i)
for the first Distribution Date, zero, and (ii) for any Class of Certificates
(other than the Class X and Class R Certificates) and any Distribution Date
after the first Distribution Date, the amount, if any, by which (a) the sum of
(1) of the Accrued Certificate Interest for such Class for the prior
Distribution Date and (2) the outstanding Unpaid Interest Shortfall Amount, if
any, for such Class for such preceding Distribution Date, exceeds (b) (1) the
aggregate amount distributed on such Class in respect of interest on such prior
Distribution Date plus (2) interest on such excess at the Class AI Fixed Rate or
the related Formula Rate or the Class N Pass-Through Rate, as applicable, for
the related Interest Accrual Period.

         "Unpaid Realized Loss Amount": For any Class M-1, Class M-2, Class M-3,
Class M-4 and Class M-5 Certificates and as to any Distribution Date, the excess
of (x) the aggregate Applied Realized Loss Amounts applied with respect to such
Class for all prior Distribution Dates over (y) the aggregate Realized Loss
Amortization Amounts with respect to such Class for all prior Distribution
Dates.

         "VA": The United States Department of Veterans Affairs.

         "VA Approved Lender": Those institutions that are approved by the VA to
act as servicer and mortgagee of record pursuant to VA Regulations.

         "VA Guaranty Agreements": With respect to a VA Loan, the agreements
evidencing the guaranty of such Mortgage Loan by the VA.

         "VA Loan": A Mortgage Loan guaranteed by the VA.

         "VA Regulations": Any and all regulations promulgated by the VA under
the Servicemen's Readjustment Act of 1944, as amended.

         "Value": With respect to any Mortgaged Property, the value thereof as
determined by an independent appraisal made at the time of the origination of
the related Mortgage Loan or the sale price, if the appraisal is not available.

         "Voting Rights": The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. The Voting Rights allocated
among Holders of the Class A and Class M Certificates shall be 97%, and shall be
allocated among each such Class according to the fraction, expressed as a
percentage, the numerator of which is the aggregate Certificate Principal
Balance of all the Certificates of such Class then outstanding and the
denominator of which is the aggregate Certificate Principal Balance of all the
Offered Certificates then outstanding. The Voting Rights allocated to each such
Class of Certificates shall be allocated among all holders of each such Class in
proportion to the outstanding Certificate Principal Balance of such
Certificates; provided, however, that any Certificate registered in the name of
the Servicer, the Depositor or the Trustee or any of their respective affiliates
shall not be included in the calculation of Voting Rights; provided that only
such Certificates as are known by a Responsible Officer of the Trustee to be so
registered will be so excluded. On each Distribution Date (a)

                                      -46-
<PAGE>

prior to the date on which the Class N Principal Amount is reduced to zero, the
percentage of all the Voting Rights allocated among the Holders of the Class N
and Class X Certificates, respectively, shall be 2% and 1%, respectively and (b)
on and after the date on which the Class N Principal Amount is reduced to zero,
the percentage of all the Voting Rights allocated among the Holders of the Class
N Certificates shall be 0% and the percentage of all the Voting Rights allocated
among the Holder of the Class X Certificates shall be 3%. The Class R
Certificates shall have no Voting Rights.

         "Weighted Average Net Mortgage Rate": The weighted average (based on
Principal Balance as of the first day of the related Collection Period or, in
the case of the first Distribution Date, the Cut-Off Date) of the Net Mortgage
Interest Rates of the Mortgage Loans, the Group I Mortgage Loans or the Group II
Mortgage Loans, as applicable, expressed for each such Mortgage Loan as an
annual rate and calculated on the basis of twelve months consisting of 30 days
each and a 360-day year.

         "Written Order to Authenticate": A written order by which the Depositor
directs the Trustee to execute, authenticate and deliver the Certificates.

         "Yield Maintenance Agreement": The interest rate cap agreement between
the Trustee, on behalf of the Trust, and the Yield Maintenance Agreement
Provider substantially in the form attached hereto as Exhibit N. The Yield
Maintenance Agreement shall not be an asset of any REMIC formed under this
Agreement.

         "Yield Maintenance Agreement Payment": Beginning on the first
Distribution Date and on each Distribution Date thereafter through the
Distribution Date in July, 2006, the amount equal to the product of (a) the
number of basis points by which One-Month LIBOR (up to a maximum of 14.00%)
exceeds the strike rate related to such Distribution Date that is set forth on
the schedule attached to the confirmation to the Yield Maintenance Agreement and
(b) the product of the notional amount set forth on the schedule attached to the
confirmation to the Yield Maintenance Agreement for that Distribution Date,
calculated on the basis of the actual number of days in the related Interest
Accrual Period and on a 360-day year.

         "Yield Maintenance Agreement Provider": WestLB AG, New York Branch and
any successor thereto.

         Section 1.02. Accounting.
                       ----------

         Unless otherwise specified herein, for the purpose of any definition or
calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any
related definitions or calculations shall be determined without duplication of
such functions.

                                      -47-
<PAGE>

                                   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, on
behalf of the Trust, 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 (i) each Mortgage
Loan identified on the Mortgage Loan Schedules, including the related Cut-off
Date Principal Balance, all interest accruing thereon after the Cut-off Date and
all collections in respect of interest and principal due after the Cut-off Date;
(ii) property which secured each such Mortgage Loan and which has been acquired
by foreclosure or deed in lieu of foreclosure; (iii) its interest in any
insurance policies in respect of the Mortgage Loans; (iv) all other assets
included or to be included in the Trust Fund; (v) all proceeds of any of the
foregoing; and (vi) the rights of the Depositor under the Mortgage Loan Purchase
Agreement, including the rights of the Depositor as assignee of the Seller with
respect to the Seller's rights under the Transfer Agreement. Such assignment
includes all interest and principal due to the Depositor or the Servicer after
the Cut-off Date with respect to the Mortgage Loans.

         In connection with such transfer and assignment, the Depositor does
hereby deliver (or cause to be delivered) to, and deposit (or cause to be
deposited) with the Trustee, or its designated agent, the following documents or
instruments with respect to each Mortgage Loan (a "Mortgage File") so
transferred and assigned:

         (a)   the original Mortgage Note including any riders thereto, endorsed
either (A) in blank or (B) in the following form: "Pay to the order of JPMorgan
Chase Bank, as Trustee under the Pooling and Servicing Agreement, dated as of
April 1, 2003, among Asset Backed Funding Corporation, Litton Loan Servicing LP
and JPMorgan Chase Bank, ABFC Asset-Backed Certificates, Series 2003-AHL1,
without recourse," or with respect to any lost Mortgage Note, an original Lost
Note Affidavit, together with a copy of the related Mortgage Note;

         (b)   the original Mortgage with evidence of recording thereon
including any riders thereto, and the original recorded power of attorney, if
the Mortgage was executed pursuant to a power of attorney, with evidence of
recording thereon or, if such Mortgage or power of attorney has been submitted
for recording but has not been returned from the applicable public recording
office, has been lost or is not otherwise available, a copy of such Mortgage or
power of attorney, as the case may be, certified to be a true and complete copy
of the original submitted for recording;

         (c)   except with respect to each MERS Designated Mortgage Loan, an
original Assignment of Mortgage, in form and substance acceptable for recording.
The Mortgage shall be assigned either (A) in blank or (B) to "JPMorgan Chase
Bank, as Trustee under the Pooling and Servicing Agreement, dated as of April 1,
2003, among Asset Backed Funding Corporation,

                                      -48-
<PAGE>

Litton Loan Servicing LP, ABFC Asset-Backed Certificates, Series 2003-AHL1,
without recourse";

         (d)   the originals of all intervening Assignments of Mortgage (if any)
evidencing a complete chain of assignment from the applicable originator (or
MERS with respect to each MERS Designated Mortgage Loan) to the last endorsee
with evidence of recording thereon, or if any such intervening assignment has
not been returned from the applicable recording office or has been lost or if
such public recording office retains the original recorded Assignments of
Mortgage, the Servicer shall deliver or cause to be delivered to the Trustee, a
photocopy of such intervening assignment, together with (A) in the case of a
delay caused by the public recording office, an Officer's Certificate of the
Servicer (or certified by the title company, escrow agent, or closing attorney)
stating that such intervening Assignment of Mortgage has been dispatched to the
appropriate public recording office for recordation and that such original
recorded intervening Assignment of Mortgage or a copy of such intervening
Assignment of Mortgage certified by the appropriate public recording office to
be a true and complete copy of the original recorded intervening assignment of
mortgage will be promptly delivered to the Trustee upon receipt thereof by the
Servicer; or (B) in the case of an intervening assignment where a public
recording office retains the original recorded intervening assignment or in the
case where an intervening assignment is lost after recordation in a public
recording office, a copy of such intervening assignment certified by such public
recording office to be a true and complete copy of the original recorded
intervening assignment;

         (e)   the original or a certified copy of lender's title insurance
policy; and

         (f)   the original or copies of each assumption, modification, written
assurance or substitution agreement, if any.

         If any of the documents referred to in Section 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 no later than the Closing Date, 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, 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(e) above, the Seller shall deliver or cause to be
delivered to the Trustee, a written commitment or interim binder or preliminary
report of title issued by the title insurance or escrow company, with the
original to be delivered to the Trustee, promptly upon receipt thereof. The
Depositor shall deliver or cause to be delivered to the Trustee promptly upon
receipt thereof any other 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.

                                      -49-
<PAGE>

         Upon discovery or receipt of notice of any materially defective
document in, or that a document is missing from, a Mortgage File, the Seller
shall have 120 days to cure such defect or 150 days following the Closing Date,
in the case of missing Mortgages or Assignments or deliver such missing document
to the Trustee. If the Seller does not cure such defect or deliver such missing
document within such time period, the Seller shall either repurchase or
substitute for such Mortgage Loan in accordance with Section 2.03.

         The Depositor shall cause the Assignments of Mortgage which were
delivered in blank with respect to any Mortgage Loans that are not MERS
Designated Mortgage Loans to be completed. The Servicer shall have no liability
for its failure to receive and act on notices related to such Assignments of
Mortgage. The Servicer shall cause, within 30 days after the Closing Date, the
MERS System to indicate that all of the Mortgage Loans have been assigned by the
Seller or the Transferor, as the case may be, to the Trustee in accordance with
this Agreement. The Servicer shall not be liable for failure to have any
assignments of Mortgage Loans that are not MERS Designated Mortgage Loans
recorded in the name of MERS.

         The Depositor herewith delivers to the Trustee an executed copy of the
Mortgage Loan Purchase Agreement.

         Section 2.02. Acceptance by Trustee.
                       ---------------------

         The Trustee acknowledges the receipt of, subject to the provisions of
Section 2.01 and subject to the review described below and any exceptions noted
on the exception report described in the next paragraph below, the documents
referred to in Section 2.01 above and all other assets included in the
definition of "Trust Fund" and declares that it holds and will hold such
documents and the other documents delivered to it constituting a Mortgage File,
and that it holds or will hold all such assets and such other assets included in
the definition of "Trust Fund" 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 each Mortgage File prior to the Closing Date (or, with respect to any
document delivered after the Startup Day, within 60 days of receipt and with
respect to any Qualified Substitute Mortgage, within 60 days after the
assignment thereof) and to certify in substantially the form attached hereto as
Exhibit F-1 that, as to each Mortgage Loan listed in the Mortgage Loan Schedules
(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 required to be delivered to it pursuant to
Section 2.01(a)-(e) and (f) to the extent delivered of this Agreement are in its
possession, (ii) such documents have been reviewed by it and have not been
mutilated, damaged or torn and relate to such Mortgage Loan and (iii) based on
its examination and only as to the foregoing, the information set forth in the
Mortgage Loan Schedules to the extent of the items set forth in Schedule B of
Exhibit F-2 accurately reflects information set forth in the Mortgage File. It
is herein acknowledged that, in conducting such review, the Trustee is under no
duty or obligation to inspect, review or examine any such documents,
instruments, certificates or other papers to determine that they are genuine,
enforceable, or appropriate for the represented purpose or that they have
actually been recorded or that they are other than what they purport to be on
their face.

                                      -50-
<PAGE>

         Prior to the first anniversary date of this Agreement the Trustee shall
deliver to the Depositor and the Servicer a final certification in the form
annexed hereto as Exhibit F-2 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
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 shall so notify the Seller, the Depositor and the Servicer. In
addition, upon the discovery by the Seller, the Depositor, the Trustee or the
Servicer (or upon receipt by the Trustee of written notification of such breach)
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 Depositor and the Trustee intend that the assignment and transfer
herein contemplated constitute a sale of the Mortgage Loans and the Related
Documents, conveying good title thereto free and clear of any liens and
encumbrances, from the Depositor to the Trustee and that such property not be
part of the Depositor's estate or property of the Depositor in the event of any
insolvency by the Depositor. In the event that such conveyance is deemed to be,
or to be made as security for, a loan, the parties intend that the Depositor
shall be deemed to have granted and does hereby grant to the Trustee, on behalf
of the Trust, a first priority perfected security interest in all of the
Depositor's right, title and interest in and to the Mortgage Loans and the
Related Documents, and that this Agreement shall constitute a security agreement
under applicable law.

         Section 2.03. Repurchase or Substitution of Mortgage Loans by the
                       Seller.
                       ---------------------------------------------------

         (a)   Upon discovery or receipt of written notice of any materially
defective document in, or that a document is missing from, a Mortgage File or
that any document in a Mortgage File is materially inconsistent with the related
Mortgage Loan Schedule or of the breach by the Transferor or the Seller of any
representation, warranty or covenant under the Transfer Agreement or the
Mortgage Loan Purchase Agreement in respect of any Mortgage Loan which
materially adversely affects the value of such Mortgage Loan, Prepayment Charge
or the interest therein of the Certificateholders, the Trustee shall promptly
notify the Seller, the Transferor and the Servicer of such defect, missing
document or breach and request that the Transferor or the Seller, as applicable,
deliver such missing document or cure such defect or breach within 120 days
following the Closing Date, in the case of missing Mortgages or Assignments, or
otherwise from the date the Transferor or the Seller, as applicable, was
notified of such missing document, defect or breach, and if the Transferor or
the Seller, as applicable, does not deliver such missing document or cure such
defect or breach in all material respects during such period, the Trustee shall
enforce the Transferor's or the Seller's obligation, as the case may be, under
the Transfer Agreement or the Mortgage Loan Purchase Agreement, as applicable,
and cause the Transferor or the Seller, as applicable, to repurchase such
Mortgage Loan from the Trust Fund at the Purchase Price on or prior to the
Determination Date following the expiration of such 120 day period (subject to
Section 2.03(d)); provided that, in connection with any such breach that could

                                      -51-
<PAGE>

not reasonably have been cured within such 120 day period, if the Transferor or
the Seller, as applicable, shall have commenced to cure such breach within such
120 day period, the Seller shall be permitted to proceed thereafter diligently
and expeditiously to cure the same within the additional period provided under
the Transfer Agreement or 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 notice from the Servicer of
such deposit, shall release to the Transferor or the Seller, as applicable, the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment, in each case without recourse, as the Transferor or the Seller,
as applicable, shall furnish to it and as shall be necessary to vest in the
Transeror or the Seller, as applicable, any Mortgage Loan released pursuant
hereto and the Trustee shall have no further responsibility with regard to such
Mortgage File. In furtherance of the foregoing, if the related Transferor or the
Seller, as applicable, is not a member of MERS and repurchases a Mortgage Loan
which is registered on the MERS(R) System, the related Transferor or the Seller,
as applicable, at its own expense and without any right of reimbursement, shall
cause MERS to execute and deliver an assignment of the Mortgage in recordable
form to transfer the Mortgage from MERS to the related Transferor or the Seller,
as applicable, and shall cause such Mortgage to be removed from registration on
the MERS(R) System in accordance with MERS' rules and regulations. In lieu of
repurchasing any such Mortgage Loan as provided above, the Transferor or the
Seller may cause such Mortgage Loan to be removed from the Trust Fund (in which
case it shall become a Defective Mortgage Loan) and substitute one or more
Eligible Substitute Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.03(c). It is understood and agreed that the obligation of
the Transferor or 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 against the Transferor or the Seller
respecting such omission, defect or breach available to the Trustee on behalf of
the Certificateholders.

         With respect to the representations and warranties set forth in the
Mortgage Loan Purchase Agreement that are made to the best of the Seller's
knowledge or as to which the Seller has no knowledge, if it is discovered by the
Depositor, the Servicer or the Trustee that the substance of such representation
and warranty is inaccurate and such inaccuracy materially and adversely affects
the value of the related Mortgage Loan, Prepayment Charge or the interest
therein of the Certificateholders then, notwithstanding the Seller's lack of
knowledge with respect to the substance of such representation and warranty
being inaccurate at the time the representation or warranty was made, such
inaccuracy shall be deemed a breach of the applicable representation or
warranty.

         It is understood and agreed that the representations and warranties set
forth in the Mortgage Loan Purchase Agreement shall survive delivery of the
Mortgage Files to the Trustee and shall inure to the benefit of the
Certificateholders notwithstanding any restrictive or qualified endorsement or
assignment. It is understood and agreed that the obligations of the Seller set
forth in this Section 2.03(a) to cure, substitute for or repurchase a Mortgage
Loan pursuant to the Mortgage Loan Purchase Agreement constitute the sole
remedies available to the Certificateholders and to the Trustee on their behalf
respecting a breach of the representations and warranties contained in the
Mortgage Loan Purchase Agreement.

                                      -52-
<PAGE>

         The representations and warranties of the Transferor with respect to
the Mortgage Loans in the Transfer Agreement, which have been assigned to the
Trustee hereunder, were made as of the date specified in the Transfer Agreement.
To the extent that any fact, condition or event with respect to a Mortgage Loan
constitutes a breach of both (i) a representation or warranty of the Transferor
under the Transfer Agreement and (ii) a representation or warranty of the Seller
and the Mortgage Loan Purchase Agreement, the only right or remedy of the
Trustee or of any Certificateholder shall be the Trustee's right to enforce the
obligations of the applicable Transferor under any applicable representation or
warranty made by it. The Trustee acknowledges that the Seller shall have no
obligation or liability with respect to any breach of a representation or
warranty made by it with respect to the Mortgage Loans if the fact, condition or
event constituting such breach also constitutes a breach of a representation or
warranty made by the Transferor in the Transfer Agreement, without regard to
whether the Transferor fulfills its contractual obligations in respect of such
representation or warranty. The Trustee further acknowledges that the Depositor
shall have no obligation or liability with respect to any breach of any
representation or warranty with respect to the Mortgage Loans (except as set
forth in Section 2.06) under any circumstances.

         (b)   Within 90 days of the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of any representation, warranty
or covenant of the Servicer set forth in Section 2.05 which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the Servicer shall cure such breach in all material respects.

         (c)   Any substitution of Eligible Substitute Mortgage Loans for
Defective Mortgage Loans made pursuant to Section 2.03(a) must be effected prior
to the last Business Day that is within two years after the Closing Date. As to
any Defective Mortgage Loan for which the Seller substitutes a Eligible
Substitute Mortgage Loan or Loans, such substitution shall be effected by the
Seller delivering to the Trustee for such Eligible 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 Eligible Substitute Mortgage Loan satisfies the definition thereof and
specifying the Substitution Adjustment Amount (as described below), if any, in
connection with such substitution. The Trustee shall acknowledge receipt for
such Eligible Substitute Mortgage Loan or Loans and, within ten Business Days
thereafter, shall review such documents as specified in Section 2.02 and deliver
to the Servicer, with respect to such Eligible Substitute Mortgage Loan or
Loans, a certification substantially in the form attached hereto as Exhibit F-1,
with any applicable exceptions noted thereon. Within one year of the date of
substitution, the Trustee shall deliver to the Servicer a certification
substantially in the form of Exhibit F-2 hereto with respect to such Eligible
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the
month of substitution are not part of the Trust Fund and will be retained by the
Seller. For the month of substitution, distributions to Certificateholders will
reflect the collections and recoveries in respect of such Defective Mortgage
Loan in the Collection Period or Prepayment Period, as applicable, preceding the
date 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 Defective 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 applicable Mortgage Loan Schedule (and

                                      -53-
<PAGE>

Prepayment Charge Schedule, if applicable) to reflect the removal of such
Defective Mortgage Loan from the terms of this Agreement and the substitution of
the Eligible Substitute Mortgage Loan or Loans and shall deliver a copy of such
amended Mortgage Loan Schedule to the Trustee. Upon such substitution, such
Eligible 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 Agreement, as of the date of substitution.

         For any month in which the Seller substitutes one or more Eligible
Substitute Mortgage Loans for one or more Defective Mortgage Loans, the Servicer
will determine the amount (the "Substitution Adjustment Amount"), if any, by
which the aggregate Purchase Price of all such Defective Mortgage Loans exceeds
the aggregate, as to each such Eligible Substitute Mortgage Loan, of the
principal balance thereof as of the date of substitution, together with one
month's interest on such principal balance at the applicable Net Mortgage
Interest Rate. On the date of such substitution, the Seller will deliver or
cause to be delivered to the Servicer for deposit in the Collection Account an
amount equal to the Substitution Adjustment Amount, if any, and the Trustee,
upon receipt of the related Eligible Substitute Mortgage Loan or Loans and
notice by the Servicer of such deposit, shall release to the Seller the related
Mortgage File or Files and shall execute and deliver such instruments of
transfer or assignment, in each case without recourse, as the Seller shall
deliver to it and as shall be necessary to vest therein any Defective Mortgage
Loan released pursuant hereto.

         In addition, the Seller 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 the Trust Fund, including without
limitation, any federal tax imposed on "prohibited transactions" under Section
860F(a)(l) of the Code or on "contributions after the startup date" under
Section 860G(d)(l) of the Code, or (b) any REMIC to fail to qualify as a REMIC
at any time that any Certificate is outstanding. If such Opinion of Counsel can
not be delivered, then such substitution may only be effected at such time as
the required Opinion of Counsel can be given.

         (d)   Upon discovery by the Seller, the Servicer or the Trustee that
any Mortgage Loan does not constitute a "qualified mortgage" within the meaning
of Section 860G(a)(3) of the Code, the party discovering such fact shall within
two Business Days give written notice thereof to the other parties. In
connection therewith, the Seller shall repurchase or, subject to the limitations
set forth in Section 2.03(c), substitute one or more Eligible 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.
In addition, upon discovery that a Mortgage Loan is defective in a manner that
would cause it to be a "defective obligation" within the meaning of Treasury
regulations relating to REMICs, the Seller shall cure the defect or make the
required purchase or substitution no later than 90 days after the discovery of
the defect. 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. The Trustee shall
reconvey to the Seller 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.

                                      -54-
<PAGE>

         Section 2.04. Execution of Yield Maintenance Agreement.
                       ----------------------------------------

         The Depositor hereby directs the Trustee to enter into and execute the
Yield Maintenance Agreement on the Closing Date on behalf of the Trust for the
benefit of the Holders of the Class AII Certificates. The Depositor, the
Servicer and the Holders of the Class AII Certificates (by their acceptance of
such Certificates) acknowledge that JPMorgan Chase Bank is entering into the
Yield Maintenance Agreement solely in its capacity as Trustee of the Trust Fund
and not in its individual capacity.

         Section 2.05. Representations, Warranties and Covenants of the
                       Servicer.
                       ------------------------------------------------

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

               (i)    The Servicer is a limited partnership duly formed, validly
         existing and in good standing under the laws of the State of Delaware
         and has all licenses necessary to carry on its business as now being
         conducted, except for such licenses, certificates and permits the
         absence of which, individually or in the aggregate, would not have a
         material adverse effect on the ability of the Servicer to conduct its
         business as it is presently conducted, and is licensed, qualified and
         in good standing in the states where the Mortgaged Property is located
         if the laws of such state require licensing or qualification in order
         to conduct business of the type conducted by the Servicer or to ensure
         the enforceability or validity of each Mortgage Loan; the Servicer has
         the power and authority to execute and deliver this Agreement and to
         perform in accordance herewith; the execution, delivery and performance
         of this Agreement (including all instruments of transfer to be
         delivered pursuant to this Agreement) by the Servicer and the
         consummation of the transactions contemplated hereby have been duly and
         validly authorized; this Agreement evidences the valid, binding and
         enforceable obligation of the Servicer, subject to applicable
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws affecting the enforcement of creditors' rights generally; and all
         requisite corporate action has been taken by the Servicer to make this
         Agreement valid and binding upon the Servicer in accordance with its
         terms;

               (ii)   The consummation of the transactions contemplated by this
         Agreement are in the ordinary course of business of the Servicer and
         will not result in the breach of any term or provision of the
         certificate of formation or the partnership agreement of the Servicer
         or result in the breach of any term or provision of, or conflict with
         or constitute a default under or result in the acceleration of any
         obligation under, any agreement, indenture or loan or credit agreement
         or other instrument to which the Servicer or its property is subject,
         or result in the violation of any law, rule, regulation, order,
         judgment or decree to which the Servicer or its property is subject;

               (iii)  The Servicer is an approved seller/servicer of
         conventional residential mortgage loans for Fannie Mae, and is an FHA
         Approved Mortgagee in good standing to service mortgages, is a VA
         Approved Lender and has not been suspended as a mortgagee or servicer
         by the FHA or VA and has the facilities, procedures, and experienced

                                      -55-
<PAGE>

         personnel necessary for the sound servicing of mortgage loans of the
         same type as the Mortgage Loans. The Servicer is, and shall remain for
         as long as it is servicing the Mortgage Loans hereunder, is in good
         standing as a FHA Approved Mortgagee and a VA Approved Lender and to
         service mortgage loans for HUD, Fannie Mae or Freddie Mac, and no
         event has occurred, including but not limited to a change in insurance
         coverage, which would make the Servicer unable to comply with HUD,
         Fannie Mae, Freddie Mac, FHA or VA eligibility requirements or which
         would require notification to any of HUD, Fannie Mae, Freddie Mac FHA
         or VA;

               (iv)   This Agreement, and all documents and instruments
         contemplated hereby which are executed and delivered by the Servicer,
         constitute and will constitute valid, legal and binding obligations of
         the Servicer, enforceable in accordance with their respective terms,
         except as the enforcement thereof may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws affecting the enforcement of creditors' rights generally (whether
         considered in a proceeding at law or in equity);

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

               (vi)   There is no action, suit, proceeding or investigation
         pending or, to its knowledge, threatened against the Servicer that,
         either individually or in the aggregate, may result in any material
         adverse change in the business, operations, financial condition,
         properties or assets of the Servicer, or in any material impairment of
         the right or ability of the Servicer to carry on its business
         substantially as now conducted, or in any material liability on the
         part of the Servicer, or that would draw into question the validity or
         enforceability of this Agreement or of any action taken or to be taken
         in connection with the obligations of the Servicer contemplated herein,
         or that would be likely to impair materially the ability of the
         Servicer to perform under the terms of this Agreement;

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

               (viii) No information in this Agreement provided by the Servicer
         nor any information, certificate of an officer, statement furnished in
         writing or report delivered to the Trustee by the Servicer in
         connection with the transactions contemplated hereby contains or will
         contain any untrue statement of a material fact or omits or will omit
         to state a material fact necessary in order to make the statements
         contained therein, in light of the circumstances under which they were
         made, not misleading; and

               (ix)   The Servicer is a member of MERS in good standing.

         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 and shall inure to the

                                      -56-
<PAGE>

benefit of the Trustee, the Depositor and the Certificateholders. Upon discovery
by any of the Depositor, the 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 other parties hereto.

         Section 2.06. Representations and Warranties of the Depositor.
                       -----------------------------------------------

         The Depositor represents and warrants to the Trust and the Trustee on
behalf of the Certificateholders and to the Servicer as follows:

               (i)   This agreement constitutes a legal, valid and binding
         obligation of the Depositor, enforceable against the Depositor in
         accordance with its terms, except as enforceability may be limited by
         applicable bankruptcy, insolvency, reorganization, moratorium or other
         similar laws now or hereafter in effect affecting the enforcement of
         creditors' rights in general and except as such enforceability may be
         limited by general principles of equity (whether considered in a
         proceeding at law or in equity);

               (ii)  Immediately prior to the sale and assignment by the
         Depositor to the Trustee on behalf of the Trust of each Mortgage Loan,
         the Depositor had good and marketable title to each Mortgage Loan
         (insofar as such title was conveyed to it by the Seller) subject to no
         prior lien, claim, participation interest, mortgage, security interest,
         pledge, charge or other encumbrance or other interest of any nature;

               (iii) As of the Closing Date, the Depositor has transferred all
         right, title interest in the Mortgage Loans to the Trustee on behalf of
         the Trust;

               (iv)  The Depositor has not transferred the Mortgage Loans to the
         Trustee on behalf of the Trust with any intent to hinder, delay or
         defraud any of its creditors;

               (v)   The Depositor has been duly incorporated and is validly
         existing as a corporation in good standing under the laws of the State
         of Delaware, with full corporate power and authority to own its assets
         and conduct its business as presently being conducted;

               (vi)  The Depositor is not in violation of its certificate of
         incorporation or by-laws or in default in the performance or observance
         of any material obligation, agreement, covenant or condition contained
         in any contract, indenture, mortgage, loan agreement, note, lease or
         other instrument to which the Depositor is a party or by which it or
         its properties may be bound, which default might result in any material
         adverse changes in the financial condition, earnings, affairs or
         business of the Depositor or which might materially and adversely
         affect the properties or assets, taken as a whole, of the Depositor;

               (vii) The execution, delivery and performance of this Agreement
         by the Depositor, and the consummation of the transactions contemplated
         thereby, do not and will not result in a material breach or violation
         of any of the terms or provisions of, or, to

                                      -57-
<PAGE>

         the knowledge of the Depositor, constitute a default under, any
         indenture, mortgage, deed of trust, loan agreement or other agreement
         or instrument to which the Depositor is a party or by which the
         Depositor is bound or to which any of the property or assets of the
         Depositor is subject, nor will such actions result in any violation of
         the provisions of the certificate of incorporation or by-laws of the
         Depositor or, to the best of the Depositor's knowledge without
         independent investigation, any statute or any order, rule or
         regulation of any court or governmental agency or body having
         jurisdiction over the Depositor or any of its properties or assets
         (except for such conflicts, breaches, violations and defaults as would
         not have a material adverse effect on the ability of the Depositor to
         perform its obligations under this Agreement);

                (viii)   To the best of the Depositor's knowledge without any
         independent investigation, no consent, approval, authorization, order,
         registration or qualification of or with any court or governmental
         agency or body of the United States or any other jurisdiction is
         required for the issuance of the Certificates, or the consummation by
         the Depositor of the other transactions contemplated by this Agreement,
         except such consents, approvals, authorizations, registrations or
         qualifications as (a) may be required under State securities or Blue
         Sky laws, (b) have been previously obtained or (c) the failure of which
         to obtain would not have a material adverse effect on the performance
         by the Depositor of its obligations under, or the validity or
         enforceability of, this Agreement; and

                (ix)     There are no actions, proceedings or investigations
         pending before or, to the Depositor's knowledge, threatened by any
         court, administrative agency or other tribunal to which the Depositor
         is a party or of which any of its properties is the subject: (a) which
         if determined adversely to the Depositor would have a material adverse
         effect on the business, results of operations or financial condition
         of the Depositor; (b) asserting the invalidity of this Agreement or
         the Certificates; (c) seeking to prevent the issuance of the
         Certificates or the consummation by the Depositor of any of the
         transactions contemplated by this Agreement, as the case may be; (d)
         which might materially and adversely affect the performance by the
         Depositor of its obligations under, or the validity or enforceability
         of, this Agreement.

         Section 2.07. Issuance of Certificates and the Uncertificated Regular
                       Interests.
                       -------------------------------------------------------

         The Trustee acknowledges the assignment to it of the Mortgage Loans and
the delivery to it of the Mortgage Files, subject to the provisions of Sections
2.01 and 2.02, and the Trustee acknowledges the assignment to it of all other
assets included in the Trust Fund, receipt of which is hereby acknowledged.
Concurrently with such assignment and delivery and in exchange therefor, the
Trustee shall, pursuant to a Written Order to Authenticate delivered in
accordance with Section 5.01, execute and deliver to the Certificate Registrar
the Certificates as provided for in Section 5.01. The Trustee acknowledges the
issuance of the uncertificated REMIC 1 Regular Interests and the REMIC 2
Uncertificated Regular Interests, and declares that it hold such regular
interests as assets of REMIC 1 and REMIC 2, respectively. The Trustee
acknowledges the obligation of the Class N and Class X Certificates to pay Cap
Carryover Amounts, and declares that it hold the same as assets of the Grantor
Trust on behalf of the Holders of the Class AI, Class AII, Class M-1, Class M-2,
Class M-3, Class M-4 and Class M-5 Certificates, respectively. In

                                      -58-
<PAGE>

addition to the assets described in the preceding sentence, the assets of the
Grantor Trust shall also include (i) any Prepayment Charges, Servicer Prepayment
Charge Payment Amounts, Transferor Prepayment Charge Payment Amounts and the
beneficial interest of the Class N Certificates with respect thereto and (ii)
the Yield Maintenance Agreement, the Reserve Account and the beneficial interest
of the Class N and Class X Certificates with respect thereto, subject to the
obligation to pay Cap Carryover Amounts. The Trustee acknowledges and declares
that it holds the X/N Interest as assets of the Grantor Trust on behalf of the
Holders of the Class N and Class X Certificates. The interests evidenced by the
Certificates constitute the entire beneficial ownership interest in the Trust
Fund.

                                  ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF THE TRUST FUND

         Section 3.01. Servicer to Act as Servicer.
                       ---------------------------

         The Servicer, as independent contract servicer, shall service and
administer the Mortgage Loans in accordance with this Agreement and the normal
and usual standards of practice of prudent mortgage servicers servicing similar
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, and shall have full power and authority, acting alone, to do or cause
to be done any and all things in connection with such servicing and
administration which the Servicer may deem necessary or desirable and consistent
with the terms of this Agreement (the "Servicing Standard").

         Consistent with the terms of this Agreement, the Servicer may waive,
modify or vary any term of any Mortgage Loan or consent to the postponement of
strict compliance with any such term or in any manner grant indulgence to any
Mortgagor if in the Servicer's reasonable and prudent determination such waiver,
modification, postponement or indulgence is not materially adverse to the
Certificateholders; provided, however, that the Servicer shall not make future
advances and, except as set forth in the following sentence or Section 3.03, the
Servicer shall not permit any modification with respect to any Mortgage Loan
that would (i) change the Mortgage Interest Rate, defer or forgive the payment
thereof of any principal or interest payments, reduce the outstanding principal
amount (except for actual payments of principal) or extend the final maturity
date with respect to such Mortgage Loan, (ii) affect adversely the status of any
REMIC constituting part of the Trust Fund as a REMIC or (iii) cause any such
REMIC to be subject to a tax on "prohibited transactions" or "contributions"
pursuant to the REMIC Provisions.

         Notwithstanding anything to the contrary contained in this Agreement,
in the event that any Mortgage Loan is in default or, if such default is
reasonably foreseeable, the Servicer, consistent with the standards set forth in
this 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, extend the final maturity date of such
Mortgage Loan (including modifications that would change the Mortgage Rate,
forgive the payment of principal or interest, extend the final maturity date of
such Mortgage Loan or waive, in whole or in part, a Prepayment Premium)), accept
payment from the related Mortgagor of an amount less

                                      -59-
<PAGE>

than the Stated Principal Balance in final satisfaction of such Mortgage Loan,
or consent to the postponement of strict compliance with any such term or
otherwise grant indulgence to any Mortgagor (any and all such waivers,
modifications, variances, forgiveness of principal or interest, postponements,
or indulgences collectively referred to herein as "forbearance"); provided,
however, that the terms of any Mortgage Loan may only be waived, modified or
varied once while the Mortgage Loan remains outstanding; provided, further, that
the final maturity date of any Mortgage Loan may not be extended beyond the
Final Scheduled Distribution Date. The Servicer's analysis supporting any
forbearance and the conclusion that any forbearance meets the standards of this
Section 3.01 shall be reflected in writing in the Servicing File.
Notwithstanding the foregoing, the Servicer shall not permit any modification
with respect to any Mortgage Loan that would both (x) effect an exchange or
reissuance of such Mortgage Loan under Section 1.860G-2(b) of the Treasury
Regulations and (y) cause any REMIC constituting part of the Trust Fund to fail
to qualify as a REMIC under the Code or the imposition of any tax on "prohibited
transactions" or "contributions" after the Startup Day under the REMIC
Provisions. Without limiting the generality of the foregoing, the Servicer shall
continue, and is hereby authorized and empowered to execute and deliver on
behalf of itself, and the Trustee, all instruments of satisfaction or
cancellation, or of partial or full release, discharge and all other comparable
instruments, with respect to the Mortgage Loans and with respect to the
Mortgaged Property. The Servicer shall make all required Servicing Advances and
shall service and administer the Mortgage Loans in accordance with Applicable
Regulations, and shall provide to the Mortgagor any reports required to be
provided to them thereby. The Trustee shall execute and deliver to the Servicer
within at least fifteen (15) Business Days of receipt, upon request, any powers
of attorney furnished to it by the Servicer empowering the Servicer to execute
and deliver instruments of satisfaction or cancellation, or of partial or full
release or discharge, and to foreclose upon or otherwise liquidate any Mortgaged
Property, and to appeal, prosecute or defend in any court action relating to the
Mortgage Loans or the Mortgaged Properties, in accordance with this Agreement,
and the Trustee shall execute and deliver such other documents as the Servicer
may request, necessary or appropriate to enable the Servicer to service and
administer the Mortgage Loans and carry out its duties hereunder, in each case
in accordance with Servicing Standard (and the Trustee shall have no liability
for misuse of any such powers of attorney by the Servicer). Notwithstanding
anything contained herein to the contrary, the Servicer shall not without the
Trustee's written consent: (i) initiate any action, suit or proceeding solely
under the Trustee's name without indicating the Servicer's representative
capacity, or (ii) take any action with the intent to cause, and which results
in, the Trustee being registered to do business in any state.

         In servicing and administering FHA Loans and VA Loans, the Servicer
shall comply strictly with the National Housing Act, the FHA Regulations, the
Servicemen's Readjustment Act and the VA Regulations and administrative
guidelines issued thereunder or pursuant thereto (insofar as the same apply to
any Mortgage Loan) and, to the extent permitted hereunder, promptly discharge
all of the obligations of the mortgagee thereunder and under each Mortgage
including the timely giving of notices, the essence hereof being that the full
benefits of each FHA Insurance Contract and VA Guaranty Agreement inure to the
Trustee, on behalf of the Certificateholders.

         In servicing and administering the Mortgage Loans, the Servicer shall
employ procedures including collection procedures and exercise the same care
that it customarily employs and

                                      -60-
<PAGE>

exercises in servicing and administering mortgage loans for its own account
giving due consideration to accepted mortgage servicing practices of prudent
lending institutions and the Certificateholders' reliance on the Servicer.

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

         The Servicer further is authorized and empowered by the Trustee, on
behalf of the Certificateholders and the Trustee, in its own name when the
Servicer believes it is appropriate in its best judgment to register any
Mortgage Loan on the MERS(R) System, or cause the removal from the registration
of any Mortgage Loan on the MERS(R) System, to execute and deliver, on behalf of
the Trustee and the Certificateholders or any of them, any and all Assignments
and other comparable instruments with respect to such assignment or re-recording
of a Mortgage in the name of MERS, solely as nominee for the Trustee and its
successors and assigns. Any reasonable expenses incurred in connection with the
actions described in the preceding sentence or as a result of MERS discontinuing
or becoming unable to continue operations in connection with the MERS(R) System,
shall be subject to withdrawal by the Servicer from the Collection Account.

         As part of its servicing activities hereunder, the Servicer, for the
benefit of the Trustee and the Certificateholders, shall enforce the obligations
of the Transferor and the Seller under the Transfer Agreement or the Mortgage
Loan Purchase Agreements, as applicable, including, without limitation, any
obligation of either the Transferor or the Seller to purchase a Mortgage Loan on
account of missing or defective documentation or on account of a breach of a
representation, warranty or covenant.

         For so long as any Mortgage Loan is registered on the MERS(R) System,
the Servicer shall maintain in good standing its membership in MERS and shall
comply in all material respects with the rules and procedures of MERS in
connection with the servicing of the Mortgage Loans that are registered with
MERS.

         Section 3.02. Collection of Mortgage Loan Payments.
                       ------------------------------------

         Continuously from the date hereof until the principal and interest on
all Mortgage Loans are paid in full or as long as the Mortgage Loan remains
subject to this Agreement, the Servicer will diligently collect all payments due
under each Mortgage Loan when the same shall become due and payable and shall,
to the extent such procedures shall be consistent with this Agreement and
Applicable Regulations, follow such collection procedures as it follows with
respect to mortgage loans comparable to the Mortgage Loans and held for its own
account. Further, the Servicer will take special care in ascertaining and
estimating on escrowed Mortgage Loans annual ground rents, taxes, assessments,
water rates, fire and hazard insurance premiums, mortgage insurance premiums,
and all other charges that, as provided in the Mortgage, will become due and
payable to that end that the installments payable by the Mortgagors will be
sufficient to pay such charges as and when they become due and payable.

                                      -61-
<PAGE>

         Section 3.03. Realization Upon Defaulted Mortgage Loans.
                       -----------------------------------------

         In the event that any payment due under any Mortgage Loan is not paid
when the same becomes due and payable, or in the event the Mortgagor fails to
perform any other covenant or obligation under the Mortgage Loan and such
failure continues beyond any applicable grace period, the Servicer shall take
such action as it shall deem to be in the best interest of the
Certificateholders. With respect to any defaulted Mortgage Loan, the Servicer
shall have the right to review the status of the related forbearance plan and,
subject to the second paragraph of Section 3.01, may modify such forbearance
plan; including extending the Mortgage Loan repayment date for a period of one
year or reducing the Mortgage Interest Rate up to 50 basis points.

         In connection with a foreclosure or other conversion, the Servicer
shall exercise such rights and powers vested in it hereunder and use the same
degree of care and skill in its exercise as prudent mortgage servicers would
exercise or use under the circumstances in the conduct of their own affairs and
consistent with Applicable Regulations and the Servicing Standards, including,
without limitation, advancing funds for the payment of taxes and insurance
premiums.

         Notwithstanding the foregoing provisions of this Section 3.03, with
respect to any Mortgage Loan as to which the 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 Servicer shall not 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
Trust 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 Response, Compensation and Liability Act of
1980, as amended from time to time, or any comparable law, unless the Servicer
has also previously determined, based on its reasonable judgment and a prudent
report prepared by a Person who regularly conducts environmental audits using
customary industry standards, that:

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

         B.   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 Certificateholders to take such
actions with respect to the affected Mortgaged Property.

         The cost of the environmental audit report contemplated by this Section
3.03 shall be advanced by the Servicer, subject to the Servicer's right to be
reimbursed therefor from the Collection Account as provided in Section 3.05(iv).

                                      -62-
<PAGE>

         If the Servicer determines, as described above, that it is in the best
economic interest of the Certificateholders 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 Servicer shall take such action as it deems to be in the best economic
interest of the Certificateholders. The cost of any such compliance,
containment, clean-up or remediation shall be advanced by the Servicer, subject
to the Servicer's right to be reimbursed therefor from the Collection Account as
provided in Section 3.05(ii).

         Section 3.04. Collection Account, Distribution Account and Reserve
                       Account.
                       ----------------------------------------------------

         (a)   The Servicer shall segregate and hold all funds collected and
received pursuant to each Mortgage Loan separate and apart from any of its own
funds and general assets and shall establish and maintain one or more Collection
Accounts. Each Collection Account shall be an Eligible Account.

         The Servicer shall deposit in the Collection Account on a daily basis
within one Business Day of receipt, and retain therein, the following payments
and collections received or made by it after the Cut-off Date with respect to
the Mortgage Loans:

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

               (ii)  all payments on account of interest on the Mortgage Loans
         adjusted to the Mortgage Interest Rate less the Servicing Fee Rate;

               (iii) all Liquidation Proceeds;

               (iv)  all Insurance Proceeds including amounts required to be
         deposited pursuant to Section 3.10, other than proceeds to be held in
         the Escrow Account and applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures, the loan documents or
         applicable law;

               (v)   all Condemnation Proceeds affecting any Mortgaged Property
         which are not released to the Mortgagor in accordance with the
         Servicer's normal servicing procedures, the loan documents or
         applicable law;

               (vi)  any amounts required to be deposited by the Servicer in
         connection with any REO Property pursuant to Section 3.13; and

               (vii) all Prepayment Charges collected by the Servicer in
         connection with the voluntary Principal Prepayment in full of any
         Mortgage Loan, all Servicer Prepayment Charge Payment Amounts required
         to be paid by the Servicer pursuant to Section 3.29(b) in connection
         with any such Principal Prepayment and all Transferor Prepayment Charge
         Payment Amounts paid by the Transferor.

                                      -63-
<PAGE>

         Any interest paid on funds deposited in the Collection Account, subject
to Section 3.25, shall accrue to the benefit of the Servicer and the Servicer
shall be entitled to retain and withdraw such interest from the Collection
Account pursuant to Section 3.05(v). The foregoing requirements for deposit from
the Collection Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of late
payment charges, bad check fees, prepayment charges that are not Prepayment
Charges or Servicer Prepayment Charge Payment Amounts, assumption fees and other
similar fees need not be deposited by the Servicer in the Collection Account.
Amounts deposited in the Collection Account in error may be withdrawn by the
Servicer at any time.

         (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 Servicer shall deliver to the Trustee in immediately
available funds for deposit in the Distribution Account by 1:00 p.m. New York
time on the Servicer Remittance Date, (i) that portion of the Available Funds
(calculated without regard to the references in the definition thereof to
amounts that may be deposited to the Distribution Account from a different
source as provided herein) then on deposit in the Collection Account and (ii)
the amount of all Prepayment Charges collected by the Servicer and all Servicer
Prepayment Charge Payment Amounts paid by the 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 and Servicer Prepayment Charge Payment Amounts paid after the related
Prepayment Period). Amounts in the Distribution Account shall be deemed to be
held on behalf of the related REMICs and the Grantor Trust in accordance with
the REMIC distributions set forth in Section 4.08. The Trustee shall be entitled
to withdraw from the Distribution Account any amounts owing to it pursuant to
Section 8.05 and Section 9.01(c) prior to the distribution of any amounts on
deposit to the Certificateholders; provided, however, in the case of amounts
owing to it other than the Trustee Fee, the Trustee shall provide the Depositor
and the Servicer with a written account of such amounts five Business Days prior
to withdrawing such funds. In connection with any failure by the Servicer to
make any remittance required to be made by the Servicer to the Distribution
Account on the day and by the time such remittance is required to be made under
the terms of this Section 3.04(b) (without giving effect to any grace or cure
period), the Servicer shall pay to the Trustee for the account of the Trustee
interest at the prime rate of United States money center commercial banks as
published in The Wall Street Journal on any amount not timely remitted from and
including the day such remittance was required to be made to, but not including,
the day on which such remittance was actually made.

         (c)   Funds in the Collection Account may be invested in Permitted
Investments in accordance with the provisions set forth in Section 3.25. The
Servicer shall give notice to the Trustee of the location of the Collection
Account maintained by it when established and prior to any change thereof. The
Trustee shall give notice to the Servicer and the Depositor of the location of
the Distribution Account when established and prior to any change thereof.

         (d)   In the event the 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 the Servicer any such amount, any
provision herein to the contrary notwithstanding. In addition, the Servicer
shall

                                      -64-
<PAGE>

deliver to the Trustee from time to time for deposit, and the Trustee shall so
deposit, in the Distribution Account in respect of REMIC 1:

                (i)   any Advances, as required pursuant to Section 4.07;

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

                (iii) any amounts required to be deposited in the Distribution
         Account by the Servicer pursuant to Sections 2.03, 3.04, 3.13, 3.15,
         3.16, 3.23, 3.24, 4.07 or 10.01; and

                (iv)  any amounts required to be deposited by the Servicer
         pursuant to Section 3.11 in connection with the deductible clause in
         any blanket hazard insurance policy, such deposit being made from the
         Servicer's own funds, without reimbursement therefor.

         (e)   Promptly upon receipt of any Stayed Funds, whether from the
Servicer, a trustee in bankruptcy, or federal bankruptcy court or other source,
the Trustee shall notify the Servicer of such receipt and deposit such funds in
the Distribution Account, subject to withdrawal thereof as permitted hereunder.
In addition, the Trustee shall deposit in the Distribution Account any amounts
required to be deposited pursuant to Section 3.25(b) in connection with losses
realized on Permitted Investments with respect to funds held in the Distribution
Account.

         (f)   Any Prepayment Charges, Transferor Prepayment Charge Payment
Amounts and Servicer Prepayment Charge Payment Amounts deposited pursuant to
Section 3.04(a)(vii) shall not be assets of any REMIC created hereunder, but
shall be considered assets of the Grantor Trust held by the Trustee for the
benefit of the Class N Certificateholders.

         (g)   (i) The Trustee shall establish and maintain the Reserve Account,
held in trust for the benefit of the Class AII Certificateholders. The Trustee
shall deposit in the Reserve Account on the date received by it, any Yield
Maintenance Agreement Payment received from the Yield Maintenance Agreement
Provider for the related Distribution Date. On each Distribution Date, the
Trustee shall withdraw from the Reserve Account any Yield Maintenance Agreement
Payment and apply it in the following order of priority:

                    (A)  to the Class AII Certificates, an amount equal to any
               unpaid remaining Cap Carryover Amounts with respect to such
               Certificates (after distributions pursuant to Section 4.02(b)
               hereof); and

                    (B)  to the Class N and Class X Certificates, any remaining
               amounts on deposit in the Reserve Account.

               (ii)  The Trustee shall account for the Yield Maintenance
         Agreement and the Reserve Account as assets of a grantor trust under
         subpart E, part I of subchapter J of the Code or as a partnership under
         subchapter K of the Code, as applicable, and not assets of any REMIC
         created pursuant to this Agreement. The beneficial owner of the Yield
         Maintenance Agreement and the Reserve Account are the Class N and Class
         X Certificateholders. For all federal tax purposes, amounts transferred
         or reimbursed by

                                      -65-
<PAGE>

         REMIC 2 to the Reserve Account shall be treated as distributions by
         the Trustee to the Class N and Class X Certificateholders.

               (iii) Any Cap Carryover Amounts paid by the Trustee pursuant to
         this Section 3.04(g) to the Class AII Certificates shall be accounted
         for by the Trustee as amounts paid first to the Class N and Class X
         Certificates and then to the Class AII Certificates. In addition, the
         Trustee shall account for the Class AII Certificates' rights to receive
         payments of Cap Carryover Amounts as rights in a limited recourse
         interest rate cap contract written by the Class N and Class X
         Certificates in favor of the Class AII Certificates.

               (iv)  For federal tax return and information reporting, the right
         of the Holders of the Class AII Certificates to receive payments under
         the Yield Maintenance Agreement in respect of any Yield Maintenance
         Agreement Payments shall be assigned a value of zero.

         Section 3.05. Permitted Withdrawals From the Collection Account.
                       -------------------------------------------------

         The Servicer may, from time to time, withdraw from the Collection
Account for the following purposes:

               (i)   to remit to the Trustee for deposit in the Distribution
         Account the amounts required to be so remitted pursuant to Section
         3.04(b);

               (ii)  to reimburse itself for Advances and Servicing Advances;
         the Servicer's right to reimburse itself pursuant to this subclause
         (ii) being limited to amounts received on the related Mortgage Loan
         which represent payments of (a) principal and/or interest respecting
         which any such Advance was made (including portions of Condemnation
         Proceeds, Insurance Proceeds or Liquidation Proceeds allocable to
         principal and/or interest on the Mortgage Loan) or (b) Condemnation
         Proceeds, Insurance Proceeds or Liquidation Proceeds respecting which
         any such Servicing Advance was made;

               (iii) to reimburse itself for unreimbursed Servicing Advances,
         any unpaid Servicing Fees and for unreimbursed Advances to the extent
         that such amounts are deemed to be Nonrecoverable Advances, and to
         reimburse itself for such amounts to the extent that such amounts are
         nonrecoverable from the disposition of REO Property pursuant to Section
         3.03 or Section 3.13 hereof;

               (iv) to reimburse itself for any amounts paid or expenses
         incurred pursuant to Section 3.03 (and not otherwise previously
         reimbursed);

               (v)   to pay to itself as servicing compensation (a) any interest
         earned on funds in the Collection Account (all such interest to be
         withdrawn monthly not later than each Servicer Remittance Date) and (b)
         the Servicing Fee from that portion of any payment or recovery as to
         interest to a particular Mortgage Loan to the extent not retained
         pursuant to Section 3.04(ii);

                                      -66-
<PAGE>

               (vi)  to pay or reimburse itself for any amounts payable or paid
         pursuant to Section 6.03 (and not otherwise previously reimbursed); and

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

         The foregoing requirements for withdrawal from the Collection Account
shall be exclusive. In the event the Servicer shall deposit in the Collection
Account any amount not required to be deposited therein, it may at any time
withdraw such amount from the Collection Account, any provision herein to the
contrary notwithstanding.

         Section 3.06. Establishment of Escrow Accounts; Deposits in Escrow
                       Accounts.
                       ----------------------------------------------------

         The Servicer shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan which constitute Escrow Payments separate and
apart from any of its own funds and general assets and shall establish and
maintain one or more Escrow Accounts, in the form of time deposit or demand
accounts. A copy of such letter agreement shall be furnished to the Trustee upon
request. The Escrow Account shall be an Eligible Account.

         The Servicer shall deposit in the Escrow Account or Accounts on a daily
basis within one Business Days of receipt, and retain therein, (i) all Escrow
Payments collected on account of the Mortgage Loans, for the purpose of
effecting timely payment of any such items as required under the terms of this
Agreement, and (ii) all Insurance Proceeds which are to be applied to the
restoration or repair of any Mortgaged Property. The Servicer shall make
withdrawals therefrom only to effect such payments as are required under this
Agreement, and for such other purposes as shall be set forth in, or in
accordance with, Section 3.07. The Servicer shall be entitled to retain any
interest paid on funds deposited in the Escrow Account by the depository
institution other than interest on escrowed funds required by law to be paid to
the Mortgagor and, to the extent required by the related Mortgage Loan or
Applicable Regulations, the Servicer shall pay interest on escrowed funds to the
Mortgagor notwithstanding that the Escrow Account is non-interest bearing or
that interest paid thereon is insufficient for such purposes.

         Section 3.07. Permitted Withdrawals From Escrow Account.
                       -----------------------------------------

         Withdrawals from the Escrow Account may be made by the Servicer (i) to
effect timely payments of ground rents, taxes, assessments, water rates, fire,
flood and hazard insurance premiums and comparable items in a manner and at a
time that assures that the lien priority of the Mortgage is not jeopardized (or,
with respect to the payment of taxes, in a manner and at a time that avoids the
loss of the Mortgaged Property due to a tax sale or the foreclosure as a result
of a tax lien), (ii) to reimburse the Servicer for any Servicing Advance made by
the Servicer with respect to a related Mortgage Loan but only from amounts
received on the related Mortgage Loan which represent late payments or Late
Collections of Escrow Payments thereunder with respect to taxes and assessments
and with respect to hazard insurance, (iii) to refund to the Mortgagor any funds
as may be determined to be overages, (iv) for transfer to the Collection Account
in accordance with the terms of this Agreement, (v) for application to
restoration or repair of the Mortgaged Property, (vi) to pay to the Servicer, or
to the Mortgagor to the extent required by the related Mortgage Loan or
Applicable Regulations, any interest paid on the funds

                                      -67-
<PAGE>

deposited in the Escrow Account, (vii) to clear and terminate the Escrow Account
on the termination of this Agreement, or (viii) to transfer to the Collection
Account any insurance proceeds. As part of its servicing duties, the Servicer
shall pay to the Mortgagor interest on funds in the Escrow Account, to the
extent required by the related Mortgage Loan or Applicable Regulations, and to
the extent that interest earned on funds in the Escrow Account is insufficient,
shall pay such interest from its own funds, without any reimbursement therefor.

         In the event the Servicer shall deposit in the Escrow Account any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Escrow Account, any provision herein to the contrary
notwithstanding.

         Section 3.08. Payment of Taxes, Insurance and Other Charges;
                       Collections Thereunder.
                       ---------------------------------------------

         With respect to each Mortgage Loan that provides for Escrow Payments,
the Servicer shall maintain accurate records reflecting the status of ground
rents, taxes, assessments, water rates and other charges which are or may become
a lien upon the Mortgaged Property and the status of fire, flood and hazard
insurance coverage and shall obtain, from time to time, all bills for the
payment of such charges (including renewal premiums) and shall effect payment of
taxes, assessments, hazard insurance premiums, and comparable items in a manner
and at a time that assures that the lien priority of the Mortgage is not
jeopardized (or, with respect to the payment of taxes, in a manner and at a time
that avoids the loss of the Mortgaged Property due to a tax sale or the
foreclosure as a result of a tax lien). To the extent that a Mortgage does not
provide for Escrow Payments, the Servicer (i) shall determine whether any such
payments are made by the Mortgagor in a manner and at a time that is necessary
to avoid the loss of the Mortgaged Property due to a tax sale or the foreclosure
as a result of a tax lien and (ii) shall ensure that all insurance required to
be maintained on the Mortgaged Property pursuant to this Agreement is
maintained. If any such payment has not been made and the Servicer receives
notice of a tax lien with respect to the Mortgage Loan being imposed, the
Servicer will, promptly and to the extent required to avoid loss of the
Mortgaged Property, advance or cause to be advanced funds necessary to discharge
such lien on the Mortgaged Property. The Servicer assumes full responsibility
for the payment of all such bills 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 Servicing Advances from its own
funds to effect such payments.

         Section 3.09. Transfer of Accounts.
                       --------------------

         The Servicer may transfer the Collection Account and the Escrow Account
to a different depository institution from time to time. Upon such transfer, the
Servicer shall deliver to the Trustee and the Depositor, a certification or
letter agreement, as the case may be, as required pursuant to Sections 3.04 and
3.06.

         Section 3.10. Maintenance of Hazard Insurance.
                       -------------------------------

         The Servicer shall cause to be maintained for each Mortgage Loan fire
and hazard insurance with extended coverage as is customary in the area where
the Mortgaged Property is located in an amount which is at least equal to the
lesser of (i) the amount necessary to fully

                                      -68-
<PAGE>

compensate for any damage or loss to the improvements which are a part of such
property on a replacement cost basis or (ii) the Principal Balance of the
Mortgage Loan, in each case in an amount not less than such amount as is
necessary to prevent the Mortgagor and/or the Mortgagee from becoming a
co-insurer. If the Mortgaged Property is in an area identified in the Federal
Register by the Flood Emergency Management Agency as having special flood
hazards and flood insurance has been made available, the Servicer will cause to
be maintained a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally acceptable
insurance carrier, in an amount representing coverage not less than the least of
(i) the Principal Balance of the Mortgage Loan, (ii) the maximum insurable value
of the improvements securing such Mortgage Loan or (iii) the maximum amount of
insurance which is available under the National Flood Insurance Act of 1968, as
amended. The Servicer shall also maintain on the REO Property for the benefit of
the Certificateholders, (x) fire and hazard insurance with extended coverage in
an amount which is at least equal to the lesser of (i) 100% of the maximum
insurable value of the improvements securing the Mortgage loan and (ii) the
outstanding Principal Balance of the Mortgage Loan at the time it became an REO
Property, (y) public liability insurance and, (z) to the extent required and
available under the National Flood Insurance Act of 1968, as amended, flood
insurance in an amount as provided above. Any amounts collected by the Servicer
under any such policies other than amounts to be deposited in the Escrow Account
and applied to the restoration or repair of the Mortgaged Property or REO
Property, or released to the Mortgagor in accordance with the Servicer's normal
servicing procedures, shall be deposited in the Collection Account, subject to
withdrawal pursuant to Section 3.05. It is understood and agreed that no
earthquake or other additional insurance is required to be maintained by the
Servicer or the Mortgagor or maintained on property acquired in respect of the
Mortgage Loan, other than pursuant to such Applicable Regulations as shall at
any time be in force and as shall require such additional insurance. All such
policies shall be endorsed with standard mortgagee clauses with loss payable to
the Servicer and shall provide for at least thirty days prior written notice of
any cancellation, reduction in the amount of or material change in coverage to
the Servicer. The Servicer shall not interfere with the Mortgagor's freedom of
choice in selecting either his insurance carrier or agent, provided, however,
that the Servicer shall not accept any such insurance policies from insurance
companies unless such companies currently reflect a general policy rating of
B:III or better in Best's Key Rating Guide and are licensed to do business in
the state wherein the property subject to the policy is located.

         Section 3.11. Maintenance of Mortgage Impairment Insurance Policy.
                       ---------------------------------------------------

         In the event that the Servicer shall obtain and maintain a blanket
policy issued by an insurer that has a general policy rating of B:III or better
in Best's Key Rating Guide insuring against hazard losses on all of the Mortgage
Loans, then, to the extent such policy provides coverage in an amount equal to
the amount required pursuant to Section 3.10 and otherwise complies with all
other requirements of Section 3.10, it shall conclusively be deemed to have
satisfied its obligations as set forth in Section 3.10, it being understood and
agreed that such policy may contain a deductible clause, in which case the
Servicer shall, in the event that there shall not have been maintained on the
related Mortgaged Property or REO Property a policy complying with Section 3.10,
and there shall have been a loss which would have been covered by such policy,
deliver to the Trustee for deposit in the Distribution Account the amount not
otherwise payable under the blanket policy because of such deductible clause,
which amount

                                      -69-
<PAGE>

shall not be reimbursable to the Servicer from the Trust Fund. In connection
with its activities as servicer of the Mortgage Loans, the Servicer agrees to
prepare and present, on behalf of the Trustee, claims under any such blanket
policy in a timely fashion in accordance with the terms of such policy. Upon
request of the Trustee, the Servicer shall cause to be delivered to the Trustee
a certified true copy of such policy and a statement from the insurer thereunder
that such policy shall in no event be terminated or materially modified without
thirty days prior written notice to the Trustee.

         Section 3.12. Fidelity Bond, Errors and Omissions Insurance.
                       ---------------------------------------------

         The Servicer shall maintain, at its own expense, a blanket fidelity
bond (the "Fidelity Bond") and an errors and omissions insurance policy, with
broad coverage with financially responsible companies on all officers, employees
or other persons acting in any capacity with regard to the Mortgage Loans to
handle funds, money, documents and papers relating to the Mortgage Loans. The
Fidelity Bond and errors and omissions insurance shall be in the form of the
Mortgage Banker's Blanket Bond and shall protect and insure the Servicer against
losses, including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons. Such Fidelity Bond shall also protect and insure
the Servicer against losses in connection with the failure to maintain any
insurance policies required pursuant to this Agreement and the release or
satisfaction of a Mortgage Loan without having obtained payment in full of the
indebtedness secured thereby. No provision of this Section 3.12 requiring the
Fidelity Bond and errors and omissions insurance shall diminish or relieve the
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by Fannie Mae in the Fannie Mae MBS
Selling and Servicing Guide or by Freddie Mac in the Freddie Mac Servicer's
Guide. Upon request of the Trustee, the Servicer shall cause to be delivered to
the requesting party a certified true copy of the Fidelity Bond and errors and
omissions insurance policy and a statement from the surety and the insurer that
such Fidelity Bond and errors and omissions insurance policy shall in no event
be terminated or materially modified without thirty days' prior written notice
to the Trustee.

         Section 3.13. Title, Management and Disposition of REO Property.
                       -------------------------------------------------

         (a)   In the event that title to a Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
shall be taken (pursuant to a limited power of attorney to be provided by the
Trustee to the Servicer) in the name of the Trustee or its nominee, on behalf of
the Certificateholders, or in the event the Trustee is not authorized or
permitted to hold title to real property in the state where the REO Property is
located, or would be adversely affected under the "doing business" or tax laws
of such state by so holding title, the deed or certificate of sale shall be
taken in the name of such Person or Persons as shall be consistent with an
Opinion of Counsel obtained by the Servicer from an attorney duly licensed to
practice law in the state where the REO Property is located. Any Person or
Persons holding such title other than the Trustee shall acknowledge in writing
that such title is being held as nominee for the benefit of the Trustee.

         (b)   In the event that the Trust Fund acquires any REO Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Servicer

                                      -70-
<PAGE>

shall dispose of such REO Property before the end of the third taxable year
beginning after the year of its acquisition by the Trust Fund for purposes of
Section 860G(a)(8) of the Code unless the Servicer has received a grant of
extension from the Internal Revenue Service, more than 60 days before the day on
which the above-mentioned grace period would otherwise expire, an extension of
the above-mentioned grace period, unless the Servicer obtains an Opinion of
Counsel, addressed to the Servicer and the Trustee, to the effect such that the
holding by the Trust Fund of such REO Property subsequent to such period will
not: (i) result in the imposition of any tax on "prohibited transactions" as
defined in Section 860F of the Code; or (ii) cause any REMIC constituting any
part of the Trust Fund to fail to qualify as a REMIC at any time that any
Certificates are outstanding, in which case the Trust Fund may continue to hold
such REO Property (subject to any conditions contained in such Opinion of
Counsel). The Servicer shall be entitled to be reimbursed from the Collection
Account for any costs incurred in obtaining such Opinion of Counsel, as provided
in Section 3.05.

         Subject to compliance with applicable laws and regulations as shall at
any time be in force, and notwithstanding any other provisions of this
Agreement, no REO Property acquired by the Trust Fund shall be rented (or
allowed to continue to be rented) or otherwise used by or on behalf of the Trust
Fund in such a manner or pursuant to any terms that would: (i) cause such REO
Property to fail to qualify as "foreclosure property" within the meaning of
Section 860G(a)(8) of the Code; or (ii) subject any REMIC constituting part of
the Trust Fund to the imposition of any federal income taxes on the income
earned from such REO Property, including any taxes imposed by reason of Sections
860F or 860G(c) of the Code, unless the Servicer has agreed to indemnify and
hold harmless the Trust Fund with respect to the imposition of any such taxes.

         The Servicer shall manage, conserve, protect and operate each REO
Property for the Certificateholders and the Trust Fund 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 the related REMIC of
any "income from non-permitted assets" within the meaning of Section
860F(a)(2)(B) of the Code, or any "net income from foreclosure property" which
is subject to taxation under the REMIC Provisions. The Servicer shall cause each
REO Property to be inspected promptly upon the acquisition of title thereto and
shall cause each REO Property to be inspected at least annually thereafter. The
Servicer shall make or cause to be made a written or electronic report of each
such inspection. Such reports shall be retained in the Mortgage File and copies
thereof shall be forwarded by the Servicer to the Trustee upon request. The
Servicer shall attempt to sell the same (and may temporarily rent the same) on
such terms and conditions as the Servicer deems to be in the best interest of
the Certificateholders and the Trust Fund.

         With respect to each REO Property, the Servicer shall account
separately for each REO Property with respect to all funds collected and
received in connection with the operation of such REO Property.

         The Servicer shall deposit or cause to be deposited, on a daily basis,
within one Business Day of receipt, in the Collection Account, all revenues
received with respect to each REO Property and shall withdraw therefrom funds
necessary for the proper operation, management and maintenance of the related
REO Property, including the cost of maintaining any hazard

                                      -71-
<PAGE>

insurance pursuant to Section 3.10 hereof and the fees of any managing agent
acting on behalf of the Servicer.

         The Servicer shall furnish to the Trustee, on each Servicer Remittance
Date, an operating statement for each REO Property covering the operation of
each REO Property for the previous month. Such operating statement shall be
accompanied by such other information as the Trustee shall reasonably request.

         The Servicer shall use its best efforts to dispose of the REO Property
as promptly as is practically consistent with protecting the Certificateholders'
interests.

         Each REO Disposition shall be carried out by the Servicer at such price
and upon such terms and conditions as the Servicer deems to be in the best
interest of the Certificateholders. If as of the date title to any REO Property
was acquired by the Servicer there were outstanding unreimbursed Servicing
Advances, Servicing Fees and Advances with respect to the REO Property, the
Servicer, upon an REO Disposition of such REO Property, shall be entitled to
reimbursement for any related unreimbursed Servicing Advances, Servicing Fees
and Advances from proceeds received in connection with such REO Disposition. The
proceeds from the REO Disposition, net of any payment to the Servicer as
provided above, shall be deposited in the Collection Account for transfer to the
Distribution Account on the succeeding Servicer Remittance Date in accordance
with Section 3.04(a)(vi).

         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 and an Opinion of Counsel is obtained by the Servicer to the
effect that such sale shall not cause any REMIC constituting part of the Trust
Fund to fail to qualify as a REMIC).

         Section 3.14. Due-on-Sale Clauses; Assumption and Substitution
                       Agreements.
                       ------------------------------------------------

         When a Mortgaged Property has been or is about to be conveyed by the
Mortgagor, the Servicer shall, except as set forth below, to the extent it has
knowledge of such conveyance or prospective conveyance, exercise its rights to
accelerate the maturity of the related Mortgage Loan under any "due-on-sale"
clause contained in the related Mortgage or Mortgage Note; provided, however,
that the Servicer shall not exercise any such right if the "due-on-sale" clause,
in the reasonable belief of the Servicer, is not enforceable under applicable
law. An Opinion of Counsel at the expense of the Servicer (which expense shall
constitute a Servicing Advance) delivered to the Trustee and the Depositor shall
conclusively establish the reasonableness of the Servicer's belief that any
"due-on-sale" clause is not enforceable under applicable law. In such event, the
Servicer shall make reasonable efforts to enter into an assumption and
modification agreement with the Person to whom such property has been or is
about to be conveyed, pursuant to which such Person becomes liable under the
Mortgage Note and, unless prohibited by applicable law or the Mortgage, the
Mortgagor remains liable thereon. If the foregoing is not permitted under
applicable law, the Servicer is authorized to enter into a substitution of
liability agreement with such Person, pursuant to which the original Mortgagor
is released from liability and such Person is substituted as Mortgagor and
becomes liable under the Note; provided that no such substitution will be
permitted unless such person satisfies the underwriting criteria of the Servicer
and such substitution is in the best interests of the Certificateholders. In
addition to the

                                      -72-
<PAGE>

foregoing, the Servicer shall not be required to enforce any "due-on-sale"
clause if in the reasonable judgment of the Servicer, entering into an
assumption and modification agreement with a Person to whom such property shall
be conveyed and releasing the original Mortgagor from liability would be in the
best interests of the Certificateholders. The Mortgage Loan, as assumed, shall
conform in all respects to the requirements, representations and warranties of
this Agreement. The Servicer shall not take or enter into any assumption and
modification agreement, unless (to the extent practicable under the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. The Servicer shall
notify the Trustee that any such assumption or substitution agreement has been
completed by forwarding to the Trustee the original copy of such assumption or
substitution agreement (indicating the Mortgage File to which it relates) which
copy shall be added by the Trustee to the related Mortgage File and which 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. The Servicer
shall be responsible for recording any such assumption or substitution
agreements. In connection with any such assumption or substitution agreement,
the Monthly Payment on the related Mortgage Loan shall not be changed but shall
remain as in effect immediately prior to the assumption or substitution, the
stated maturity or outstanding principal amount of such Mortgage Loan shall not
be changed nor shall any required monthly payments of principal or interest be
deferred or forgiven. Any fee collected by the Servicer for consenting to any
such conveyance or entering into an assumption or substitution agreement shall
be retained by or paid to the Servicer as additional servicing compensation.

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

         Section 3.15. Notification of Adjustments.
                       ---------------------------

         On each Adjustment Date, the Servicer shall make Mortgage Interest Rate
adjustments for each Adjustable-Rate Mortgage Rate Loan in compliance with the
requirements of the related Mortgage and Mortgage Note and Applicable
Regulations. The Servicer shall execute and deliver the notices required by each
Mortgage and Mortgage Note and Applicable Regulations regarding Mortgage
Interest Rate adjustments. Upon the discovery by the Servicer or the Trustee
that the Servicer has failed to adjust or has incorrectly adjusted a Mortgage
Interest Rate or a Monthly Payment pursuant to the terms of the related Mortgage
Note and Mortgage, the Servicer shall deliver to the Trustee for deposit in the
Distribution Account from its own funds the amount of any interest loss caused
thereby without reimbursement therefor; provided, however, the Servicer shall be
held harmless with respect to any Mortgage Interest Rate adjustments made by any
servicer prior to the Servicer.

                                      -73-
<PAGE>

         Section 3.16. Optional Purchases of Mortgage Loans by Servicer.
                       ------------------------------------------------

         The Servicer shall have the right to purchase any defaulted Mortgage
Loan that is 120 days or more delinquent, which the Servicer determines in good
faith will otherwise become subject to foreclosure proceedings (evidence of such
determination to be delivered in writing to the Trustee, in form and substance
satisfactory to the Servicer and the Trustee prior to purchase), at a price
equal to the Purchase Price. The Purchase Price for any Mortgage Loan purchased
hereunder shall be deposited in the Collection Account, and the Trustee, upon
receipt of written certification from the Servicer of such deposit, shall
release or cause to be released to the Servicer the related Mortgage File and
the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Servicer shall furnish and as
shall be necessary to vest in the Servicer title to any Mortgage Loan released
pursuant hereto.

         Section 3.17. Trustee to Cooperate; Release of Files.
                       --------------------------------------

         (a)   Upon the payment in full of any Mortgage Loan (including any
liquidation of such Mortgage Loan through foreclosure or otherwise, or the
receipt by the Servicer of a notification that payment in full will be escrowed
in a manner customary for such purposes), the Servicer shall deliver to the
Trustee, in written form (with two executed copies) or electronic form, of a
completed "Request for Release" in the form of Exhibit E. Upon receipt of such
Request for Release of Documents, the Trustee shall promptly release the related
Mortgage File within three (3) Business Days via overnight mail delivery (at the
expense of the Servicer), in trust, to (i) the Servicer, or (ii) such other
party identified in the related Request for Release. Upon any such payment in
full, or the receipt of such notification that such funds have been placed in
escrow, the Servicer shall direct the Trustee in writing to execute an
instrument of satisfaction (or assignment of Mortgage without recourse)
regarding the Mortgaged Property relating to such Mortgage, which instrument of
satisfaction or assignment shall be delivered to the Person or Persons entitled
thereto against receipt therefor of payment in full, it being understood and
agreed that no expense incurred in connection with such instrument of
satisfaction or assignment, as the case may be, shall be chargeable to the
Collection Account. In lieu of executing any such satisfaction or assignment, as
the case may be, the Servicer may prepare and submit to the Trustee a
satisfaction (or assignment without recourse, if requested by the Person or
Persons entitled thereto) in form for execution by the Trustee with all
requisite information completed by the Servicer; in such event, the Trustee
shall execute and acknowledge such satisfaction or assignment, as the case may
be, and deliver the same with the related Mortgage File, as aforesaid.

         (b)   From time to time and as appropriate in the servicing of any
Mortgage Loan, including, without limitation, foreclosure or other comparable
conversion of a Mortgage Loan or collection under any insurance policy relating
to a Mortgage Loan, the Trustee shall (except in the case of the payment or
liquidation pursuant to which the related Mortgage File is released to an escrow
agent or an employee, agent or attorney of the Trustee), upon written request of
the Servicer and delivery to the Trustee, in written form (with two executed
copies) or electronic form, of a "Request for Release" in the form of Exhibit E
signed by a Servicing Officer, release the related Mortgage File to the Servicer
within three (3) Business Days and shall execute such documents as shall be
necessary to the prosecution of any such proceedings, including, without
limitation, an assignment without recourse of the related Mortgage to the
Servicer. Such receipt

                                      -74-
<PAGE>

shall obligate the Servicer to return the Mortgage File to the Trustee when the
need therefor by the Servicer no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a Request for Release evidencing such
liquidation, the receipt shall be released by the Trustee to the Servicer.

         (c)   Subject to Section 3.01, the Servicer shall have the right to
accept applications of Mortgagors for consent to (i) partial releases of
Mortgages, (ii) alterations, (iii) removal, demolition or division of properties
subject to Mortgages, (iv) modifications, and (v) second mortgage subordination
agreements. No application for approval shall be considered by the Servicer
unless: (w) it has received an Opinion of Counsel, addressed to the Trustee
(which opinion shall not be an expense of the Trustee or the Trust Fund) that
such sale, disposition, substitution, acquisition or contribution will not
affect adversely the status of any REMIC constituting part of the Trust Fund as
a REMIC or cause any REMIC constituting part of the Trust Fund to be subject to
a tax on "prohibited transactions" or "contributions" pursuant to the REMIC
Provisions; (x) the provisions of the related Note and Mortgage have been
complied with; (y) the Loan-to-Value Ratio and debt-to-income ratio after any
release does not exceed the maximum Loan-to-Value Ratio and debt-to-income ratio
established in accordance with the underwriting standards of the Mortgage Loans;
and (z) the lien priority of the related Mortgage is not affected. Upon receipt
by the Trustee of a Servicing Officer's certificate setting forth the action
proposed to be taken in respect of a particular Mortgage Loan and certifying
that the criteria set forth in the immediately preceding sentence have been
satisfied, the Trustee shall execute and deliver to the Servicer the consent or
partial release so requested by the Servicer. A proposed form of consent or
partial release, as the case may be, shall accompany any Servicing Officer's
certificate delivered by the Servicer pursuant to this paragraph.

         Section 3.18. Servicing Compensation.
                       ----------------------

         As compensation for its activities hereunder, the Servicer shall be
entitled to retain the amount of the Servicing Fee with respect to each Mortgage
Loan (including REO Properties). The Servicer shall be entitled to retain
additional servicing compensation in the form of release fees, bad check
charges, assumption fees, modification or extension fees, late payment charges,
prepayment charges that are not Prepayment Charges, Servicer Prepayment Charge
Payment Amounts, Transferor Prepayment Charge Payment Amounts or any other
service-related fees and similar items, to the extent collected from Mortgagors.

         Section 3.19. Annual Statement as to Compliance.
                       ---------------------------------

         (a)   The Servicer, at its own expense, will deliver to the Trustee and
the Depositor, not later than March 15 of each calendar year commencing in 2004,
a Servicing Officer's certificate stating, as to each signer thereof, that (i) a
review of the activities of the Servicer during such preceding fiscal 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 Servicer has fulfilled all its obligations under this Agreement for
such year, or, if there has been a default in the fulfillment of all such
obligations, specifying each such default known to such officers and the nature
and status thereof including the steps being taken by the Servicer to remedy
such default.

                                      -75-
<PAGE>

         (b)   Delivery of such reports, information and documents to the
Trustee is for informational purposes only and their receipt of such shall not
constitute constructive notice of any information contained therein or
determinable, from information contained therein, including the Servicer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

         Section 3.20. Annual Independent Certified Public Accountants' Reports.
                       --------------------------------------------------------

         (a)   On or before March 15 of each calendar year commencing in 2004,
the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Trustee, the
Depositor and each Rating Agency, a report stating that (i) it has obtained a
letter of representation regarding certain matters from the management of the
Servicer which includes an assertion that the Servicer has complied with certain
minimum residential mortgage loan servicing standards, identified in either the
Uniform Single Attestation Program for Mortgage Bankers established by the
Mortgage Bankers Association of America or the Audit Program for Mortgages
serviced by Freddie Mac, 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. Copies of such statement shall be
provided by the Trustee to any Certificateholder upon request, at the Servicer's
expense, provided that such statement is delivered by the Servicer to the
Trustee.

         (b)   Delivery of such reports, information and documents to the
Trustee is for informational purposes only and their receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Servicer's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

         Section 3.21. Access to Certain Documentation and Information Regarding
                       the Mortgage Loans.
                       ---------------------------------------------------------

         The Servicer shall provide to the Trustee, Certificateholders that are
federally insured savings and loan associations, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of each of the
foregoing (which, in the case of supervisory agents and examiners, may be
required by applicable state and federal regulations) access to the available
documentation regarding the Mortgage Loans, such access being afforded without
charge but only upon reasonable advance request and during normal business hours
at the offices of the Servicer designated by it.

         Section 3.22. Reports Filed with Securities and Exchange Commission;
                       Annual Certification of Securities and Exchange
                       Commission Filing.
                       ------------------------------------------------------

         (a)   The Trustee and the Servicer shall reasonably cooperate with the
Depositor in connection with the Trust's satisfying the reporting requirements
under the Exchange Act. The Trustee shall prepare on behalf of the Trust any
Forms 8-K and 10-K customary for similar

                                      -76-
<PAGE>

securities as required by the Exchange Act and the Rules and Regulations of the
Securities and Exchange Commission thereunder, and the Trustee shall sign and
file (via the Securities and Exchange Commission's Electronic Data Gathering and
Retrieval System) such Forms on behalf of the Depositor. 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
either 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.
Notwithstanding the foregoing, the Depositor shall sign any Form 10-K with
respect to which the Depositor signs a Sarbanes-Oxley Certification.

         (b)   The Trustee shall file a Form 8-K within 15 days after each
Distribution Date, including a Form 8-K with a copy of the statement to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
March 30th of each year (or such earlier date as may be required by the Exchange
Act and the Rules and Regulations of the Securities and Exchange Commission),
the Trustee shall file a Form 10-K, in substance as required by applicable law
or applicable Securities and Exchange Commission staff interpretations. Such
Form 10-K shall include as exhibits the Servicer's annual statement of
compliance described under Section 3.19 and the accountant's report described
under Section 3.20, in each case to the extent they have been timely delivered
to the Trustee. If they are not so timely delivered, the Trustee shall file an
amended Form 10-K including such documents as exhibits reasonably promptly after
they are delivered to the Trustee. The Trustee shall have no liability with
respect to any failure to properly prepare or file such periodic reports
resulting from or relating to the Trustee's inability or failure to obtain any
information not resulting from its own negligence or willful misconduct. The
Form 10-K and any amended Form 10-K shall also include a certification of the
Depositor in the form attached hereto as Exhibit Q (the "Sarbanes Oxley
Certification"), which shall be signed by the senior officer of the Depositor in
charge of its securitizations, and which the Depositor shall deliver to the
Trustee prior to March 15th of each year in which a Form 10-K is to be filed
with respect to the Trust. The Trustee, the Depositor and the Servicer shall
cooperate reasonably to enable the Securities and Exchange Commission
requirements with respect to the Trust to be met in the event the Securities and
Exchange Commission issues additional interpretative guidance or promulgates
rules or regulations, or in the event of any other change of law, that would
require the reporting arrangements, or the allocation of responsibilities with
respect thereto, described in this Section 3.22 to be conducted in a different
manner than as described herein.

         (c)   Not later than 15 calendar days before the date on which the
Depositor's annual report on Form 10-K is required to be filed in accordance
with the Exchange Act and the rules and regulations of the Securities and
Exchange Commission (or, if such day is not a Business Day, the immediately
preceding Business Day), the Trustee shall sign and deliver to the Depositor (or
to the Servicer, if the Servicer is signing the Sarbanes-Oxley Certification) a
certification in the form attached hereto as Exhibit R-1 (the "Trustee's
Certification") for the benefit of the Depositor (or the Servicer) and its
officers, directors and Affiliates; provided, however, that the Trustee shall
not undertake an analysis of the accountant's report attached as an exhibit to
the Form 10-K. In addition, the Trustee shall indemnify and hold harmless the
Depositor and each Person, if any, who "controls" the Depositor within the
meaning of the Securities Act and its officers, directors and Affiliates from
and against any losses, damages, penalties, fines, forfeitures, reasonable and
necessary legal fees and related costs, judgments and

                                      -77-
<PAGE>

other costs and expenses arising out of or based upon a breach of the Trustee's
obligations under this Section 3.22(c) or the Trustee's negligence, bad faith or
willful misconduct in connection therewith or any inaccuracy in the Trustee's
Certification. If the indemnification provided for in this Section 3.22(c) is
unavailable or insufficient to hold harmless such Persons, then the Trustee
shall contribute to the amount paid or payable by such Persons as a result of
the losses, claims, damages or liabilities of such Persons in such proportion as
is appropriate to reflect the relative fault of the Depositor or the Servicer on
the one hand and the Trustee on the other. The Trustee acknowledges that the
Depositor is relying on the Trustee's performance of its obligations under this
Section 3.22(c) in order to perform its obligations under Section 3.22(b) above.

         (d)   Not later than 15 calendar days before the date on which the
Depositor's annual report on Form 10-K is required to be filed in accordance
with the Exchange Act and the rules and regulations of the Securities and
Exchange Commission (or, if such day is not a Business Day, the immediately
preceding Business Day), the Servicer will deliver to the Depositor and to the
Trustee an Officer's Certificate for the prior calendar year in substantially
the form of Exhibit R-2 to this Agreement and shall deliver to the Depositor a
similar Officer's Certificate with respect to any additional Sarbanes-Oxley
Certification that is required to be filed upon 30 days' written request. The
Servicer agrees to indemnify and hold harmless each of the Depositor and each
Person, if any, who "controls" the Depositor within the meaning of the
Securities Act and their respective officers, directors and Affiliates against
any and all losses, penalties, fines, forfeitures, reasonable legal fees and
related costs, judgments and any other costs and expenses that such Person may
sustain arising out of or based on the failure of the Servicer to deliver or
cause to be delivered when required any Officer's Certificate required pursuant
to this Section 3.22(d), or any untrue statement of a material fact or omission
of a material fact necessary to make any reports, certificates or other
information contained in any Officer's Certificate provided pursuant to this
Section 3.22(d) in light of the circumstances under which such statements were
made, not misleading, or the Servicer's negligence, bad faith or willful
misconduct of the Servicer in connection therewith. If an event occurs that
would otherwise result in an indemnification obligation under this Section
3.22(d), but the indemnification provided for in this Section 3.22(d) by the
Servicer is unavailable or insufficient to hold harmless such Persons, then the
Servicer shall contribute to the amount paid or payable by such Persons as a
result of the losses, claims, damages or liabilities of such Persons in such
proportion as is appropriate to reflect the relative fault of the Depositor or
Trustee on the one hand and the Servicer on the other. The Servicer acknowledges
that the Depositor and the Trustee are relying on the Servicer's performance of
its obligations under this Agreement in order to perform their respective
obligations under this Section 3.22.

         (e)   Upon any filing with the Securities and Exchange Commission, the
Trustee shall promptly deliver to the Depositor a copy of any such executed
report, statement or information.

         (f)   If the Securities and Exchange Commission issues additional
interpretative guidance or promulgates additional rules or regulations, or if
other changes in applicable law occur, which would require the reporting
arrangements, or the allocation of responsibilities with respect thereto,
described in this Section 3.22, to be conducted differently than as described,
the Depositor, the Servicer and the Trustee will reasonably cooperate to amend
the provisions of this Section 3.22 in order to comply with such amended
reporting requirements and such amendment of this Section 3.22. Any such
amendment shall be made in accordance with Section 11.01

                                      -78-
<PAGE>

without the consent of the Certificateholders, and may result in a change in the
reports filed by the Trustee on behalf of the Trust under the Exchange Act.
Notwithstanding the foregoing, none of the Depositor, the Servicer or the
Trustee shall be obligated to enter into any amendment pursuant to this Section
3.22 that adversely affects its obligations and immunities under this Agreement.

         (g) Prior to January 30 of the first year in which the Trustee is able
to do so under applicable law, the Trustee shall file a Form 15D Suspension
Notification with respect to the Trust.

         Section 3.23. Obligations of the Servicer in Respect of Compensating
                       Interest.
                       ------------------------------------------------------

         Not later than the close of business on each Servicer Remittance Date,
the Servicer shall deliver to the Trustee for deposit in the Distribution
Account an amount ("Compensating Interest") equal to the lesser of (A) the
aggregate of the Prepayment Interest Shortfalls on the Mortgage Loans for the
related Distribution Date resulting from Principal Prepayments on the Mortgage
Loans during the related Prepayment Period and (B) 50% of its Servicing Fee
received in the related Collection Period. The Servicer shall apply Compensating
Interest to offset any Prepayment Interest Shortfalls on the Mortgage Loans. The
Servicer shall not have the right to reimbursement for any amounts remitted to
the Trustee in respect of Compensating Interest. Such amounts so remitted shall
be included in the Available Funds and distributed therewith on the next
Distribution Date. The Servicer shall not be obligated to pay Compensating
Interest with respect to Relief Act Interest Shortfalls.

         Section 3.24. Obligations of the Servicer in Respect of Mortgage
                       Interest 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 Interest Rates, Monthly Payments or Principal Balances that were made
by the Servicer in a manner not consistent with the terms of the related
Mortgage Note and this Agreement, the 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 servicer in respect of any such liability. Such indemnities shall
survive the termination or discharge of this Agreement. Notwithstanding the
foregoing, this Section 3.24 shall not limit the ability of the 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 3.25. Investment of Funds in the Collection Account.
                       ---------------------------------------------

         (a)   The Servicer may direct any depository institution maintaining
the Collection Account to invest the funds in the Collection 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

                                      -79-
<PAGE>

withdrawn from such account pursuant to this Agreement, if the Trustee is the
obligor thereon or if such investment is managed or advised by the Trustee of an
Affiliate. All such Permitted Investments shall be held to maturity, unless
payable on demand. Any investment of funds in the Collection Account shall be
made in the name of the Trustee or the Servicer, as applicable (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) over each such investment and the income
thereon, and any certificate or other instrument evidencing any such investment
shall be delivered directly to the Trustee or its agent, together with any
document of transfer necessary to transfer title to such investment to the
Trustee or its nominee. In the event amounts on deposit in the Collection
Account are at any time invested in a Permitted Investment payable on demand,
the Trustee shall at the direction of the Servicer:

                           (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 Collection Account.

         (b)   All income and gain realized from the investment of funds in the
Collection Account shall be for the benefit of the Servicer. The Servicer shall
deposit in the Collection Account or (to the extent funds in the Escrow Account
are invested if permitted by applicable law) the Escrow Account, as applicable,
the amount of any loss incurred in respect of any such Permitted Investment made
with funds in such account immediately upon realization of such loss. Funds in
the Distribution Account shall remain uninvested.

         (c)   Except as otherwise expressly provided in this Agreement, if any
default occurs in the making of a payment due under any Permitted Investment, or
if a default occurs in any other performance required under any Permitted
Investment, the Trustee 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 3.26. Liability of Servicer; Indemnification.
                       --------------------------------------

         Subject to Section 6.03, the Servicer (except the Trustee if it is
required to succeed the Servicer hereunder) indemnifies and holds the Trustee,
the Depositor and the Trust Fund harmless against any and all claims, losses,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any other costs, fees and expenses that the Trustee, the
Depositor and the Trust Fund may sustain in any way related to the failure of
the Servicer to perform its duties and service the Mortgage Loans in compliance
with the Servicing Standard. The Servicer

                                      -80-
<PAGE>

shall immediately notify the Trustee and the Depositor if a claim is made that
may result in such claims, losses, penalties, fines, forfeitures, legal fees or
related costs, judgments, or any other costs, fees and expenses, and the
Servicer shall assume (with the consent of the Trustee) the defense of any such
claim and pay all expenses in connection therewith, including reasonable counsel
fees, and promptly pay, discharge and satisfy any judgment or decree which may
be entered against the Servicer, the Trustee, the Depositor and/or the Trust
Fund in respect of such claim. The provisions of this Section 3.26 shall survive
the termination of this Agreement and the payment of the outstanding
Certificates.

         Section 3.27. Reports of Foreclosure and Abandonment of Mortgaged
                       Properties.
                       ---------------------------------------------------

         Beginning in 2003, the Servicer shall file the reports of foreclosure
and abandonment of any Mortgaged Property required by Section 6050J of the Code
with the Internal Revenue Service on or before the due date for any such report.
Not later than 90 days following the end of each calendar year, beginning in
2003, the Servicer will deliver an Officer's Certificate to the Trustee
certifying its compliance with this Section 3.27. The reports from the Servicer
shall be in form and substance sufficient to meet the reporting requirements
imposed by such Section 6050J.

         Section 3.28. Protection of Assets.
                       --------------------

         (a)   Except for transactions and activities entered into in connection
with the securitization that is the subject of this Agreement, the Trust is not
authorized and has no power to:

               (1)      borrow money or issue debt;

               (2)      merge with another entity, reorganize, liquidate or sell
                        assets; or

               (3)      engage in any business or activities.

         (b)   Each party to this Agreement agrees that it will not file an
involuntary bankruptcy petition against the Trustee or the Trust Fund or
initiate any other form of insolvency proceeding until after the Certificates
have been paid.

         Section 3.29. Prepayment Charges.
                       ------------------

         (a)   To the extent consistent with the terms of this Agreement, the
Servicer may waive (or permit a subservicer to waive) a Prepayment Charge only
under the following circumstances: (i) such waiver relates to a default or a
reasonably forseable default and would, in the reasonable judgment of the
Servicer, maximize recovery of total proceeds taking into account the value of
such Prepayment Charge and the related Mortgage Loan or (ii) such waiver is
required under state or federal law or (iii) the Servicer has not been provided
with information sufficient to enable it to collect the Prepayment Charge. If a
Prepayment Charge is waived as permitted by meeting the standard described in
clause (iii) above, then the Servicer shall use commercially reasonable efforts
to enforce the obligation, if any, of the Transferor to pay the Transferor
Prepayment Charge Payment Amount related to such waived Prepayment Charge, for
deposit in

                                      -81-
<PAGE>

the Collection Account. The Servicer shall not waive any Prepayment Charge
unless it is waived in accordance with this Section 3.29(a).

         (b)   The Servicer shall pay the amount of any Prepayment Charge (to
the extent not collected and remitted to the Collection Account pursuant to
Section 3.04(a)) to the Trustee, if a Servicer or any subservicer waives any
Prepayment Charge other than as permitted under Section 3.29(a); provided,
however, that no such payment shall be required in respect of a Prepayment
Charge that was waived by the Transferor, as predecessor servicer, prior to
April 30, 2003. The Servicer shall pay the amount of such Prepayment Charge (or
portion thereof not collected) by depositing such amount into the Collection
Account at the time that amount prepaid on the related Mortgage Loan is required
to be deposited into the Collection Account.

         (c)   In the event that a Prepayment Charge due with respect to any
Mortgage Loan is not timely received by the Servicer, the Servicer shall use
commercially reasonable efforts to determine whether the Transferor is obligated
to pay a related Transferor Prepayment Charge Payment Amount, and if the
Servicer determines that a Transferor Prepayment Charge Payment Amount is due,
the Servicer shall promptly notify the Transferor, and the Servicer shall
enforce the Transferor's obligations to pay in a timely manner any such
Transferor Prepayment Charge Payment Amounts and, to the extent that such
amounts are received by the Servicer, shall cause such amounts to be deposited
into the Collection Account within one Business Day of receipt.

         Section 3.30. [Reserved].
                       --------

         Section 3.31. No Personal Solicitation.
                       -------------------------

         From and after the Closing Date, the Servicer agrees that it will not
take any action or permit or cause any action to be taken by any of its agents
and Affiliates, or by any independent contractors or independent mortgage
brokerage companies on the Servicer's behalf, to personally, by telephone, mail
or electronic mail, solicit the Mortgagor under any Mortgage Loan for the
purpose of refinancing such Mortgage Loan; provided, that the Servicer may
solicit any Mortgagor for whom the Servicer has received a request for
verification of mortgage, a request for demand for payoff, a mortgagor initiated
written or verbal communication indicating a desire to prepay the related
Mortgage Loan, or the mortgagor initiates a title search; provided further, it
is understood and agreed that promotions undertaken by the Servicer or any of
its Affiliates which (i) concern optional insurance products or other additional
products or (ii) are directed to the general public at large, including, without
limitation, mass mailings based on commercially acquired mailing lists,
newspaper, radio and television advertisements shall not constitute solicitation
under this Section, nor is the Servicer prohibited from responding to
unsolicited requests or inquiries made by a Mortgagor or an agent of a
Mortgagor. Furthermore, the Servicer shall be permitted to include in its
monthly statements to borrowers or otherwise, statements regarding the
availability of the Servicer's counseling services with respect to refinancing
mortgage loans.

                                      -82-
<PAGE>

                                   ARTICLE IV

                                  FLOW OF FUNDS

         Section 4.01. Interest Distributions.
                       ----------------------

         On each Distribution Date, the Trustee shall withdraw from the
Distribution Account the Interest Remittance Amount and apply it in the
following order of priority (based upon the Mortgage Loan information provided
to it in the Remittance Report, upon which the Trustee may conclusively rely),
and the calculations required to be made by the Trustee, to the extent
available:

                (i) to the Trustee, the Trustee Fee for such Distribution Date;

                (ii) concurrently, as follows:

                     (a)   from the Group I Interest Remittance Amount to the
                Class AI Certificates, pro rata, the Accrued Certificate
                Interest for the Class AI Certificates for such Distribution
                Date; and

                     (b)   from the Group II Interest Remittance Amount to the
                Class AII Certificates, pro rata, the Accrued Certificate
                Interest for the Class AII Certificates for such Distribution
                Date;

                (iii) concurrently, as follows:

                     (a)   from the Group I Interest Remittance Amount to the
                Class AI Certificates, pro rata, the Unpaid Interest Shortfall
                Amount for the Class AI Certificates for such Distribution Date;
                and

                     (b)   from the Group II Interest Remittance Amount to the
                Class AII Certificates, pro rata, the Unpaid Interest Shortfall
                Amount for the Class AII Certificates for such Distribution
                Date;

                (iv) concurrently, as follows:

                     (a)   if the Group II Interest Remittance Amount is
                insufficient to pay the Class AII Certificates' Accrued
                Certificate Interest for such Distribution Date pursuant to
                Section 4.01(ii)(b) above, from the remaining Group I Interest
                Remittance Amount, to the Class AII Certificates, pro rata, to
                cover such shortfall for such Distribution Date; and

                     (b)   if the Group I Interest Remittance Amount is
                insufficient to pay the Class AI Certificates' Accrued
                Certificate Interest for such Distribution Date pursuant to
                Section 4.01(ii)(a) above, from the remaining Group II Interest
                Remittance Amount, to the Class AI Certificates, pro rata, to
                cover such shortfall for such Distribution Date;

                                      -83-
<PAGE>

                (v)    concurrently, as follows:

                       (a)   if the Group II Interest Remittance Amount is
                insufficient to pay the Class AII Certificates' Unpaid Interest
                Shortfall Amount for such Distribution Date pursuant to Section
                4.01(iii)(b) above, from the remaining Group I Interest
                Remittance Amount, to the Class AII Certificates, pro rata, to
                cover such shortfall for such Distribution Date; and

                       (b)   if the Group I Interest Remittance Amount is
                insufficient to pay the Class AI Certificates' Unpaid Interest
                Shortfall Amount for such Distribution Date pursuant to Section
                4.01(iii)(a) above, concurrently, from the remaining Group II
                Interest Remittance Amount, to the Class AI Certificates, pro
                rata, to cover such shortfall for such Distribution Date;

                (vi)   to the Class M-1 Certificates, the Accrued Certificate
         Interest thereon for such Distribution Date;

                (vii)  to the Class M-2 Certificates, the Accrued Certificate
         Interest thereon for such Distribution Date;

                (viii) to the Class M-3 Certificates, the Accrued Certificate
         Interest thereon for such Distribution Date;

                (ix)   to the Class M-4 Certificates, the Accrued Certificate
         Interest thereon for such Distribution Date;

                (x)    to the Class M-5 Certificates, the Accrued Certificate
         Interest thereon for such Distribution Date; and

                (xi)   the amount, if any, of the Interest Remittance Amount
         remaining after application with respect to the priorities set forth
         above will be distributed as part of the Monthly Excess Cashflow Amount
         as set forth in Section 4.02(b).

         Section 4.02. Distributions of Principal and Monthly Excess Cashflow
                       Amounts.
                       ------------------------------------------------------

         (a)    On each Distribution Date, the Trustee shall make the following
distributions in the following order of priority (based upon the Mortgage Loan
information provided to it in the Remittance Report and the calculations
required to be made by the Trustee), to the extent of the Principal Distribution
Amount:

                (i)    Before the Stepdown Date or with respect to which a
         Trigger Event is in effect, sequentially, as follows:

                       first, concurrently, as follows:

                       (A)   the Group I Principal Distribution Amount to the
                Class AI Certificates, until the Certificate Principal Balance
                thereof has been reduced to zero; and

                                      -84-
<PAGE>

                       (B)   the Group II Principal Distribution Amount to the
                Class AII Certificates, until the Certificate Principal Balance
                thereof has been reduced to zero;

                       second, concurrently, as follows:

                       (A)   the Group I Principal Distribution Amount remaining
                after priority first of this Section 4.02(a)(i), to the Class
                AII Certificates, until the Certificate Principal Balance
                thereof has been reduced to zero; and

                       (B)   the Group II Principal Distribution Amount
                remaining after priority first of this Section 4.02(a)(i),
                to the Class AI Certificates, until the Certificate
                Principal Balance thereof has been reduced to zero;

                       third, to the Class M-1 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;

                       fifth, to the Class M-3 Certificates, until the
                Certificate Principal Balance thereof has been reduced to zero;

                       sixth, to the Class M-4 Certificates, until the
                Certificate Principal Balance thereof has been reduced to zero;

                       seventh, to the Class M-5 Certificates, until the
                Certificate Principal Balance has been reduced to zero; and

                       eighth, any remaining Principal Distribution Amount will
                be distributed as part of the Monthly Excess Cashflow Amount as
                set forth in Section 4.02(b).

                (ii)   On or after the Stepdown Date and as long as a Trigger
         Event is not in effect:

                       first, concurrently, as follows:

                       (A)   the Group I Principal Distribution Amount to the
                Class AI Certificates up to the Class AI Principal Distribution
                Amount, until the Certificate Principal Balance of the Class AI
                Certificates has been reduced to zero; and

                       (B)   the Group II Principal Distribution Amount to the
                Class AII Certificates up to the Class AII Principal
                Distribution Amount, until the Certificate Principal Balance of
                the Class AII Certificate has been reduced to zero;

                       second, concurrently, as follows:

                                      -85-
<PAGE>

                       (A)   from the Group I Principal Distribution Amount
                remaining after application pursuant to priority first of this
                Section 4.02(a)(ii) above, to the Class AII Certificates up to
                the portion, if any, of the related Class AII Principal
                Distribution Amount that was not distributed pursuant to
                priority first of this Section 4.02(a)(ii) above, until the
                Certificate Principal Balance of the Class AII Certificates has
                been reduced to zero; and

                       (B)   from the Group II Principal Distribution Amount
                remaining after application pursuant to priority first of this
                Section 4.02(a)(ii) above, to the Class AI Certificates up to
                the portion, if any, of the related Class AI Principal
                Distribution Amount that was not distributed pursuant to
                priority first, of this Section 4.02(a)(ii) above, until the
                Certificate Principal Balance of the Class AI Certificates has
                been reduced to zero.

                       third, if any portion of the Class A Principal
                Distribution Amount remains unpaid after distributions pursuant
                to priorities first and second of this Section 4.02(a)(ii)
                above, any remaining Principal Distribution Amount pro rata to
                the Classes of Class A Certificates remaining outstanding, up to
                such remaining portion of the Class A Principal Distribution
                Amount, until the Certificate Principal Balance of each such
                Class has been reduced to zero;

                       fourth, to the Class M-1 Certificates, up to the Class
                M-1 Principal Distribution Amount, until the Certificate
                Principal Balance thereof has been reduced to zero;

                       fifth, to the Class M-2 Certificates, up to the Class M-2
                Principal Distribution Amount, until the Certificate Principal
                Balance thereof has been reduced to zero;

                       sixth, to the Class M-3 Certificates, up to the Class M-3
                Principal Distribution Amount, until the Certificate Principal
                Balance thereof has been reduced to zero;

                       seventh, to the Class M-4 Certificates, up to the Class
                M-4 Principal Distribution Amount, until the Certificate
                Principal Balance thereof has been reduced to zero;

                       eighth, to the Class M-5 Certificates, up to the Class
                M-5 Principal Distribution Amount, until the Certificate
                Principal Balance thereof has been reduced to zero; and

                       ninth, any remaining Principal Distribution Amount will
                be distributed as part of the Monthly Excess Cashflow Amount as
                set forth in Section 4.02(b).

         (b)    On each Distribution Date, any Monthly Excess Cashflow Amount
shall be distributed, to the extent available, in the following order of
priority on such Distribution Date:

                (i)    to pay the Extra Principal Distribution Amount for such
         Distribution Date;

                                      -86-
<PAGE>

                (ii)   to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-1 Certificates;

                (iii)  to pay the remaining Unpaid Interest Shortfall Amount, if
         any, for the Class M-1 Certificates;

                (iv)   to pay the Class M-1 Realized Loss Amortization Amount
         for such Distribution Date;

                (v)    to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-2 Certificates;

                (vi)   to pay the remaining Unpaid Interest Shortfall Amount, if
         any, for the Class M-2 Certificates;

                (vii)  to pay the Class M-2 Realized Loss Amortization Amount
         for such Distribution Date;

                (viii) to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-3
         Certificates;

                (ix)   to pay the remaining Unpaid Interest Shortfall Amount, if
         any, for the Class M-3 Certificates;

                (x)    to pay the Class M-3 Realized Loss Amortization Amount
         for such Distribution Date;

                (xi)   to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-4 Certificates;

                (xii)  to pay the remaining Unpaid Interest Shortfall Amount, if
         any, for the Class M-4 Certificates;

                (xiii) to pay the Class M-4 Realized Loss Amortization Amount
         for such Distribution Date;

                (xiv)  to pay any remaining unpaid Accrued Certificate Interest
         for such Distribution Date for the Class M-5 Certificates;

                (xv)   to pay the remaining Unpaid Interest Shortfall Amount, if
         any, for the Class M-5 Certificates;

                (xvi)  to pay the Class M-5 Realized Loss Amortization Amount
         for such Distribution Date;

                (xvii) first, to the Class AI and Class AII Certificates, pro
         rata, and then sequentially, to the Class M-1, Class M-2, Class M-3,
         Class M-4 and Class M-5

                                      -87-
<PAGE>

         Certificates, in that order, any Cap Carryover Amount for each such
         Class, in each case until such amount for such Class is paid in full;

                (xviii) to pay the Class N Certificates, (A) the Accrued
         Certificate Interest for the Class N Certificates, (B) the Unpaid
         Interest Shortfall Amount for the Class N Certificates remaining unpaid
         and (C) any remaining Monthly Excess Cashflow Amount to reduce the
         Class N Principal Amount, until the Class N Principal Amount has been
         reduced to zero; and

                (xix)   to the Class X Certificates, the Class X Distributable
         Amount for such Distribution Date.

         On each Distribution Date, there shall be distributed to the Holder of
the Class R Certificate, any remaining amount in the Distribution Account on
such date after the application pursuant to Sections 4.01, 4.02(a) and
4.02(b)(i)-(xix).

         (c)    On each Distribution Date, the Trustee shall withdraw any
amounts then on deposit in the Distribution Account that represent Prepayment
Charges collected by the Servicer in connection with the Principal Prepayment in
full of any of the Mortgage Loans, any Transferor Prepayment Charge Payment
Amount or any Servicer Prepayment Charge Payment Amount and shall distribute
such amounts to the Holders of the Class N Certificates (for so long as the
Class N Principal Amount has not been reduced to zero pursuant to Section
4.02(b)(xviii) above), and to the Class X Certificates after the Class N
Principal Amount has been reduced to zero. Such amounts shall be treated as
having been distributed to the Holders of the Class N and Class X Certificates
from the Grantor Trust. Such amounts shall be applied to make the distributions
specified under Section 4.02(b)(xviii) and (xix), in the order specified in such
clauses, to the extent not paid out of the Monthly Excess Cashflow Amount
pursuant to Section 4.02(b).

         (d)    Any amounts distributed to the Class A and Mezzanine
Certificates in respect of interest pursuant to Sections 4.02(b)(xvii) which
constitute Cap Carryover Amounts (taking into account, in the case of the Class
AI and Class AII Certificates, the parenthetical in clause (ii) of the
definition of Cap Carryover Amount) shall first be deemed distributed by REMIC 2
as a distribution in respect of the Class X/N Interest and distributed thereby
as a distribution to the Class N and Class X Certificates, and then distributed
to the Class A and Mezzanine Certificates from the Grantor Trust as payments on
notional principal contracts in the nature of cap contracts. Any remaining
amount with respect to the Class X/N Interest or any remaining Yield Maintenance
Agreement Payment shall be treated as having been distributed to the Holders of
the Class N and Class X Certificates from the Grantor Trust.

         Section 4.03. Allocation of Losses.
                       --------------------

         Realized Losses shall be allocated first against the
Overcollateralization Amount until such amount has been reduced to zero. If,
after giving effect to the distribution of the Principal Distribution Amount on
any Distribution Date the aggregate Certificate Principal Balance of the Offered
Certificates exceeds the Pool Balance as of the end of the related Collection
Period, such excess will be allocated against the Class M-5, Class M-4, Class
M-3, Class M-2 and Class M-1

                                      -88-
<PAGE>

Certificates, in that order and until the respective Certificate Principal
Balances thereof are reduced to zero.

         Section 4.04. Method of Distribution.
                       ----------------------

         The Trustee shall make distributions in respect of a Distribution Date
to each Certificateholder of record on the related Record Date (other than as
provided in Section 10.01 respecting the final distribution), in the case of
Certificateholders of the Certificates, 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 such Certificates, or 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, provided that the Trustee may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
Distributions among Certificateholders shall be made in proportion to the
Percentage Interests evidenced by the Certificates held by such
Certificateholders.

         Section 4.05. Distributions on Book-Entry Certificates.
                       ----------------------------------------

         Each distribution with respect to a Book-Entry Certificate shall be
paid to the Depository, which shall credit 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 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. All such credits
and disbursements with respect to a Book-Entry Certificate are to be made by the
Depository and the Depository Participants in accordance with the provisions of
the Certificates. None of the Trustee, the Depositor or the Servicer shall have
any responsibility therefor except as otherwise provided by applicable law.

         Section 4.06. Statements.
                       ----------

         (a)    On each Distribution Date, based on the Mortgage Loan
information contained in the Remittance Report, the Trustee shall prepare and
post on its website at www.jpmorgan.com/absmbs, a statement (the "Distribution
Date Statement") as to the distributions made on such Distribution Date:

                (i)    the amount of the distribution made on such Distribution
         Date to the Holders of each Class of Certificates allocable to
         principal or reduction of Principal Balance, separately identified and
         the amount of the distribution made on such Distribution Date to the
         Holders of the Class N Certificates allocable to Prepayment Charges,
         Servicer Prepayment Charge Payment Amounts and Transferor Prepayment
         Charge Payment Amounts;

                (ii)   the amount of the distribution made on such Distribution
         Date to the Holders of each Class of Certificates allocable to interest
         or Class X Distributable Amount, separately identified;

                                      -89-
<PAGE>

                (iii)  the Overcollateralization Amount, the
         Overcollateralization Release Amount, the Overcollateralization
         Deficiency and the Targeted Overcollateralization Amount as of such
         Distribution Date and the Monthly Excess Interest Amount and Monthly
         Excess Cashflow Amount for such Distribution Date;

                (iv)   the aggregate amount of servicing compensation received
         by the Servicer during the related Collection Period;

                (v)    the aggregate amount of Advances for the related
         Collection Period, cumulative unreimbursed Advances and Servicing
         Advances and cumulative Nonrecoverable Advances;

                (vi)   the Pool Balance, at the close of business at the end of
         the related Collection Period;

                (vii)  the number, weighted average remaining term to maturity
         and weighted average Mortgage Interest Rate of the Mortgage Loans as of
         the related Due Date;

                (viii) the number and aggregate unpaid principal balance of
         Mortgage Loans (a) 30 to 59 days past due on a contractual basis, (b)
         60 to 89 days past due on a contractual basis, (c) 90 or more days past
         due on a contractual basis, (d) as to which foreclosure proceedings
         have been commenced and (e) in bankruptcy as of the close of business
         on the last day of the calendar month preceding such Distribution Date;

                (ix)   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 Principal Balance
         of such Mortgage Loan as of the date it became an REO Property;

                (x)    the book value of any REO Property as of the close of
         business on the last Business Day of the calendar month preceding the
         Distribution Date, and, cumulatively, the total number and cumulative
         principal balance of all REO Properties as of the close of business of
         the last day of the preceding Collection Period;

                (xi)   separately stated for each Loan Group, the aggregate
         amount of Principal Prepayments made during the related Prepayment
         Period;

                (xii)  separately stated for each Loan Group, the aggregate
         amount of Realized Losses incurred during the related Collection Period
         and the cumulative amount of Realized Losses;

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

                                      -90-
<PAGE>

                (xiv)   the Accrued Certificate Interest in respect of each
         Class of Certificates for such Distribution Date and any related Cap
         Carryover Amounts, and the respective portions thereof, if any,
         remaining unpaid following the distributions made in respect of such
         Certificates on such Distribution Date;

                (xv)    the aggregate amount of any Prepayment Interest
         Shortfalls for such Distribution Date, to the extent not covered by
         payments by the Servicer pursuant to Section 3.23;

                (xvi)   the amount of the Trustee Fee paid;

                (xvii   the Cap Carryover Amount for each Class distributed on
         such Distribution Date, the amount of Cap Carryover Amount remaining
         after giving effect to distributions thereof on such Distribution Date
         and the amount of all Cap Carryover Amounts on the Class AII
         Certificates covered by withdrawals from the Reserve Account on such
         Distribution Date;

                (xviii) any Overcollateralization Deficiency after giving effect
         to the distribution of principal on such Distribution Date;

                (xix)   (A) whether a Trigger Event has occurred and is
         continuing, (B) the Credit Enhancement Percentage, (C) the three-month
         rolling average percentage of the Pool Balance, as of the end of each
         of the preceding three Collection Periods, represented by the aggregate
         Principal Balance of all 60+ Day Delinquent Loans, (D) the percentage
         obtained by dividing such percentage reported pursuant to (C) by the
         Credit Enhancement Percentage, and (E) the cumulative Realized Losses,
         as a percentage of the original Pool Balance;

                (xx)    the amount of Available Funds for such Distribution
         Date;

                (xxi)   the rate at which interest accrues for each Class of
         Certificates for such Distribution Date;

                (xxii)  the information contained in the Liquidation Report for
         such Distribution Date;

                (xxiii) the aggregate Principal Balance of Mortgage Loans
         purchased by the Servicer or Seller during the related Prepayment
         Period and indicating the Section of this Agreement requiring or
         allowing the purchase of each such Mortgage Loan;

                (xxiv)  the aggregate Principal Balance of the Mortgage Loans
         repurchased by the Servicer during the related Prepayment Period in
         connection with Section 3.16; and

                (xxv)   the Mortgage Loan identifying number of each Mortgage
         Loan with a Prepayment Charge that was the subject of a Principal
         Prepayment in full during the related Collection Period, the
         Prepayment Charge listed on, or calculated pursuant to, each related
         Mortgage Note and the Prepayment Charge collected and/or the Servicer

                                      -91-
<PAGE>

         Prepayment Charge Payment Amount paid by the Servicer with respect to
         each such Mortgage Loan.

         The Trustee may fully rely upon and shall have no liability with
respect to information with respect to the Mortgage Loans provided by the
Servicer.

         In the case of information furnished pursuant to subclauses (i), (ii)
and (xiii) above, the amounts shall be expressed in a separate section of the
report as a dollar amount for each Class for each $1,000 original dollar amount
as of the Cut-off Date.

         (b)    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 Certificateholder of a Regular Certificate, if requested
in writing by such Person, such information as is reasonably necessary to
provide to such Person a statement containing the information set forth in
subclauses (i), (ii), (xiv) and (xvii) 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 that substantially comparable information shall be prepared and furnished
by the Trustee to Certificateholders pursuant to any requirements of the Code as
are in force from time to time.

         (c)    On each Distribution Date, the Trustee shall make available to
the Class R Certificateholder a copy of the reports made available to the
Regular Certificateholders in respect of such Distribution Date with such other
information as the Trustee deems necessary or appropriate. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished to Class R
Certificateholder by the Trustee pursuant to any requirements of the Code as
from time to time in force.

         Section 4.07. Remittance Reports; Advances.
                       ----------------------------

         (a)    On the second Business Day following each Determination Date,
the Servicer shall deliver to the Trustee by telecopy (or by such other means as
the Servicer and the Trustee may agree from time to time) a Remittance Report
with respect to the related Distribution Date. On the same date, the Servicer
shall electronically forward to the Trustee in such medium as may be agreed
between the Servicer and the Trustee the information set forth in such
Remittance Report with respect to the related Distribution Date and such
information reasonably available to the Servicer necessary in order for the
Trustee to perform the calculations necessary to make the distributions
contemplated by Section 4.01, 4.02 and 4.03 and to prepare the Distribution Date
Statement. The Trustee shall not be responsible to recompute, recalculate or
verify any information provided to it by the Servicer.

         (b)    The amount of Advances to be made by the Servicer for any
Distribution Date shall equal, subject to Section 4.07(d), the sum of (i) the
aggregate amount of Monthly Payments (net of the related Servicing Fee), due
during the related Collection Period in respect of the Mortgage Loans, which
Monthly Payments were delinquent on a contractual basis as of the close of
business on the related Determination Date and (ii) with respect to each REO
Property, which REO Property was acquired during or prior to the related
Collection Period and as to which REO

                                      -92-
<PAGE>

Property an REO Disposition did not occur during the related Collection Period,
an amount equal to the excess, if any, of the REO Imputed Interest on such REO
Property for such Collection Period, over the net income from such REO Property
transferred to the Distribution Account pursuant to Section 3.13 for
distribution on such Distribution Date. For purposes of the preceding sentence,
the Monthly Payment on each Balloon Mortgage Loan with a delinquent Balloon
Payment is equal to the assumed monthly payment that would have been due on the
related Due Date based on the original principal amortization schedule for the
such Balloon Mortgage Loan.

         On or before 3:00 p.m. New York time on each Servicer Remittance Date,
the Servicer shall remit in immediately available funds to the Trustee for
deposit in the Distribution Account an amount equal to the aggregate amount of
Advances, if any, to be made in respect of the Mortgage Loans 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 the
Collection Account that amounts held for future distribution have been, as
permitted by this Section 4.07, used by the Servicer in discharge of any such
Advance) or (iii) in the form of any combination of (i) and (ii) aggregating the
total amount of Advances to be made by the Servicer with respect to the Mortgage
Loans. Any amounts held for future distribution and so used shall be
appropriately reflected in the Servicer's records and replaced by the Servicer
by deposit in the Collection Account on or before any future Servicer Remittance
Date to the extent that the Available Funds for the related Distribution Date
(determined without regard to Advances to be made on the Servicer Remittance
Date) shall be less than the total amount that would be distributed to the
Classes of Certificateholders pursuant to Section 4.01 and 4.02 on such
Distribution Date if such amounts held for future distributions had not been so
used to make Advances. The Trustee will provide notice to the Servicer by
telecopy by the close of business on any Servicer Remittance Date in the event
that the amount remitted by the Servicer to the Trustee on such date is less
than the Advances required to be made by the Servicer for the related
Distribution Date, as set forth in the related Remittance Report.

         (c)    The obligation of the Servicer to make such Advances is
mandatory, notwithstanding any other provision of this Agreement but subject to
Section 4.07(d) below, and, with respect to any Mortgage Loan, shall continue
until the earlier of such time as the Trust acquires title to the related
Mortgaged Property or such Mortgage Loan is paid in full by the Mortgagor or
disposed of by the Trust, or until the recovery of all Liquidation Proceeds
thereon.

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

                                      -93-
<PAGE>

         Section 4.08. REMIC Distributions and Allocation of Losses.
                       --------------------------------------------

         (a)    On each Distribution Date, the Trustee shall cause, in the
following order of priority, the following amounts to be distributed by REMIC 1
to REMIC 2 on account of the REMIC 1 Regular Interests or withdrawn from the
Distribution Account and distributed to the Holders of the Class R Certificates
(in respect of the Class R-1 Interest), as the case may be:

                (i)     to Holders of REMIC 1 Regular Interest LT1AA, REMIC 1
         Regular Interest LT1AI, REMIC 1 Regular Interest LT1AII, REMIC 1
         Regular Interest LT1M1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular
         Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular
         Interest LT1M5 and REMIC 1 Regular Interest LT1ZZ, pro rata, in an
         amount equal to (A) the Uncertificated Accrued Interest for such
         Distribution Date, plus (B) any amounts in respect thereof remaining
         unpaid from previous Distribution Dates. Amounts payable as
         Uncertificated Accrued Interest in respect of REMIC 1 Regular Interest
         LT1ZZ shall be reduced and deferred when the REMIC 1 Overcollateralized
         Amount is less than the REMIC 1 Overcollateralization Target Amount, by
         the lesser of (x) the amount of such difference and (y) the Maximum
         LT1ZZ Uncertificated Accrued Interest Deferral Amount and such amount
         will be payable to the Holders of REMIC 1 Regular Interest LT1AI, REMIC
         1 Regular Interest LT1AII, REMIC 1 Regular Interest LT1M1, REMIC 1
         Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3, REMIC 1 Regular
         Interest LT1M4 and REMIC 1 Regular Interest LT1M5 in the same
         proportion as the Overcollateralization Deficiency is allocated to the
         Corresponding Certificates;

                (ii)    to Holders of REMIC 1 Regular Interest LT1SUB, REMIC 1
         Regular Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1
         Regular Interest LT2GRP and REMIC 1 Regular Interest LT1XX, pro rata,
         in an amount equal to (A) the Uncertificated Accrued Interest for such
         Distribution Date, plus (B) any amounts in respect thereof remaining
         unpaid from previous Distribution Dates;

                (iii)   to the Holders of REMIC 1 Regular Interests, in an
         amount equal to the remainder of the REMIC 1 Marker Allocation
         Percentage of Available Funds for such Distribution Date after the
         distributions made pursuant to clause (i) above, allocated as follows:

                      (A)   to the Holders of REMIC 1 Regular Interest LT1AA,
                98.00% of such remainder, until the Uncertificated Principal
                Balance of such uncertificated REMIC 1 Regular Interest is
                reduced to zero;

                      (B)   to the Holders of REMIC 1 Regular Interest LT1AI,
                REMIC 1 Regular Interest LT1AII, REMIC 1 Regular Interest LT1M1,
                REMIC 1 Regular Interest LT1M2, REMIC 1 Regular Interest LT1M3,
                REMIC 1 Regular Interest LT1M4 and REMIC 1 Regular Interest
                LT1M5, 1.00% of such remainder, in the same proportion as
                principal payments are allocated to the Corresponding
                Certificates, until the Uncertificated Principal Balances of
                such REMIC 1 Regular Interests are reduced to zero; then

                                      -94-
<PAGE>

                      (C)   to the Holders of REMIC 1 Regular Interest LT1ZZ,
                1.00% of such remainder, until the Uncertificated Principal
                Balance of such REMIC 1 Regular Interest is reduced to zero;

provided, however, that (i) 98.00% and (ii) 2.00% of any principal payments that
are attributable to an Overcollateralization Release Amount shall be allocated
to Holders of (i) REMIC 1 Regular Interest LT1AA and (ii) REMIC 1 Regular
Interest LT1ZZ, respectively; and

                (iv)    to the Holders of REMIC 1 Regular Interests, in an
         amount equal to the remainder of the REMIC 1 Sub WAC Allocation
         Percentage of Available Funds for such Distribution Date after the
         distributions made pursuant to clause (i) above, such that
         distributions of principal shall be deemed to be made to the REMIC 1
         Regular Interests first, so as to keep the Uncertificated Principal
         Balance of each REMIC 1 Regular Interest ending with the designation
         "GRP" equal to 0.01% of the aggregate Principal Balance of the
         Mortgage Loans in the related Loan Group; second, to each REMIC 1
         Regular Interest ending with the designation "SUB," so that the
         Uncertificated Principal Balance of each such REMIC 1 Regular Interest
         is equal to 0.01% of the excess of (x) the aggregate Principal Balance
         of the Mortgage Loans in the related Loan Group over (y) the current
         Certificate Principal Balance of the Class A Certificate in the
         related Loan Group (except that if any such excess is a larger number
         than in the preceding distribution period, the least amount of
         principal shall be distributed to such REMIC 1 Regular Interests such
         that the REMIC 1 Subordinated Balance Ratio is maintained); and third,
         any remaining principal to REMIC 1 Regular Interest LT1XX.

         (b)    (i) The REMIC 1 Marker Allocation Percentage of the
         aggregate amount of any Prepayment Interest Shortfalls and the REMIC 1
         Marker Allocation Percentage of the aggregate amount of any Relief Act
         Interest Shortfalls incurred in respect of the Mortgage Loans for any
         Distribution Date shall be allocated first, to Uncertificated Accrued
         Interest payable to REMIC 1 Regular Interest LT1AA and REMIC 1 Regular
         Interest LT1ZZ up to an aggregate amount equal to the REMIC 1 Interest
         Loss Allocation Amount, 98% and 2%, respectively, and thereafter among
         REMIC 1 Regular Interest LTAI, REMIC 1 Regular Interest LT1AII, REMIC 1
         Regular Interest LTAM1, REMIC 1 Regular Interest LT1M2, REMIC 1 Regular
         Interest LT1M3, REMIC 1 Regular Interest LT1M4, REMIC 1 Regular
         Interest LT1M5 and REMIC 1 Regular Interest LT1ZZ pro rata based on,
         and to the extent of, one month's interest at the then applicable
         respective Uncertificated REMIC 1 Pass-Through Rate on the respective
         Uncertificated Principal Balance of each such REMIC 1 Regular Interest;
         and

                (ii)    The REMIC 1 Sub WAC Allocation Percentage of the
         aggregate amount of any Prepayment Interest Shortfalls and the REMIC 1
         Sub WAC Allocation of the aggregate amount of any Relief Act Interest
         Shortfalls incurred in respect of the Mortgage Loans for any
         Distribution Date shall be allocated first, to Uncertificated Accrued
         Interest payable to REMIC 1 Regular Interest LT1SUB, REMIC 1 Regular
         Interest LT1GRP, REMIC 1 Regular Interest LT2SUB, REMIC 1 Regular
         Interest LT2GRP and REMIC 1 Regular Interest LT1XX, pro rata based on,
         and to the extent of, one month's interest at the then applicable
         respective Uncertificated REMIC 1 Pass-Through Rate on the respective
         Uncertificated Principal Balance of each such REMIC 1

                                     -95-
<PAGE>

         Regular Interest. For purposes of calculating the amount of
         Uncertificated Accrued Interest for the REMIC 1 Regular Interests for
         any Distribution Date, the aggregate amount of any Prepayment Interest
         Shortfalls and any Relief Act Interest.

         (c)    (i) The REMIC 1 Marker Percentage of all Realized Losses on
         the Mortgage Loans shall be allocated by the Trustee on each
         Distribution Date to the following REMIC 1 Regular Interests in the
         specified percentages, as follows: first, to Uncertificated Accrued
         Interest payable to REMIC 1 Regular Interest LT1AA and REMIC 1 Regular
         Interest LT1ZZ up to an aggregate amount equal to the REMIC 1 Interest
         Loss Allocation Amount, 98% and 2%, respectively; second, to the
         Uncertificated Principal Balances of REMIC 1 Regular Interest LT1AA and
         REMIC 1 Regular Interest LT1ZZ up to an aggregate amount equal to the
         REMIC 1 Principal Loss Allocation Amount, 98% and 2%, respectively;
         third, to the Uncertificated Principal Balances of REMIC 1 Regular
         Interest LT1AA, REMIC 1 Regular Interest LT1M5 and REMIC 1 Regular
         Interest LT1ZZ, 98%, 1% and 1%, respectively, until the Uncertificated
         Principal Balance of REMIC 1 Regular Interest LT1M5 has been reduced to
         zero; fourth to the Uncertificated Principal Balances of REMIC 1
         Regular Interest LT1AA, REMIC 1 Regular Interest LT1M4 and REMIC 1
         Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the
         Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M4 has
         been reduced to zero; fifth to the Uncertificated Principal Balances of
         REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M3 and
         REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the
         Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M3 has
         been reduced to zero; sixth to the Uncertificated Principal Balances of
         REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest LT1M2 and
         REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively, until the
         Uncertificated Principal Balance of REMIC 1 Regular Interest LT1M2 has
         been reduced to zero and seventh, to the Uncertificated Principal
         Balances of REMIC 1 Regular Interest LT1AA, REMIC 1 Regular Interest
         LT1M1 and REMIC 1 Regular Interest LT1ZZ, 98%, 1% and 1%, respectively,
         until the Uncertificated Principal Balances of REMIC 1 Regular Interest
         LT1M1 has been reduced to zero.

                (ii)    The REMIC 1 Sub WAC Allocation Percentage of all
         Realized Losses shall be applied after all distributions have been
         made on each Distribution Date first, so as to keep the Uncertificated
         Principal Balance of each REMIC 1 Regular Interest ending with the
         designation "GRP" equal to 0.01% of the aggregate Stated Principal
         Balance of the Mortgage Loans in the related Loan Group; second, to
         each REMIC 1 Regular Interest ending with the designation "SUB," so
         that the Uncertificated Principal Balance of each such REMIC 1 Regular
         Interest is equal to 0.01% of the excess of (x) the aggregate
         Principal Balance of the Mortgage Loans in the related Loan Group over
         (y) the current Certificate Principal Balance of the Class A
         Certificate in the related Loan Group (except that if any such excess
         is a larger number than in the preceding distribution period, the
         least amount of Realized Losses shall be applied to such REMIC 1
         Regular Interests such that the REMIC 1 Subordinated Balance Ratio is
         maintained); and third, any remaining Realized Losses shall be
         allocated to REMIC 1 Regular Interest LT1XX.

                                      -96-
<PAGE>

         (d)    The Class X/N Interest is entitled to distributions of interest
at its Pass-Through Rate on its Notional Amount and to distributions of
principal in an amount equal to the Initial Overcollateralization Amount. For
federal income tax purposes, distributions made under Sections 4.02(b)(xvii),
(xviii) and (xix) will be treated as distributed with respect to the Class X/N
Interest and then distributed as provided under Sections 4.02(b)(xvii), (xviii)
and (xix).

                                   ARTICLE V

                                THE CERTIFICATES

         Section 5.01. The Certificates.
                       ----------------

         Each of the Class AI, Class AII, Class M-1, Class M-2, Class M-3, Class
M-4, Class M-5, Class N, Class X, and Class R Certificates shall be
substantially in the forms annexed hereto as exhibits, and shall, on original
issue, be executed by the Trustee and authenticated and delivered by the
Certificate Registrar to or upon the receipt of a Written Order to Authenticate
from the Depositor concurrently with the sale and assignment to the Trustee of
the Trust Fund. Each Class of the Offered Certificates shall be initially
evidenced by one or more Certificates representing a Percentage Interest with a
minimum dollar denomination of $25,000 and integral multiples of $1 in excess
thereof. The Class N Certificates are issuable only in minimum denominations
evidencing initial principal amounts of $25,000 and integral multiples of $1 in
excess thereof. The Class X and Class R Certificates are issuable only in
minimum Percentage Interests of 10%.

         The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature on behalf of the Trustee by a Responsible Officer.
Certificates bearing the manual or facsimile signatures of individuals who were,
at the time when such signatures were affixed, authorized to sign on behalf of
the Trustee shall bind the Trust, notwithstanding that such individuals or any
of them have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of such
Certificate. No Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose, unless such Certificate shall have been
manually authenticated by the Certificate Registrar substantially in the form
provided for herein, and such authentication upon any Certificate 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. Subject to Section 5.02(c), the Offered Certificates
and the Class M-5 Certificates shall be Book-Entry Certificates. The Class N,
Class X and Class R Certificates shall not be Book-Entry Certificates but shall
be issued in fully registered certificate form.

         Section 5.02. Registration of Transfer and Exchange of Certificates.
                       -----------------------------------------------------

         (a)    The Certificate Registrar shall cause to be kept at the
Corporate Trust Office of the Trustee a Certificate Register in which, subject
to such reasonable regulations as it may prescribe, the Certificate Registrar
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. The Trustee shall initially serve
as Certificate Registrar for the purpose of registering Certificates and
transfers and exchanges of Certificates as herein provided. The Trustee as
Certificate Registrar shall be subject to the same

                                      -97-
<PAGE>

standards of care, limitations on liability and rights to indemnity as the
Trustee, and the provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15
and 8.16 shall apply to the Certificate Registrar to the same extent as they
apply to the Trustee. Any Certificate Registrar appointed in accordance with
this Section 5.02(a) may at any time resign by giving at least 30 days' advance
written notice of resignation to the Trustee, the Servicer and the Depositor,
such resignation to become effective upon appointment of a successor Certificate
Registrar.

         Upon surrender for registration of transfer of any Certificate at any
office or agency of the Certificate Registrar maintained for such purpose
pursuant to the foregoing paragraph and, in the case of the Class R Certificate,
upon satisfaction of the conditions set forth below, the Trustee on behalf of
the Trust 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 aggregate Percentage Interest.

         At the option of the Certificateholders, Certificates may be exchanged
for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any
such office or agency. Whenever any Certificates are so surrendered for
exchange, the Trustee shall execute on behalf of the Trust and the Certificate
Registrar shall authenticate and deliver the Certificates which the
Certificateholder making the exchange is entitled to receive. Every Certificate
presented or surrendered for registration of transfer or exchange shall (if so
required by the Trustee or the Certificate Registrar) be duly endorsed by, or be
accompanied by a written instrument of transfer satisfactory to the Trustee and
the Certificate Registrar duly executed by, the Holder thereof or his attorney
duly authorized in writing.

         (b)    Upon original issuance, the Book-Entry Certificates shall be
issued in the form of one or more typewritten certificates, to be delivered to
the Depository, the initial Depository, by, or on behalf of, the Depositor; or
to, and deposited with the Certificate Custodian, on behalf of the Depository,
if directed to do so pursuant to instructions from the Depository. Except as
provided in paragraph (c) below, the Book-Entry Certificates shall at all times
remain registered in the name of the Depository or its nominee and at all times:
(i) registration of such Certificates may not be transferred by the Trustee
except to another Depository; (ii) the Depository shall maintain book-entry
records with respect to the Certificate Owners and with respect to ownership and
transfers of such Certificates; (iii) ownership and transfers of registration of
such Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository; (iv) the Depository may collect its usual
and customary fees, charges and expenses from its Depository Participants; (v)
the Trustee shall for all purposes deal with the Depository as representative of
the Certificate Owners of the Certificates for purposes of exercising the rights
of Holders under this Agreement, and requests and directions for and votes of
such representative shall not be deemed to be inconsistent if they are made with
respect to different Certificate Owners; (vi) the Trustee may rely and shall be
fully protected in relying upon information furnished by the Depository with
respect to its Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and Persons shown on
the books of such indirect participating firms as direct or indirect Certificate
Owners; and (vii) the direct participants of the Depository shall have no rights
under this Agreement under or with respect to any of the Certificates held on
their behalf by the Depository, and the

                                      -98-
<PAGE>

Depository may be treated by the Trustee and its agents, employees, officers and
directors as the absolute owner of the Certificates for all purposes whatsoever.

         All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners
that it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The parties hereto are
hereby authorized to execute a Letter of Representations with the Depository or
take such other action as may be necessary or desirable to register a Book-Entry
Certificate to the Depository. In the event of any conflict between the terms of
any such Letter of Representation and this Agreement, the terms of this
Agreement shall control.

         (c)    If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly
its responsibilities as Depository and (y) the Trustee or the Depositor is
unable to locate a qualified successor, (ii) the Depositor, at its sole option,
with the consent of the Trustee, elects to terminate the book-entry system
through the Depository or (iii) after the occurrence of a Servicer Event of
Termination, the Certificate Owners of each Class of Book-Entry Certificates
representing Percentage Interests of such Classes aggregating not less than 51%
advises the Trustee and Depository through the Financial Intermediaries and the
Depository Participants in writing that the continuation of a book-entry system
through the Depository to the exclusion of definitive, fully registered
certificates (the "Definitive Certificates") to Certificate Owners is no longer
in the best interests of the Certificate Owners. Upon surrender to the
Certificate Registrar of the Book-Entry Certificates by the Depository,
accompanied by registration instructions from the Depository for registration,
the Trustee shall, at the Depositor's expense, in the case of (ii) above, or the
Seller's expense, in the case of (i) and (iii) above, execute on behalf of the
Trust and the Certificate Registrar shall authenticate the Definitive
Certificates. None of the Depositor or the Trustee shall be liable for any delay
in delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates, the Trustee, the Certificate Registrar, the Servicer, any Paying
Agent and the Depositor shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.

         (d)    Except with respect to a transfer of the Private Certificates
between or among the Depositor, the Seller, their affiliates or both, no
transfer, sale, pledge or other disposition of any Private Certificate shall be
made unless such disposition is exempt from the registration requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities laws or is made in accordance with the 1933 Act and laws. In the
event of any such transfer, and as a condition precedent to the transfer, (i)
the transferor shall deliver to the Certificate Registrar an executed transferor
certificate (in substantially the form attached hereto as Exhibit L) and (ii)
the prospective transferee shall deliver to the Certificate Registrar (A) an
executed investment letter in substantially the form attached hereto as Exhibit
J-2 certifying that such transferee is a "qualified institutional buyer" as
defined in Rule 144A, which investment letter shall not be an expense of the
Certificate Registrar or the Depositor or (B) an executed investment letter in
substantially the form attached hereto as Exhibit J-1 certifying as to certain
facts and circumstances relating to the transfer that establish that the
transfer is exempt from 1933 Act registration and that the prospective
transferee is an institutional "accredited investor,"

                                      -99-
<PAGE>

which investment letter shall not be an expense of the Certificate Registrar or
the Depositor or (C) if the Private Certificate is in physical form, an Opinion
of Counsel satisfactory to the Depositor and the Trustee 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 or the Certificate
Registrar, in their respective capacities as such. In addition, in the case of
the transfer of a Class R Certificate, the Certificate Registrar and the
Depositor shall require a written Opinion of Counsel (which may be in-house
counsel) acceptable to and in form and substance reasonably satisfactory to the
Certificate Registrar and the Depositor that such transfer may be made pursuant
to an exemption, describing the applicable exemption and the basis therefor,
from the 1933 Act or is being made pursuant to the 1933 Act, which Opinion of
Counsel shall not be an expense of the Certificate Registrar, the Trustee, the
Servicer or the Depositor. The Holder of a Private Certificate desiring to
effect such transfer shall, and does hereby agree to, indemnify the Certificate
Registrar and the Depositor 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.

         For purposes of the Class M-5 Certificates, the representations in the
transferor certificate (in substantially the form attached hereto as Exhibit L),
as discussed in (i) above, shall be deemed to have been made by a transferor
Certificate Owner to the Certificate Registrar by the acceptance by such
Certificate Owner of the beneficial interest in any such Class of Class M-5
Certificates and the transfer by the Certificate Owner of such beneficial
interest, unless the Certificate Registrar shall have received from the
transferor an alternative representation acceptable in form and substance to the
Depositor. For the purposes of the Class M-5 Certificates, the representations
set forth in the investment letter (in substantially the form attached hereto as
Exhibit J-1 or J-2), as discussed in (ii) above, shall be deemed to have been
made by a transferee Certificate Owner to the Certificate Registrar by the
acceptance by a Certificate Owner of the beneficial interest in any such Class
of Class M-5 Certificates, unless the Certificate Registrar shall have received
from the transferee an alternative representation acceptable in form and
substance to the Depositor.

         No transfer of an ERISA-Restricted Certificate shall be made unless the
Certificate Registrar shall have received either (i) a representation from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Certificate Registrar and the Depositor, (such requirement
is satisfied only by the Certificate Registrar's receipt of a representation
letter from the transferee substantially in the form of Exhibit I hereto, as
appropriate), to the effect that such transferee is not an employee benefit plan
or arrangement subject to Section 406 of ERISA or a plan subject to Section 4975
of the Code, nor a person acting on behalf of any such plan or arrangement nor
using the assets of any such plan or arrangement to effect such transfer or (ii)
(except in the case of a Class R, Class X or Class N Certificate) if the
purchaser is an insurance company, a representation that the purchaser is an
insurance company which is purchasing such Certificates with funds contained in
an "insurance company general account" (as such term is defined in Section V(e)
of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") and that the
purchase and holding of such Certificates are covered under Sections I and III
of PTCE 95-60 or (iii) (except in the case of the Class R Certificate) in the
case of any such ERISA Restricted Certificate presented for registration in the
name of an employee benefit plan subject to ERISA or a plan or arrangement
subject to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any

                                     -100-
<PAGE>

such plan or any other person acting on behalf of any such plan or arrangement
or using such plan's or arrangement's assets, an Opinion of Counsel satisfactory
to the Certificate Registrar, to the effect that the purchase or holding of such
ERISA Restricted Certificate will not result in the assets of the Trust being
deemed to be "plan assets" and subject to the prohibited transaction provisions
of ERISA and the Code and will not subject the Depositor, the Servicer, the
Trustee or the Certificate Registrar to any obligation in addition to those
expressly undertaken in this Agreement or to any liability. For purposes of
clause (i) of the preceding sentence, such representation shall be deemed to
have been made to the Certificate Registrar by the acceptance by a Certificate
Owner of the beneficial interest in any such Class of ERISA-Restricted
Certificates, unless the Certificate Registrar shall have received from the
transferee an alternative representation acceptable in form and substance to the
Depositor. Notwithstanding anything else to the contrary herein, any purported
transfer of an ERISA-Restricted Certificate to or on behalf of an employee
benefit plan subject to ERISA or to the Code without the delivery to the
Certificate Registrar of an Opinion of Counsel satisfactory to the Certificate
Registrar as described above shall be void and of no effect. Any representations
required to be made in subsection (i) and (ii) above in the case of an
ERISA-Restricted Certificate which is also a Book-Entry Certificate shall be
deemed to have been made by the acquisition of such Certificate.

         Any beneficial owner of a Mezzanine Certificate that is not an
ERISA-Restricted Certificate shall be deemed to have represented by virtue of
its acquisition or holding of such Certificate that such Certificate is rated
"BBB-" (or its equivalent) or higher by Moody's, Fitch or S&P.

         Each Person who has or who acquires any Ownership Interest in the Class
R 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 appointed the Depositor or its designee as its attorney-in-fact to
negotiate the terms of any mandatory sale under clause (v) below and to execute
all instruments of transfer and to do all other things necessary in connection
with any such sale, and the rights of each Person acquiring any Ownership
Interest in the Class R Certificate are expressly subject to the following
provisions:

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

                (ii)    No Person shall acquire an Ownership Interest in the
         Class R Certificate unless such Ownership Interest is a pro rata
         undivided interest.

                (iii)   In connection with any proposed transfer of any
         Ownership Interest in the Class R Certificate, the Certificate
         Registrar shall as a condition to registration of the transfer,
         require delivery to it, in form and substance satisfactory to it, of
         each of the following:

                        A.   an affidavit in the form of Exhibit K hereto from
                the proposed transferee to the effect that, among other
                things, such transferee is a Permitted Transferee and that
                it is not acquiring its Ownership Interest in the Class R

                                     -101-
<PAGE>

                Certificate that is the subject of the proposed transfer as
                a nominee, trustee or agent for any Person who is not a
                Permitted Transferee; and

                        B.   a covenant of the proposed transferee to the effect
                that the proposed transferee agrees to be bound by and to abide
                by the transfer restrictions applicable to the Class R
                Certificate.

                (iv)    Any attempted or purported transfer of any Ownership
         Interest in the Class R Certificate in violation of the provisions of
         this Section shall be absolutely null and void and shall vest no rights
         in the purported transferee. If any purported transferee shall, in
         violation of the provisions of this Section, become the Holder of the
         Class R Certificate, then the prior Holder of such Class R Certificate
         that is a Permitted Transferee shall, upon discovery that the
         registration of transfer of such Class R Certificate was not in fact
         permitted by this Section, be restored to all rights as Holder thereof
         retroactive to the date of registration of transfer of such Class R
         Certificate. The Certificate Registrar shall be under no liability to
         any Person for any registration of transfer of the Class R Certificate
         that is in fact not permitted by this Section or for making any
         distributions due on such Class R Certificate to the Holder thereof or
         taking any other action with respect to such Holder under the
         provisions of this Agreement so long as the Certificate Registrar
         received the documents specified in clause (iii). The Trustee shall be
         entitled to recover from any Holder of the Class R Certificate that was
         in fact not a Permitted Transferee at the time such distributions were
         made all distributions made on such Class R Certificate. Any such
         distributions so recovered by the Trustee shall be distributed and
         delivered by the Trustee to the prior Holder of such Class R
         Certificate that is a Permitted Transferee.

                (v)     If any Person other than a Disqualified Organization
         acquires any Ownership Interest in the Class R Certificate in violation
         of the restrictions in this Section, then the Certificate Registrar
         shall have the right but not the obligation, without notice to the
         Holder of the Class R Certificate or any other Person having an
         Ownership Interest therein, to notify the Depositor to arrange for the
         sale of the Class R Certificate. The proceeds of such sale, net of
         commissions (which may include commissions payable to the Depositor or
         its affiliates in connection with such sale), expenses and taxes due,
         if any, will be remitted by the Trustee to the previous Holder of the
         Class R Certificate that is a Permitted Transferee, except that in the
         event that the Trustee determines that the Holder of the Class R
         Certificate may be liable for any amount due under this Section or any
         other provisions of this Agreement, the Trustee may withhold a
         corresponding amount from such remittance as security for such claim.
         The terms and conditions of any sale under this clause (v) shall be
         determined in the sole discretion of the Trustee and it shall not be
         liable to any Person having an Ownership Interest in the Class R
         Certificate as a result of its exercise of such discretion.

                (vi)    If any Person other than a Permitted Transferee acquires
         any Ownership Interest in the Class R Certificate in violation of the
         restrictions in this Section, then the Trustee will provide to the
         Internal Revenue Service, and to the persons specified in Sections
         860E(e)(3) and (6) of the Code, information needed to compute the tax
         imposed under Section 860E(e)(5) of the Code on transfers of residual
         interests to disqualified

                                     -102-
<PAGE>

         organizations. The Trustee shall be entitled to reasonable
         compensation for providing such information from the person to whom it
         is provided.

The foregoing provisions of this Section shall cease to apply to transfers
occurring on or after the date on which there shall have been delivered to the
Certificate Registrar, in form and substance satisfactory to the Certificate
Registrar, (i) written notification from each Rating Agency that the removal of
the restrictions on Transfer set forth in this Section will not cause such
Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of
Counsel to the effect that such removal will not cause any REMIC hereunder to
fail to qualify as a REMIC.

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

         All Certificates surrendered for registration of transfer or exchange
shall be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures.

         Section 5.03. Mutilated, Destroyed, Lost or Stolen Certificates.
                       -------------------------------------------------

         If (i) any mutilated Certificate is surrendered to the Certificate
Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (ii) there is delivered to
the Trustee, the Depositor and the Certificate Registrar such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Trustee or the Certificate Registrar that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute on behalf of the Trust, and the Certificate Registrar shall authenticate
and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like tenor and Percentage Interest.
Upon the issuance of any new Certificate under this Section, the Trustee or the
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee and the
Certificate Registrar) in connection therewith. Any duplicate Certificate issued
pursuant to this Section, shall constitute complete and indefeasible evidence of
ownership in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be found at any time.

         Section 5.04. Persons Deemed Owners.
                       ---------------------

         The Servicer, the Depositor, the Trustee, the Certificate Registrar,
any Paying Agent and any agent of the Servicer, the Depositor, the Certificate
Registrar, any Paying Agent or the Trustee may treat the Person, including a
Depository, 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 4.02 and for all other purposes whatsoever, and none of the Servicer, the
Trust, the Trustee nor any agent of any of them shall be affected by notice to
the contrary.

         Section 5.05. Appointment of Paying Agent.
                       ---------------------------

                                     -103-
<PAGE>

         The Paying Agent shall make distributions to Certificateholders from
the Distribution Account pursuant to Section 4.01 and 4.02 and shall report the
amounts of such distributions to the Trustee. The duties of the Paying Agent may
include the obligation to distribute statements and provide information to
Certificateholders as required hereunder. The Paying Agent hereunder shall at
all times be an entity duly incorporated and validly existing under the laws of
the United States of America or any state thereof, authorized under such laws to
exercise corporate trust powers and subject to supervision or examination by
federal or state authorities. The Paying Agent shall initially be the Trustee.
The Trustee may appoint a successor to act as Paying Agent, which appointment
shall be reasonably satisfactory to the Depositor and the Rating Agencies. The
Trustee as Paying Agent shall be subject to the same standards of care,
limitations on liability and rights to indemnity as the Trustee, and the
provisions of Sections 8.01, 8.02, 8.03, 8.04, 8.05, 8.14, 8.15 and 8.16 shall
apply to the Paying Agent to the same extent as they apply to the Trustee. Any
Paying Agent appointed in accordance with this Section 5.05 may at any time
resign by giving at least 30 days' advance written notice of resignation to the
Trustee, the Servicer and the Depositor, such resignation to become effective
upon appointment of a successor Paying Agent.

                                   ARTICLE VI

                         THE SERVICER AND THE DEPOSITOR

         Section 6.01. Liability of the Servicer and the Depositor.
                       -------------------------------------------

         The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Servicer
herein. The Depositor shall be liable in accordance herewith only to the extent
of the obligations specifically imposed upon and undertaken by the Depositor.

         Section 6.02. Merger or Consolidation of, or Assumption of the
                       Obligations of, the Servicer or the Depositor.
                       ------------------------------------------------

         Any entity into which the Servicer or the Depositor may be merged or
consolidated, or any entity resulting from any merger, conversion or
consolidation to which the Servicer or the Depositor shall be a party, or any
corporation succeeding to the business of the Servicer or the Depositor, shall
be the successor of the Servicer or the Depositor, 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 servicer shall satisfy
all the requirements of Section 7.02 with respect to the qualifications of a
successor servicer.

         Section 6.03. Limitation on Liability of the Servicer and Others.
                       --------------------------------------------------

         None of the Depositor, the Servicer, or any of the directors, officers,
employees or agents of the Depositor or the 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 or the Servicer or any such Person against any
breach of

                                     -104-
<PAGE>

warranties or representations made by such party herein, or against any specific
liability imposed on the Servicer for a breach of the Servicing Standard and/or
this Agreement, or against any liability which would otherwise be imposed by
reason of its respective willful misfeasance, bad faith, fraud or negligence in
the performance of its duties or by reasons of negligent disregard of its
respective obligations or duties hereunder.

         The Depositor, the Servicer and any director, officer, employee or
agent of the Depositor or the Servicer, may rely in good faith on any document
of any kind which, prima facie, is properly executed and submitted by any
appropriate Person with respect to any matters arising hereunder. The Depositor,
the Servicer and any director, officer, employee or agent of the Depositor or
the Servicer shall be indemnified and held harmless by the Trust 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
incurred in connection with any legal action incurred by reason of its
respective misfeasance, bad faith, fraud or negligence, a breach of a
representation or warranty made by such party hereunder or (in the case of the
Servicer) a breach of the Servicing Standard in the performance of its
respective duties or by reason of negligent disregard of its respective
obligations or duties hereunder. Neither the Depositor nor the 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 expose it to any expense or liability; provided, however, that
the Depositor or the Servicer may in their discretion undertake any action
related to their obligations hereunder which they 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. The
Servicer's right to indemnity or reimbursement pursuant to this Section shall
survive any resignation or termination of the Servicer pursuant to Section 6.04
or 7.01 with respect to any losses, expenses, costs or liabilities arising prior
to such resignation or termination (or arising from events that occurred prior
to such resignation or termination).

         Section 6.04. Servicer Not to Resign.
                       ----------------------

         Subject to the provisions of Section 7.01 and Section 6.02, the
Servicer shall not resign from the obligations and duties hereby imposed on it
except (i) upon determination that the performance of its obligations or duties
hereunder are no longer permissible under applicable law or are in material
conflict by reason of applicable law with any other activities carried on by it
or its subsidiaries or Affiliates, the other activities of the Servicer so
causing such a conflict being of a type and nature carried on by the Servicer or
its subsidiaries or Affiliates at the date of this Agreement or (ii) upon
satisfaction of the following conditions: (a) the Servicer has proposed a
successor servicer to the Trustee in writing and such proposed successor
servicer is reasonably acceptable to the Trustee; and (b) each Rating Agency
shall have delivered a letter to the Trustee prior to the appointment of the
successor servicer stating that the proposed appointment of such successor
servicer as Servicer hereunder will not result in the reduction or withdrawal of
the then current rating of the Regular Certificates or the ratings that are in
effect; provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the
Trustee shall have assumed the Servicer's responsibilities and obligations
hereunder or the Trustee shall have designated a successor servicer in
accordance with Section 7.02. Any such resignation shall not relieve the
Servicer of responsibility for any of the obligations specified in Sections 7.01
and 7.02 as obligations that survive the resignation or

                                     -105-
<PAGE>

termination of the Servicer. Any such determination permitting the resignation
of the Servicer shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee.

         The Trustee and the Depositor hereby specifically (i) consent to the
pledge and assignment by the Servicer of all the Servicer's right, title and
interest in, to and under this Agreement to the Servicing Rights Pledgee, for
the benefit of certain lenders, and (ii) provided that no Servicer Event of
Termination exists, agree that upon delivery to the Trustee by the Servicing
Rights Pledgee of a letter signed by the Servicer whereunder the Servicer shall
resign as Servicer under this Agreement, the Trustee shall appoint the Servicing
Rights Pledgee or its designee as successor Servicer, provided that at the time
of such appointment, the Servicing Rights Pledgee or such designee meets the
requirements of a successor Servicer pursuant to Section 7.02(a) (including
being acceptable to the Rating Agencies) and agrees to be subject to the terms
of this Agreement. If, pursuant to any provision hereof, the duties of the
Servicer are transferred to a successor, the entire amount of the Servicing Fee
and other compensation payable to the Servicer pursuant hereto shall thereafter
be payable to such successor.

         Section 6.05. Delegation of Duties.
                       --------------------

         In the ordinary course of business, the Servicer at any time may
delegate any of its duties hereunder to any Person, including any of its
Affiliates, who agrees to conduct such duties in accordance with standards
comparable to those set forth in Section 3.01. Such delegation shall not relieve
the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 6.04. The
Servicer shall provide the Trustee and the Rating Agencies with 60 days prior
written notice prior to the delegation of any of its duties to any Person other
than any of the Servicer's Affiliates or their respective successors and
assigns.

         Section 6.06. Advance Facility.
                       ----------------

         (a)    The Servicer is hereby authorized to enter into a financing or
other facility (any such arrangement, an "Advance Facility"), the documentation
for which complies with Section 6.06(e) below, under which (1) the Servicer
assigns or pledges its rights under this Agreement to be reimbursed for any or
all Advances and/or Servicing Advances to (a) a Person, which may be a
special-purpose bankruptcy-remote entity (an "SPV"), (b) a Person, which may
simultaneously assign or pledge such rights to an SPV or (c) a lender (a
"Lender"), which, in the case of any Person or SPV of the type described in
either of the preceding clauses (a) or (b), may directly or through other
assignees and/or pledgees, assign or pledge such rights to a Person, which may
include a trustee acting on behalf of holders of debt instruments (any such
Person or any such Lender, an "Advance Financing Person"), and/or (2) an Advance
Financing Person agrees to fund all the Advances and/or Servicing Advances
required to be made by the Servicer pursuant to this Agreement. No consent of
the Trustee, Certificateholders or any other party shall be required before the
Servicer may enter into an Advance Facility nor shall the Trustee or the
Certificateholders be a third party beneficiary of any obligation of an Advance
Financing Person to the Servicer. Notwithstanding the existence of any Advance
Facility under which an Advance Financing Person agrees to fund Advances and/or
Servicing Advances, (A) the Servicer (i) shall remain obligated pursuant to this
Agreement to make Advances and/or Servicing Advances pursuant to and as required
by this Agreement and (ii) shall not be relieved of such obligations

                                     -106-
<PAGE>

by virtue of such Advance Facility and (B) neither the Advance Financing Person
nor any Servicer's Assignee (as hereinafter defined) shall have any right to
proceed against or otherwise contact any Mortgagor for the purpose of collecting
any payment that may be due with respect to any related Mortgage Loan or
enforcing any covenant of such Mortgagor under the related Mortgage Loan
documents.

         (b)    If the Servicer enters into an Advance Facility, the Servicer
and the related Advance Financing Person shall deliver to the Trustee at the
address set forth in Section 11.05 hereof a written notice (an "Advance Facility
Notice"), stating (1) the identity of the Advance Financing Person and (2) the
identity of the Person (the "Servicer's Assignee") that will, subject to Section
6.06(c) hereof, have the right to receive amounts available from the Collection
Account pursuant to Section 3.05 hereof to reimburse previously unreimbursed
Advances and/or Servicing Advances ("Advance Reimbursement Amounts"). Advance
Reimbursement Amounts (1) shall consist solely of amounts in respect of Advances
and/or Servicing Advances for which the Servicer would be permitted to reimburse
itself in accordance with Section 3.05 hereof, assuming the Servicer had made
the related Advance(s) and/or Servicing Advance(s) and (2) shall not consist of
amounts payable to a successor Servicer in accordance with Section 3.05 hereof
to the extent permitted under Section 6.06(e) below.

         (c)    Notwithstanding the existence of an Advance Facility, the
Servicer, on behalf of the Advance Facility Person, shall be entitled to receive
reimbursements of Advances and/or Servicing Advances in accordance with Section
3.05(ii) and Section 3.05(iii) hereof, which entitlement may be terminated by
the Advance Financing Person pursuant to a written notice to the Trustee in the
manner set forth in Section 11.05 hereof. Upon receipt of such written notice,
the Servicer shall no longer be entitled to receive reimbursement for any
Advance Reimbursement Amounts and the Servicer's Assignee shall immediately have
the right to receive from the Collection Account all Advance Reimbursement
Amounts. Notwithstanding the foregoing, an Advance Financing Person shall only
be entitled to reimbursement of Advance Reimbursement Amounts hereunder pursuant
to Section 3.05(ii) and Section 3.05(iii) of this Agreement and shall not
otherwise be entitled to receive amounts designated for distribution to
Certificateholders. None of the Trustee or the Certificateholders shall have any
right to, or otherwise be entitled to, receive any amounts which constitute
Advance Reimbursement Amounts designated for distribution to the Servicer
pursuant to Section 3.05(ii) and Section 3.05(iii) hereof. An Advance Facility
may be terminated by the joint written direction of the Servicer and the related
Advance Financing Person. Written notice of such termination shall be delivered
to the Trustee in the manner set forth in Section 11.05 hereof. None of the
Depositor or the Trustee shall, as a result of the existence of any Advance
Facility, have any additional duty or liability with respect to the calculation
or payment of any Advance Reimbursement Amount, nor, as a result of the
existence of any Advance Facility, shall the Depositor or the Trustee have any
additional responsibility to track or monitor the administration of the Advance
Facility or the payment of Advance Reimbursement Amounts to the Servicer's
Assignee. The Servicer shall indemnify the Depositor, the Trustee, any successor
Servicer and the Trust Fund resulting from any claim by the related Advancing
Financing Person, except to the extent that such claim, loss, liability or
damage resulted from or arose out of negligence or willful misconduct on the
part of the Depositor, the Trustee or any successor Servicer, or, with respect
to claim for indemnity by any successor Servicer or the Trustee, the failure by
such Person to remit funds as required by this Agreement or, with respect to
claim for indemnity by any successor Servicer or the Trustee,

                                     -107-
<PAGE>

the commission of an act or omission to act by the successor Servicer or the
Trustee, and the passage of any applicable cure or grace period, such that an
Event of Default under this Agreement occurs or such entity is subject to
termination for cause under this Agreement. The Servicer shall maintain and
provide to any successor Servicer and, upon request, the Trustee a detailed
accounting on a loan-by-loan basis as to amounts advanced by, pledged or
assigned to, and reimbursed to any Advancing Financing Person. The successor
Servicer shall be entitled to rely on any such information provided by the
predecessor Servicer, and the successor Servicer shall not be liable for any
errors in such information.

         (d) [Reserved].
              --------

         (e)    As between a predecessor Servicer and its Advance Financing
Person, on the one hand, and a successor Servicer and its Advance Financing
Person, if any, on the other hand, Advance Reimbursement Amounts on a
loan-by-loan basis with respect to each Mortgage Loan as to which an Advance
and/or Servicing Advance shall have been made and be outstanding shall be
allocated on a "first-in, first out" basis. In the event the Servicer's Assignee
shall have received some or all of an Advance Reimbursement Amount related to
Advances and/or Servicing Advances that were made by a Person other than such
predecessor Servicer or its related Advance Financing Person in error, then such
Servicer's Assignee shall be required to remit any portion of such Advance
Reimbursement Amount to each Person entitled to such portion of such Advance
Reimbursement Amount. Without limiting the generality of the foregoing, the
Servicer shall remain entitled to be reimbursed by the Advance Financing Person
for all Advances and/or Servicing Advances funded by the Servicer to the extent
the related Advance Reimbursement Amounts have not been assigned or pledged to
such Advance Financing Person or Servicer's Assignee.

         (f)    For purposes of any Officer's Certificate of the Servicer made
pursuant to Section 4.07(d), any Nonrecoverable Advance referred to therein may
have been made by such Servicer or any predecessor Servicer. In making its
determination that any Advance or Servicing Advance theretofore made has become
a Nonrecoverable Advance, the Servicer shall apply the same criteria in making
such determination regardless of whether such Advance or Servicing Advance shall
have been made by the Servicer or any predecessor Servicer.

         (g)    Any amendment to this Section 6.06 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 6.06, including
amendments to add provisions relating to a successor Servicer, may be entered
into by the Trustee, the Depositor and the Servicer without the consent of any
Certificateholder, provided such amendment complies with Section 11.01 hereof.
All reasonable costs and expenses (including attorneys' fees) of each party
hereto of any such amendment shall be borne solely by the Servicer. The parties
hereto hereby acknowledge and agree that: (a) the Advances and/or Servicing
Advances financed by and/or pledged to an Advance Financing Person under any
Advance Facility are obligations owed to the Servicer payable only from the cash
flows and proceeds received under this Agreement for reimbursement of Advances
and/or Servicing Advances only to the extent provided herein, and the Trustee
and the Trust are not, as a result of the existence of any Advance Facility,
obligated or liable to repay any Advances and/or Servicing Advances financed by
the Advance Financing Person; (b) the Servicer will be responsible for remitting
to the Advance Financing Person the

                                     -108-
<PAGE>

applicable amounts collected by it as reimbursement for Advances and/or
Servicing Advances funded by the Advance Financing Person, subject to the
provisions of this Agreement; and (c) the Trustee shall not have any
responsibility to track or monitor the administration of the financing
arrangement between the Servicer and any Advance Financing Person.

                                     -109-
<PAGE>

                                  ARTICLE VII

                                     DEFAULT

         Section 7.01. Servicer Events of Termination.
                       ------------------------------

         (a)    If any one of the following events ("Servicer Events of
Termination") shall occur and be continuing:

                (i)     (A) The failure by the Servicer to make any Advance; or
         (B) any other failure by the Servicer to deposit in the Collection
         Account or Distribution Account any deposit required to be made under
         the terms of this Agreement, which failure continues unremedied for a
         period of one Business Day after the date upon which written notice of
         such failure shall have been given to the Servicer by the Trustee or
         by any Holder of a Regular Certificate evidencing at least 25% of the
         Voting Rights; or

                (ii)    The failure by the Servicer to make any required
         Servicing Advance which failure continues unremedied for a period of
         30 days, or the failure by the Servicer duly to observe or perform, in
         any material respect, any other covenants, obligations or agreements
         of the Servicer as set forth in this Agreement, which failure
         continues unremedied for a period of 30 days, after the date (A) on
         which written notice of such failure, requiring the same to be
         remedied, shall have been given to the Servicer by the Trustee or by
         any Holder of a Regular Certificate evidencing at least 25% of the
         Voting Rights or (B) actual knowledge of such failure by a Servicing
         Officer of the Servicer; or

               (iii)   The entry against the Servicer of a decree or order by a
         court or agency or supervisory authority having jurisdiction in the
         premises for the appointment of a trustee, conservator, receiver or
         liquidator in any insolvency, conservatorship, receivership,
         readjustment of debt, marshalling of assets and liabilities or similar
         proceedings, or for the winding up or liquidation of its affairs, and
         the continuance of any such decree or order unstayed and in effect for
         a period of 60 days; or

                (iv)    The Servicer shall voluntarily go into liquidation,
         consent to the appointment of a conservator or receiver or liquidator
         or similar person in any insolvency, readjustment of debt, marshalling
         of assets and liabilities or similar proceedings of or relating to the
         Servicer or of or relating to all or substantially all of its
         property; or a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         conservator, receiver, liquidator or similar person in any insolvency,
         readjustment of debt, marshalling of assets and liabilities or similar
         proceedings, or for the winding-up or liquidation of its affairs,
         shall have been entered against the Servicer and such decree or order
         shall have remained in force undischarged, unbonded or unstayed for a
         period of 60 days; or the Servicer shall admit in writing its
         inability to pay its debts generally as they become due, file a
         petition to take advantage of any applicable insolvency or
         reorganization statute, make an assignment for the benefit of its
         creditors or voluntarily suspend payment of its obligations; or

                                     -110-
<PAGE>

                (v)     On any Distribution Date on or after the Distribution
         Date occurring in May 2006, a Cumulative Loss Trigger Event shall have
         occurred.

         (b)    Then, and in each and every such case, so long as a Servicer
Event of Termination shall not have been remedied within the applicable grace
period, (x) with respect solely to clause (i)(A) above, if such Advance is not
made by 2:00 P.M., New York time, on the Business Day immediately following the
Servicer Remittance Date, the Trustee shall terminate all of the rights and
obligations of the Servicer under this Agreement and the Trustee, or a successor
servicer appointed in accordance with Section 7.02, shall immediately make such
Advance and assume, pursuant to Section 7.02, the duties of a successor servicer
and (y) in the case of (i)(B), (ii), (iii), (iv) and (v) above, the Trustee
shall, at the direction of the Holders of each Class of Regular Certificates
evidencing Percentage Interests aggregating not less than 51%, by notice then
given in writing to the Servicer (and to the Trustee if given by Holders of
Certificates), terminate all of the rights and obligations of the Servicer as
servicer under this Agreement. Any such notice to the Servicer shall also be
given to each Rating Agency and the Depositor. On or after the receipt by the
Servicer (and by the Trustee if such notice is given by the Holders) of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Certificates or the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to and under this Section or
successor servicer appointed in connection with Section 7.02; and, without
limitation, the Trustee or successor servicer is hereby authorized and empowered
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of each
Mortgage Loan and Related Documents or otherwise. The Servicer agrees to
cooperate with the Trustee (or the applicable successor servicer) in effecting
the termination of the responsibilities and rights of the Servicer hereunder,
including, without limitation, the delivery to the Trustee (or the applicable
successor servicer) of all documents and records requested by it to enable it to
assume the Servicer's functions under this Agreement within ten Business Days
subsequent to such notice, the transfer within one Business Day subsequent to
such notice to the Trustee (or the applicable successor servicer) for the
administration by it of all cash amounts that shall at the time be held by the
Servicer and to be deposited by it in the Collection Account, the Distribution
Account or any Escrow Account or that have been deposited by the Servicer in
such accounts or thereafter received by the Servicer with respect to the
Mortgage Loans or any REO Property received by the Servicer. All reasonable
out-of-pocket costs and expenses (including attorneys' fees) incurred in
connection with transferring the servicing to the successor servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section shall be paid by the predecessor servicer (or if the predecessor
servicer is the Trustee, the initial servicer) upon presentation of reasonable
documentation of such costs and expenses.

         Notwithstanding any termination of the activities of a Servicer
hereunder, the Servicer shall be entitled to receive payment of all accrued and
unpaid Servicing Fees and reimbursement for all outstanding Advances and
Servicing Advances properly made prior to the date of termination.

                                     -111-
<PAGE>

         Section 7.02. Trustee to Act; Appointment of Successor.
                       ----------------------------------------

         (a)    Within 90 days of the time the Servicer (and the Trustee, if
notice is sent by the Holders) receives a notice of termination pursuant to
Section 7.01 or 6.04, the Trustee (or such other successor servicer as is
approved in accordance with this Agreement) shall be the successor in all
respects to the Servicer in its capacity as servicer under this Agreement and
the transactions set forth or provided for herein and shall be subject to all
the responsibilities, duties and liabilities relating thereto placed on the
Servicer by the terms and provisions hereof arising on and after its succession.
As compensation therefor, the Trustee (or such other successor servicer) shall
be entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given. Notwithstanding the
above, (i) if the Trustee is unwilling to act as successor servicer or (ii) if
the Trustee is legally unable so to act, the Trustee shall appoint or petition a
court of competent jurisdiction to appoint, any established housing and home
finance institution, bank or other mortgage loan or home equity loan servicer
having a net worth of not less than $50,000,000 as the successor to the Servicer
hereunder in the assumption of all or any part of the responsibilities, duties
or liabilities of the Servicer hereunder; provided, that the appointment of any
such successor servicer will not result in the qualification, reduction or
withdrawal of the ratings assigned to the Certificates or the ratings that are
in effect by the Rating Agencies as evidenced by a letter to such effect from
the Rating Agencies. Pending appointment of a successor to the Servicer
hereunder, unless the Trustee is prohibited by law from so acting, the Trustee
shall act in such capacity as hereinabove provided. In connection with such
appointment and assumption, the successor shall be entitled to receive
compensation out of payments on Mortgage Loans in an amount equal to the
compensation which the Servicer would otherwise have received pursuant to
Section 3.18 (or such other compensation as the Trustee and such successor shall
agree, not to exceed the Servicing Fee). The successor servicer shall be
entitled to withdraw from the Collection Account all costs and expenses
associated with the transfer of the servicing to the successor servicer,
including costs and expenses of the Trustee. The appointment of a successor
servicer shall not affect any liability of the predecessor servicer which may
have arisen under this Agreement prior to its termination as Servicer to pay any
deductible under an insurance policy pursuant to Section 3.12 or to indemnify
the parties indicated in Section 3.26 pursuant to the terms thereof, nor shall
any successor servicer be liable for any acts or omissions of the predecessor
servicer or for any breach by such servicer of any of its representations or
warranties contained herein or in any related document or agreement. The Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession.

         In the event of a Servicer Event of Termination, notwithstanding
anything to the contrary above, the Trustee and the Depositor hereby agree that
upon delivery to the Trustee by the Servicing Rights Pledgee of a letter signed
by the Servicer within ten Business Days of when notification of such event
shall have been provided to the Trustee, whereunder the Servicer shall resign as
Servicer under this Agreement, the Servicing Rights Pledgee or its designee
shall be appointed as successor servicer (provided that at the time of such
appointment the Servicing Rights Pledgee or such designee meets the requirements
of a successor servicer set forth above) and the Servicing Rights Pledgee agrees
to be subject to the terms of this Agreement.

         (b)    Any successor, including the Trustee, to the Servicer as
servicer shall during the term of its service as servicer continue to service
and administer the Mortgage Loans for the

                                     -112-
<PAGE>

benefit of Certificateholders, and maintain in force a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Servicer hereunder and a Fidelity Bond in respect of its officers, employees and
agents to the same extent as the Servicer is so required pursuant to Section
3.12.

         Section 7.03. Waiver of Defaults.
                       ------------------

         The Holders of Certificates entitled to at least 66 2/3% of the Voting
Rights allocated to the Classes of Certificates affected by a Servicer Event of
Termination may, on behalf of all Certificateholders, waive any events
permitting removal of the Servicer as servicer pursuant to this Article VII,
provided, however, that such Holders may not waive a default in making a
required distribution on a Certificate without the consent of the Holder of such
Certificate. Upon any waiver of a past default, such default shall cease to
exist and any Servicer Event of Termination arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereto
except to the extent expressly so waived. Notice of any such waiver shall be
given by the Trustee to the Rating Agencies.

         Section 7.04. Notification to Certificateholders.
                       ----------------------------------

         (a)    On any termination or appointment of a successor the Servicer
pursuant to this Article VII or Section 6.04, the Trustee shall give prompt
written notice thereof to the Certificateholders at their respective addresses
appearing in the Certificate Register and each Rating Agency.

         (b)    No later than 60 days after the occurrence of any event which
constitutes or which, with notice or a lapse of time or both, would constitute a
Servicer Event of Termination for five Business 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 Certificateholders notice of such occurrence
unless such default or Servicer Event of Termination shall have been waived or
cured. Such notice shall be given to the Rating Agencies promptly after any such
occurrence.

         Section 7.05. Survivability of Servicer Liabilities.
                       -------------------------------------

         Notwithstanding anything herein to the contrary, upon termination of
the Servicer hereunder, any liabilities of the Servicer which accrued prior to
such termination shall survive such termination.

                                  ARTICLE VIII

                                   THE TRUSTEE

         Section 8.01. Duties of Trustee.
                       -----------------

         The Trustee, prior to the occurrence of a Servicer Event of Termination
of which a Responsible Officer of the Trustee shall have actual knowledge and
after the curing of all Servicer Events of Termination which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement. If a Servicer Event of

                                     -113-
<PAGE>

Termination has occurred (which has not been cured) of which a Responsible
Officer has actual knowledge, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee 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; provided, however, that that the
Trustee shall not be responsible for the accuracy or content of any resolution,
certificate, statement, opinion, report, document, order or other instrument
furnished by the Servicer, the Seller or the Depositor hereunder. If any such
instrument is found not to conform in any material respect to the requirements
of this Agreement, the Trustee shall notify the Certificateholders of such
instrument in the event that the Trustee, after so requesting, does not receive
a satisfactorily corrected instrument.

         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 Servicer Event of
         Termination of which a Responsible Officer of the Trustee shall have
         actual knowledge, and after the curing of all such Servicer Events of
         Termination 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
         and conforming 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 of the
         Trustee, unless it shall be proved that the Trustee was negligent in
         ascertaining or investigating the facts related thereto;

                (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 Majority
         Certificateholders relating to the time, method and place of
         conducting any proceeding for any remedy available to the Trustee or
         exercising or omitting to exercise any trust or power conferred upon
         the Trustee under this Agreement; and

                (iv)    the Trustee shall not be charged with knowledge of any
         failure by the Servicer to comply with the obligations of the Servicer
         referred to in clauses (i) and (ii) of Section 7.01(a) or any Servicer
         Event of Termination unless a Responsible Officer of the Trustee at the
         Corporate Trust Office obtains actual knowledge of such failure or the
         Trustee receives written notice of such failure from the Servicer or
         the Majority

                                     -114-
<PAGE>

         Certificateholders. In the absence of such receipt of such notice, the
         Trustee may conclusively assume that there is no Servicer Event of
         Termination.

         The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there is
reasonable ground for believing that the repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it, and
none of the provisions contained in this Agreement shall in any event require
the Trustee to perform, or be responsible for the manner of performance of, any
of the obligations of the Servicer under this Agreement, except during such
time, if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.

         The Trustee shall not have any duty (A) to see any recording, filing,
or depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or
to see to the maintenance of any such recording or filing or depositing or to
any rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance or (C) to see to the payment or discharge of any tax, assessment, or
other governmental charge or any lien or encumbrance of any kind owing with
respect to, assessed or levied against, any part of the Trust Fund other than
from funds available in the Distribution Account.

         The Trustee shall have no duty hereunder with respect to any complaint,
claim, demand, notice or other document it may receive or which may be alleged
to have been delivered to or served upon it by any third party as a consequence
of the assignment of any Mortgage Loan hereunder; provided, however, that the
Trustee shall promptly remit to the Servicer upon receipt of any such complaint,
claim, demand, notice or other document (i) which is delivered to the Trustee at
its Corporate Trust Office; (ii) of which a Responsible Officer has actual
knowledge and (iii) which contains information sufficient to permit the Trustee
to make a determination that the real property to which such document relates to
is a Mortgaged Property.

         Section 8.02. Certain Matters Affecting the Trustee.
                       -------------------------------------

         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,
         Officer's Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document 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 advice or
         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 advice or Opinion
         of Counsel;

                (iii)   the Trustee shall not be under any obligation to
          exercise any of the rights or powers vested in it by this Agreement,
          or to institute, conduct or defend any litigation

                                     -115-
<PAGE>

         hereunder or in relation hereto, at the request, order or direction 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; the right of the
         Trustee to perform any discretionary act enumerated in this Agreement
         shall not be construed as a duty, and the Trustee shall not be
         answerable for other than its negligence or willful misconduct in the
         performance of any such act;

                (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 Servicer Event of
         Termination and after the curing of all Servicer Events of Termination
         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 documents, unless
         requested in writing to do so by the Majority Certificateholders;
         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 the security
         afforded to it by the terms of this Agreement, the Trustee may require
         reasonable indemnity against such cost, expense or liability as a
         condition to such proceeding. The reasonable expense of every such
         examination shall be paid by the Servicer or, if paid by the Trustee,
         shall be reimbursed by the Servicer upon demand. Nothing in this
         clause (v) shall derogate from the obligation of the Servicer to
         observe any applicable law prohibiting disclosure of information
         regarding the Mortgagors;

                (vi)    the Trustee shall not be accountable, have any liability
         or make any representation as to any acts or omissions hereunder of
         the Servicer until such time as the Trustee may be required to act as
         Servicer pursuant to Section 7.02;

               (vii)    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 or a custodian and the Trustee shall not be
         responsible for any misconduct or negligence on the part of any such
         agent, attorney or custodian appointed by it with due care; and

                (viii)  the right of the Trustee to perform any discretionary
         act enumerated in this Agreement shall not be construed as a duty, and
         the Trustee shall not be answerable for other than its negligence or
         willful misconduct in the performance of such act.

         Section 8.03. Trustee Not Liable for Certificates or Mortgage Loans.
                       -----------------------------------------------------

         The recitals contained herein and in the Certificates (other than the
authentication of the Trustee on the Certificates) shall be taken as the
statements of the Seller, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representations as to the validity
or sufficiency of this Agreement or of the Certificates (other than the
signature and authentication of the Trustee on the Certificates) or of any
Mortgage Loan or Related

                                     -116-
<PAGE>

Document. The Trustee shall not be accountable for the use or application by the
Servicer, or for the use or application of any funds paid to the Servicer in
respect of the Mortgage Loans or deposited in or withdrawn from the Collection
Account by the Servicer. The Trustee shall not at any time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage or any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust or its ability to
generate the payments to be distributed to Certificateholders under this
Agreement, including, without limitation: the existence, condition and ownership
of any Mortgaged Property; the existence and enforceability of any hazard
insurance thereon (other than if the Trustee shall assume the duties of the
Servicer pursuant to Section 7.02); the validity of the assignment of any
Mortgage Loan to the Trustee or of any intervening assignment; the completeness
of any Mortgage Loan; the performance or enforcement of any Mortgage Loan (other
than if the Trustee shall assume the duties of the Servicer pursuant to Section
7.02); the compliance by the Depositor or the Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any non-compliance therewith or any breach
thereof; any investment of monies by or at the direction of the Servicer or any
loss resulting therefrom, it being understood that the Trustee shall remain
responsible for any Trust property that it may hold in its individual capacity;
the acts or omissions of any of the Servicer (other than if the Trustee shall
assume the duties of the Servicer pursuant to Section 7.02), or any Mortgagor;
any action of the Servicer (other than if the Trustee shall assume the duties of
the Servicer pursuant to Section 7.02), taken in the name of the Trustee; the
failure of the Servicer to act or perform any duties required of it as agent of
the Trustee hereunder; or any action by the Trustee taken at the instruction of
the Servicer (other than if the Trustee shall assume the duties of the Servicer
pursuant to Section 7.02); provided, however, that the foregoing shall not
relieve the Trustee of its obligation to perform its duties under this
Agreement. The Trustee shall not have any responsibility for filing any
financing or continuation statement in any public office at any time or to
otherwise perfect or maintain the perfection of any security interest or lien
granted to it hereunder.

         Section 8.04. Trustee May Own Certificates.
                       ----------------------------

         The Trustee in its individual or any other capacity may become the
owner or pledgee of Certificates with the same rights as it would have if it
were not Trustee and may transact any banking and trust business with the
Servicer, the Depositor or their Affiliates.

         Section 8.05. Trustee Fees and Expenses.
                       -------------------------

         The Trustee shall be entitled to the Trustee Fee (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust) for all services rendered by the Trustee in the exercise and
performance of any of the powers and duties hereunder. The Trustee shall
withdraw from the Distribution Account on each Distribution Date and pay to
itself the Trustee Fee. The Trust shall reimburse the Trustee for all reasonable
expenses, disbursements and advances incurred or made by the Trustee 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 or which is the

                                     -117-
<PAGE>

responsibility of Certificateholders or the Trustee hereunder. In addition, the
Trustee and its officers, directors, employees and agents shall be indemnified
by the Trust from, and held harmless against, any and all losses, liabilities,
damages, claims or expenses incurred in connection with any legal action
relating to this Agreement or the Certificates, other than any loss, liability
or expense incurred by reason of willful misfeasance, bad faith or negligence of
the Trustee in the performance of its duties hereunder or by reason of the
Trustee's reckless disregard of obligations and duties hereunder. This Section
shall survive termination of this Agreement or the resignation or removal of any
Trustee hereunder. Anything in this Agreement to the contrary notwithstanding,
in no event shall the Trustee be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including, but not limited to, lost
profits) even if the Trustee has been advised of the likelihood of such loss or
damage and regardless of the form of action.

         Section 8.06. Eligibility Requirements for Trustee.
                       ------------------------------------

         The Trustee hereunder shall at all times be an entity duly organized
and validly existing under the laws of the United States of America or any state
thereof, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and a minimum long-term
debt rating of BBB by Fitch and S&P and a long term debt rating of at least A1
or better by Moody's and subject to supervision or examination by federal or
state authority. If such entity publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section 8.06, the combined
capital and surplus of such entity shall be deemed to be its combined capital
and surplus as set forth in its most recent report of condition so published.
The principal office of the Trustee (other than the initial Trustee) shall be in
a state with respect to which an Opinion of Counsel has been delivered to such
Trustee at the time such Trustee is appointed Trustee to the effect that the
Trust will not be a taxable entity under the laws of such state. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions of
this Section 8.06, the Trustee shall resign immediately in the manner and with
the effect specified in Section 8.07.

         Section 8.07. Resignation or Removal of Trustee.
                       ---------------------------------

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice thereof to the Depositor, the Servicer
and each Rating Agency. Upon receiving such notice of resignation, the Depositor
shall promptly appoint a successor Trustee by written instrument, in duplicate,
one copy of which instrument shall be delivered to the resigning Trustee and one
copy to the successor Trustee. If no successor Trustee shall have been so
appointed and having 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 be
legally unable to act, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Trustee or of their property shall be appointed, or any public
officer shall take charge or control of the Trustee or of their property or
affairs for the purpose of rehabilitation,

                                     -118-
<PAGE>

conservation or liquidation, then the Depositor may remove the Trustee. If the
Depositor or the Servicer removes the Trustee under the authority of the
immediately preceding sentence, the Depositor shall promptly appoint a successor
Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the Trustee so removed and one copy to the successor Trustee.

         The Majority Certificateholders may at any time remove the Trustee by
written instrument or instruments delivered to the Servicer, the Depositor and
the Trustee; the Depositor shall thereupon use its best efforts to appoint a
successor Trustee in accordance with this Section.

         Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 8.07 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, the Rating Agencies, the
Servicer 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 like effect as if
originally named as Trustee. The Depositor, the Servicer and the predecessor
Trustee shall execute and deliver such instruments and do such other things as
may reasonably be required for fully and certainly vesting and confirming in the
successor Trustee all such rights, powers, duties and obligations.

         No successor Trustee shall accept appointment as provided in this
Section 8.08 unless at the time of 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 the Regular Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.

         Upon acceptance of appointment by a successor Trustee as provided in
this Section 8.08, the successor Trustee shall mail notice of the appointment of
a successor Trustee hereunder to all Holders of Certificates at their addresses
as shown in the Certificate Register and to each Rating Agency.

         Section 8.09. Merger or Consolidation of Trustee.
                       ----------------------------------

         Any entity into which the Trustee may be merged or converted or with
which it may be consolidated, or any entity resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any entity
succeeding to the business of the Trustee, shall be the successor of the
hereunder, provided such entity shall be eligible under the provisions of
Section 8.06 and 8.08, 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.

                                     -119-
<PAGE>

         Section 8.10. Appointment of Co-Trustee or Separate Trustee.
                       ---------------------------------------------

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust or any Mortgaged Property may at the time be located, the
Depositor and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of the Trust, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Certificateholders, such title to the Trust, or any part thereof, and, subject
to the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Servicer and the Trustee may consider necessary or
desirable. Any such co-trustee or separate trustee shall be subject to the
written approval of the Servicer. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, or in
the case a Servicer Event of Termination shall have occurred and be continuing,
the Trustee alone shall have the power to make such appointment. No co-trustee
or separate trustee hereunder shall be required to meet the terms of eligibility
as a successor Trustee under Section 8.06, and no notice to Certificateholders
of the appointment of any co-trustee or separate trustee shall be required under
Section 8.08.

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

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

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

                (iii)   the Servicer and the Trustee, acting jointly may at any
         time accept the resignation of or remove any separate trustee or
         co-trustee except that following the occurrence of a Servicer Event of
         Termination, the Trustee acting alone may accept the resignation or
         remove any separate trustee or co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided

                                     -120-
<PAGE>

therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trustee. Every such instrument
shall be filed with the Trustee and a copy thereof given to the Depositor, the
Rating Agencies and the Servicer.

         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. Limitation of Liability.
                       -----------------------

         The Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it by this Agreement. Each of the undertakings
and agreements made on the part of the Trustee in the Certificates is made and
intended not as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.

         Section 8.12. Trustee May Enforce Claims Without Possession of
                       Certificates.
                       ------------------------------------------------

         (a)    All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and such proceeding instituted by the Trustee shall
be brought in its own name or in its capacity as Trustee for the benefit of all
Holders of such Certificates, subject to the provisions of this Agreement. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursement and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Certificateholders in respect of
which such judgment has been recovered.

         (b)    The Trustee shall afford the Depositor, the Servicer and each
Certificateholder upon reasonable notice during normal business hours, access to
all records maintained by the Trustee in respect of its duties hereunder and
access to officers of the Trustee responsible for performing such duties. The
Trustee shall cooperate fully with the Servicer, the Depositor and such
Certificateholder and shall make available to the Servicer, the Depositor and
such Certificateholder for review and copying at the expense of the party
requesting such copies, such books, documents or records as may be requested
with respect to the Trustee's duties hereunder. The Depositor, the Servicer and
the Certificateholders shall not have any responsibility or liability for any
action or failure to act by the Trustee and are not obligated to supervise the
performance of the Trustee under this Agreement or otherwise.

         Section 8.13. Suits for Enforcement.
                       ---------------------

         In case a Servicer Event of Termination or other default by the
Servicer hereunder shall occur and be continuing, the Trustee may proceed to
protect and enforce its rights and the rights of the Certificateholders under
this Agreement by a suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in

                                     -121-
<PAGE>

this Agreement or in aid of the execution of any power granted in this Agreement
or for the enforcement of any other legal, equitable or other remedy, as the
Trustee, being advised by counsel, and subject to the foregoing, shall deem most
effectual to protect and enforce any of the rights of the Trustee and the
Certificateholders.

         Section 8.14. Waiver of Bond Requirement.
                       --------------------------

         The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee post a bond or other surety with any
court, agency or body whatsoever.

         Section 8.15. Waiver of Inventory, Accounting and Appraisal
                       Requirement.
                       ---------------------------------------------

         The Trustee shall be relieved of, and each Certificateholder hereby
waives, any requirement of any jurisdiction in which the Trust, or any part
thereof, may be located that the Trustee file any inventory, accounting or
appraisal of the Trust with any court, agency or body at any time or in any
manner whatsoever.

                                   ARTICLE IX

                     REMIC AND GRANTOR TRUST ADMINISTRATION

         Section 9.01. REMIC Administration.
                       --------------------

         (a)    The Trustee shall make or cause to be made REMIC elections for
each of REMIC 1 and REMIC 2 as set forth in the Preliminary Statement on Forms
1066 or other appropriate federal tax or information return for the taxable year
ending on the last day of the calendar year in which the Certificates are
issued. The regular interests and residual interest in each REMIC shall be as
designated in the Preliminary Statement.

         (b)    The Closing Date is hereby designated as the "Startup Day" of
each REMIC within the meaning of section 860G(a)(9) of the Code.

         (c)    The Trustee shall pay any and all tax related expenses (not
including taxes) of each REMIC, including but not limited to any professional
fees or expenses related to audits or any administrative or judicial proceedings
with respect to such REMIC that involve the Internal Revenue Service or state
tax authorities, but only to the extent that (i) such expenses are ordinary or
routine expenses, including expenses of a routine audit but not expenses of
litigation (except as described in (ii)); or (ii) such expenses or liabilities
(including taxes and penalties) are attributable to the negligence or willful
misconduct of the Trustee in fulfilling its duties hereunder. The Trustee shall
be entitled to reimbursement of expenses to the extent provided in clause (i)
above from the Collection Account.

         (d)    The Trustee shall prepare or cause to be prepared, sign and file
or cause to be filed, each REMIC's federal and state tax and information returns
as such REMIC's direct representative. The expenses of preparing and filing such
returns shall be borne by the Trustee.

                                     -122-
<PAGE>

         (e)    The Holder of the Class R Certificate shall be the "tax matters
person" as defined in the REMIC Provisions (the "Tax Matters Person") with
respect to a REMIC, and the Trustee is irrevocably designated as and shall act
as attorney-in-fact and agent for such Tax Matters Person for each REMIC. The
Trustee, as agent for the Tax Matters Person, shall perform, on behalf of each
REMIC, 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, if required by the Code, the REMIC Provisions, or other
such guidance, the Trustee, as agent for the Tax Matters Person, shall provide
(i) to the Treasury or other governmental authority such information as is
necessary for the application of any tax relating to the transfer of the Class R
Certificate to any disqualified person or organization and (ii) to the
Certificateholders such information or reports as are required by the Code or
REMIC Provisions.

         (f)    The Trustee, the Servicer, and the Holders of Certificates shall
take any action or cause any REMIC formed under this Agreement to take any
action necessary to create or maintain the status of such REMIC as a REMIC under
the REMIC Provisions and shall assist each other as necessary to create or
maintain such status. None of the Trustee, the Servicer or the Holder of the
Class R Certificate shall take any action or cause any REMIC formed under this
Agreement 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 such REMIC as a REMIC or (ii) result in the
imposition of a tax upon such REMIC (including but not limited to the tax on
prohibited transactions as defined in Code Section 860F(a)(2) and the tax on
prohibited contributions set forth on Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless such action or failure to act is
expressly permitted under the terms of this Agreement, or the Trustee and the
Servicer have received an Opinion of Counsel (at the expense of the party
seeking to take such action) to the effect that the contemplated action will not
endanger such status or result in the imposition of such a tax. In addition,
prior to taking any action with respect to any REMIC formed under this Agreement
or the assets therein, or causing such REMIC to take any action, which is not
expressly permitted under the terms of this Agreement, any Holder of the Class R
Certificate will consult with the Trustee and the Servicer, or their respective
designees, in writing, with respect to whether such action could cause an
Adverse REMIC Event to occur with respect to such REMIC, and no such Person
shall take any such action or cause such REMIC to take any such action as to
which the Trustee or the Servicer has advised it in writing that an Adverse
REMIC Event could occur.

         (g)    The Holder of the Class R Certificate shall pay when due any and
all taxes imposed on any REMIC formed under this Agreement by federal or state
governmental authorities, but only from amounts, if any, distributable thereon.
To the extent that such REMIC taxes are not paid by the Class R
Certificateholder, the Trustee shall pay any remaining REMIC taxes out of future
amounts otherwise distributable to the Holder of the Class R Certificate or, if
no such amounts are available, out of other amounts held in the Distribution
Account, and shall reduce amounts otherwise payable to Holders of the REMIC 1
Regular Interests or the Certificates, as the case may be.

                                     -123-
<PAGE>

         (h)    The Trustee, shall, for federal income tax purposes, maintain or
cause to be maintained books and records with respect to each REMIC formed under
this Agreement on a calendar year and on an accrual basis.

         (i)    No additional contributions of assets shall be made to any
REMIC, except as expressly provided in this Agreement with respect to Eligible
Substitute Mortgage Loans.

         (j)    Neither the Trustee nor the Servicer shall enter into any
arrangement by which any REMIC will receive a fee or other compensation for
services.

         (k)    The Trustee shall treat (i) the rights of the Class A and
Mezzanine Certificates to receive Cap Carryover Amounts as a right in interest
rate cap contracts written by the Class X and Class N Certificateholders in
favor of the Holders of the Class A and Mezzanine Certificates and (ii) the
rights of the Class N and Class X Certificates under the Yield Maintenance
Agreement in accordance with the terms thereof and shall assign such rights for
federal tax return and information reporting a value of zero. The Trustee shall
account for such as property held separate and apart from the regular interests
it holds in each of the REMICs created hereunder. The provisions of this
paragraph are intended to satisfy the requirements of Treasury Regulations
Section 1.860G-2(i) for the treatment of property rights coupled with regular
interests to be separately respected and shall be interpreted consistent with
such regulation. On each Distribution Date, to the extent the Class A and
Mezzanine Certificates receive interest in excess of the Class AI REMIC
Pass-Through Rate, Class AII REMIC Pass-Through Rate, Class M-1 REMIC
Pass-Through Rate, Class M-2 REMIC Pass-Through Rate, Class M-3 REMIC
Pass-Through Rate, Class M-4 REMIC Pass-Through Rate and Class M-5 REMIC
Pass-Through Rate, as applicable, such interest will be treated as distributed
on the Class X/N Interest, pro rata, beneficially owned by the Class N and Class
X Certificates, together with any amount deposited in the Reserve Account in
respect of the Yield Maintenance Agreement, and then paid to the respective
Classes of Class A and Mezzanine Certificates pursuant to the related interest
rate cap agreement.

         (l)    In the event that the beneficial ownership of the Class N
Certificates and the Class X Certificates is held by a single Person for federal
income tax purposes or is held proportionately by more than one Person, such
Person shall be treated as the beneficial owner of the Class X/N Interest. In
the event that beneficial ownership of the Class N and the Class X Certificates
is held by two or more Persons for tax purposes and such Persons do not hold the
Class N and Class X Certificates proportionally, the Trustee shall take the
position that the Class N Certificateholders and the Class X Certificateholders
as partners in a partnership that owns the Class X/N Interest for federal income
tax purposes and shall not treat the Class N and Class X Certificates as an
interest in any REMIC created hereunder. By acquiring the Class N Certificates
and the Class X Certificates, the respective Holders will agree to treat the
Class N Certificates and the Class X Certificates in the manner described in the
preceding sentence for federal income tax purposes in the event that the
beneficial ownership of the Class N Certificates and the Class X Certificates is
separated. In such event, (1) a separate capital account shall be established
and maintained for each Holder of a Class N or Class X Certificate in accordance
with Treasury Regulations Section 1.704-1(b)(2)(iv), which shall be credited
with income or gain and debited by any expenses or losses and distributions
allocable to such Certificates, (2) the Class N Certificates shall be allocated
income in an amount equal to interest at the Pass-Through

                                     -124-
<PAGE>

Rate thereon and any original issue discount that would be reportable thereon if
the Class N Certificate were a debt instrument issued on the date ownership of
the Class N and Class X Certificates is separated, with a principal balance
equal to the Class N Principal Amount, (3) the Class X and Class N Certificates
shall be allocated income with respect to all prepayment penalties (including
amounts in connection with the full or partial waiver of such prepayment
penalties or premiums pursuant to Section 3.29) in accordance with the
allocation of such amounts pursuant to Section 4.02(c), (4) the Class X and
Class N Certificates shall be allocated accruals (under any reasonable method)
of any "cap premiums" deemed received on the date ownership of the Class X and
Class N Certificates is separated in respect of the obligation of the Class X/N
Interest to pay Cap Carryover Amounts, and shall be allocated expense in respect
of any actual payment of such Cap Carryover Amounts based on which one of such
Classes economically bears such expense, (5) the Class X Certificates shall be
allocated all remaining income and any expenses and Realized Losses with respect
to the Class X/N Interest, until the capital account of the Class X Certificates
is reduced to zero, and any remaining expenses or losses shall be allocated to
the Class N Certificates, (6) neither the Class N Certificates nor the Class X
Certificates shall be responsible for restoring any deficit to its capital
account, (7) upon termination of the Trust Fund pursuant to Article X, all
amounts available for distribution to Holders of the Class N and Class X
Certificates shall be distributed in accordance with their positive capital
account balances, first to the Class N Certificates until their Principal
Balance and any accrued but unpaid interest thereon are reduced to zero, and
then to the Class X Certificates, and (8) the Trustee shall maintain books and
records with respect to the partnership on a calendar year basis (unless a
different taxable year shall be required by the Code) and shall prepare or cause
to be prepared, and cause the Holder of the largest Percentage Interest of the
Class X Certificates to sign and file or cause to be filed all federal and state
tax and information returns for the partnership, and shall furnish or cause to
be furnished Schedule K-1's to the Holders of the Class N and Class X
Certificates at the time required by the Code. Unless otherwise directed by a
majority of the Percentage Interests of the Class X and Class N Certificates,
the Trustee shall not make an election under Section 754 of the Code. The Holder
of the largest Percentage Interest of the Class X Certificates, by acceptance of
its Class X Certificate, agrees to act as "tax matters partner" (within the
meaning of Section 6231(a)(7) of the Code and to sign and timely file all
federal and state partnership tax and information returns prepared by the
Trustee pursuant to this Section 9.01(l).

         Section 9.02. Prohibited Transactions and Activities.
                       --------------------------------------

         None of the Depositor, the Servicer or the Trustee shall sell, dispose
of, or substitute for any of the Mortgage Loans, except in a disposition
pursuant to (i) the foreclosure of a Mortgage Loan, (ii) the bankruptcy of the
Trust Fund, (iii) the termination of any REMIC pursuant to Article X of this
Agreement, (iv) a substitution pursuant to Article II of this Agreement, (v) a
repurchase of Mortgage Loans pursuant to Article II of this Agreement or (vi) an
optional purchase by the Servicer pursuant to Section 3.16 of this Agreement,
nor acquire any assets for any REMIC, nor sell or dispose of any investments in
the Distribution Account for gain, nor accept any contributions to any REMIC
after the Closing Date, unless it has received an Opinion of Counsel (at the
expense of the party causing such sale, disposition, or substitution) that such
disposition, acquisition, substitution, or acceptance will not (a) affect
adversely the status of such REMIC as a REMIC or of the interests therein other
than the Class R Certificate as the regular interests therein, (b) affect the
distribution of interest or principal on the Certificates, (c) result in

                                     -125-
<PAGE>

the encumbrance of the assets transferred or assigned to the Trust Fund (except
pursuant to the provisions of this Agreement) or (d) cause such REMIC to be
subject to a tax on prohibited transactions or prohibited contributions pursuant
to the REMIC Provisions.

         Section 9.03. Indemnification with Respect to Certain Taxes and Loss of
                       REMIC Status.
                       ---------------------------------------------------------

         In the event that any REMIC formed hereunder fails to qualify as a
REMIC, loses its status as a REMIC, or incurs federal, state or local taxes as a
result of a prohibited transaction or prohibited contribution under the REMIC
Provisions due to the negligent performance by the Servicer of its duties and
obligations set forth herein, the Servicer shall indemnify the Holder of the
Class R Certificate against any and all losses, claims, damages, liabilities or
expenses ("Losses") resulting from such negligence; provided, however, that the
Servicer shall not be liable for any such Losses attributable to the action or
inaction of the Trustee, the Depositor or the Holder of the Class R Certificate,
as applicable, nor for any such Losses resulting from misinformation provided by
the Holder of the Class R Certificate on which the Servicer has relied. The
foregoing shall not be deemed to limit or restrict the rights and remedies of
the Holder of the Class R Certificate now or hereafter existing at law or in
equity. Notwithstanding the foregoing, however, in no event shall the Servicer
have any liability (1) for any action or omission that is taken in accordance
with and in compliance with the express terms of, or which is expressly
permitted by the terms of, this Agreement, (2) for any Losses other than arising
out of a negligent performance by the Servicer of its duties and obligations set
forth herein, and (3) for any special or consequential damages to
Certificateholders (in addition to payment of principal and interest on the
Certificates).

         Section 9.04. REO Property.
                       ------------

         (a)    Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding any other provision of this
Agreement, the Servicer, acting on behalf of the Trust hereunder, shall not
rent, lease, or otherwise earn income on behalf of any REMIC with respect to any
REO Property which might 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 any REMIC of any "income from non-permitted assets"
within the meaning of section 860F(a)(2) of the Code or any "net income from
foreclosure property" which is subject to tax under the REMIC Provisions unless
the Servicer has advised, or has caused the applicable Servicer to advise, the
Trustee in writing to the effect that, under the REMIC Provisions, such action
would not adversely affect the status of any REMIC as a REMIC and any income
generated for such REMIC by the REO Property would not result in the imposition
of a tax upon such REMIC.

         (b)    The Servicer shall make reasonable efforts to sell any REO
Property for its fair market value. In any event, however, the Servicer shall
dispose of any REO Property before the close of the third calendar year
beginning after the year of its acquisition by the Trust Fund unless the
Servicer has received a grant of extension from the Internal Revenue Service to
the effect that, under the REMIC Provisions and any relevant proposed
legislation and under applicable state law, any REMIC may hold REO Property for
a longer period without adversely affecting its REMIC status or causing the
imposition of a Federal or state tax upon any REMIC. If the Servicer has
received such an extension, then the Servicer shall continue to attempt to sell

                                     -126-
<PAGE>

the REO Property for its fair market value as determined in good faith by the
Servicer for such longer period as such extension permits (the "Extended
Period"). If the Servicer has not received such an extension and the Servicer is
unable to sell the REO Property within 33 months after its acquisition by the
Trust Fund or if the Servicer has received such an extension, and the Servicer
is unable to sell the REO Property within the period ending three months before
the close of the Extended Period, the Servicer shall, before the end of the
applicable period, (i) purchase such REO Property at a price equal to the REO
Property's fair market value as determined in good faith by the Servicer or (ii)
auction the REO Property to the highest bidder (which may be the Servicer) in an
auction reasonably designed to produce a fair price prior to the expiration of
the applicable period.

         Section 9.05. Grantor Trust Administration.
                       ----------------------------

         The parties intend that the portions of the Trust Fund consisting of
the right of the Class N and Class X Certificates to receive Prepayment Charges,
Servicer Prepayment Charge Payment Amounts and Transferor Prepayment Charge
Payment Amounts, the right of the Class A and Mezzanine Certificates to receive
Cap Carryover Amounts, the Reserve Account and the right of the Class N and
Class X Certificates to receive Yield Maintenance Agreement Payments subject to
the obligation of the Class N and Class X Certificates to pay Cap Carryover
Amounts, shall be treated as a "grantor trust" or "partnership", as applicable,
under the Code, and the provisions hereof shall be interpreted consistently with
this intention. In furtherance of such intention, the Trustee shall furnish or
cause to be furnished (i) to the Holders of the Class A and Mezzanine
Certificates and (ii) to the Holder of the Class X and Class N Certificates (if
there is a single beneficial owner or two or more proportional Holders thereof)
or to itself on behalf of the partnership comprised of the Holders of the Class
X and Class N Certificates (if there are two or more non-proportional beneficial
owners thereof), and shall file or cause to be filed with the Internal Revenue
Service together with Form 1041 or such other form as may be applicable, their
allocable shares of income with respect to the property held by the Grantor
Trust, at the time or times and in the manner required by the Code.

                                   ARTICLE X

                                   TERMINATION

         Section 10.01. Termination.
                        -----------

         (a)    The respective obligations and responsibilities of the Servicer,
the Depositor, the Trustee and the Certificate Registrar created hereby (other
than the obligation of the Trustee to make certain payments to
Certificateholders after the final Distribution Date and the obligation of the
Servicer to send certain notices as hereinafter set forth) shall terminate upon
notice to the Trustee upon the earliest of (i) the Distribution Date on which
the Certificate Principal Balance of each Class of Certificates has been reduced
to zero, (ii) the final payment or other liquidation of the last Mortgage Loan
in the Trust, and (iii) the optional purchase by the Servicer of the Mortgage
Loans as described below. Notwithstanding the foregoing, 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.

                                     -127-
<PAGE>

         The Majority Class X Certificateholders may, at their option, terminate
the Trust Fund and retire the Offered Certificates on the next succeeding
Distribution Date upon which the aggregate current Pool Balance is less than 10%
of the aggregate Pool Balance of the Mortgage Loans as of the Cut-off Date by
purchasing all of the outstanding (i) Mortgage Loans in the Trust Fund at a
price equal to the sum of the outstanding Principal Balance of the Mortgage
Loans and except to the extent previously advanced by the Servicer, accrued and
unpaid interest thereon at the weighted average of the Mortgage Interest Rates
through the end of the Collection Period preceding the final Distribution Date
plus unreimbursed Servicing Advances, Advances and any unpaid Servicing Fees
allocable to such Mortgage Loans and (ii) REO Properties in the Trust Fund at a
price equal to their fair market value as determined in good faith by the
Servicer (the "Termination Price"). If such option is not exercised by the
Majority Class X Certificateholders on the first applicable Distribution Date,
the Servicer may exercise such option, but only upon providing at least 60 days
prior written notice to the Majority Class X Certificateholders of the
Servicer's intention to terminate the Trust Fund and the applicable Distribution
Date for such termination. Upon receipt of such notice, the Majority Class X
Certificateholders may exercise their option to terminate the Trust Fund on or
before the Distribution Date selected by the Servicer in accordance with the
procedures set forth in this Section 10.01.

         In connection with any such purchase pursuant to the preceding
paragraph, the Servicer or its affiliate shall deliver to the Trustee for
deposit in the Distribution Account all amounts then on deposit in the
Collection Account (less amounts permitted to be withdrawn by the Servicer
pursuant to Section 3.07), which deposit shall be deemed to have occurred
immediately following such purchase.

         Any such purchase shall be accomplished by delivery on the Servicer
Remittance Date before such Distribution Date of the Termination Price to the
Trustee for deposit into the Distribution Account as part of Available Funds.

         (b)    Notice of any termination, specifying the Distribution Date
(which shall be a date that would otherwise be a Distribution Date) upon which
the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee upon the Trustee receiving notice of such date from the Majority
Class X Certificateholders or the Servicer, as applicable, by letter to the
Certificateholders mailed not earlier than the 15th day of the month preceding
the month of such final distribution and not later than the 15th day of the
month of such final distribution specifying (1) the Distribution Date upon which
final distribution of the Certificates will be made upon presentation and
surrender of such Certificates at the office or agency of the Trustee therein
designated, (2) the amount of any such final distribution and (3) that the
Record Date otherwise applicable to such Distribution Date is not applicable,
distributions being made only upon presentation and surrender of the
Certificates at the office or agency of the Trustee therein specified.

         (c)    Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to the Holders of the Certificates on the
Distribution Date for such final distribution, in proportion to the Percentage
Interests of their respective Class and to the extent that funds are available
for such purpose, an amount equal to the amount required to be distributed to
such Holders in accordance with the provisions of Sections 4.01 and 4.02 for
such Distribution Date.

                                     -128-
<PAGE>

         (d)    In the event that all Certificateholders shall not surrender
their Certificates for final payment and cancellation on or before such final
Distribution Date, the Trustee shall promptly following such date cause all
funds in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining
Certificateholders by depositing such funds in a separate escrow account for the
benefit of such Certificateholders, and the Servicer (if the Servicer or an
affiliate of the Servicer, has exercised its right to purchase the Mortgage
Loans) or the Trustee (in any other case) shall give a second written notice to
the remaining Certificateholders, to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
nine months after the second notice all the Certificates shall not have been
surrendered for cancellation, the Class R Certificateholder shall be entitled to
all unclaimed funds and other assets which remain subject hereto (except with
respect to the Class X and Class N Certificates) and the Trustee upon transfer
of such funds shall be discharged of any responsibility for such funds, and all
other Certificateholders shall look to the Class R Certificateholder for
payment, and Class N and Class X Certificates (representing partners in a
partnership which beneficially owns the Class X/N Interest) also shall be
entitled to look only to the Class R Certificateholder for payment.

         Section 10.02. Additional Termination Requirements.
                        -----------------------------------

         (a)    In the event that the Majority Class X Certificateholders or the
Servicer exercises the purchase option as provided in Section 10.01, the Trust
shall be terminated in accordance with the following additional requirements,
unless the Trustee shall have been furnished with an Opinion of Counsel to the
effect that the failure of the Trust to comply with the requirements of this
Section will not (i) result in the imposition of taxes on "prohibited
transactions" of the Trust as defined in Section 860F of the Code or (ii) cause
any REMIC constituting part of the Trust Fund to fail to qualify as a REMIC at
any time that any Certificates are outstanding:

                (i)     The Trustee shall designate a date within 90 days prior
         to the final Distribution Date as the date of adoption of plans of
         complete liquidation of each of REMIC 1 and REMIC 2 and shall specify
         such date in the final federal income tax return of each REMIC;

                (ii)    After the date of adoption of such plans of complete
         liquidation and at or prior to the final Distribution Date, the Trustee
         shall sell all of the assets of the Trust to the Majority Class X
         Certificateholders or the Servicer, as applicable, 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 in the following order of priority (A) (i) to
         the Holders of each of the Class AI and Class AII Certificates, pro
         rata and (ii) to the Class M-1, Class M-2, Class M-3, Class M-4, Class
         M-4 and Class M-5 Certificates, the related Certificate Principal
         Balance, as applicable, plus one month's interest thereon at the
         applicable Pass-Through Rate, (B) to the Class N and Class X
         Certificates in respect of the Class X/N Interest, the amount of any
         remaining Monthly Excess Cash Flow Amounts not previously distributed
         thereon, (C) to the remaining REMIC 1 Regular Interests the amounts
         allocable thereto pursuant to Section 4.08 and (D) to the Class R
         Certificateholder, all cash on hand in respect of the

                                     -129-
<PAGE>

         REMICs after such payment (other than cash retained to meet claims)
         and the Trust shall terminate at such time.

         (b)    By their acceptance of Certificates, the Holders thereof hereby
agree to appoint the Trustee as their attorney in fact to: (i) designate such
date of adoption of plans of complete liquidation and (ii) to take such other
action in connection therewith as may be reasonably required to carry out such
plans of complete liquidation all in accordance with the terms hereof.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

         Section 11.01. Amendment.
                        ---------

         This Agreement may be amended from time to time by the Depositor, the
Servicer and the Trustee; and without the consent of the Certificateholders, (i)
to cure any ambiguity or mistake, (ii) to correct, modify or supplement any
provision herein which may be inconsistent with any other provision herein or
the Prospectus Supplement, (iii) to make any other provisions with respect to
matters or questions arising under this Agreement, which shall not be
inconsistent with the provisions of this Agreement; or (iv) to comply with any
requirements imposed by the Code; provided, however, that any such action listed
in clause (iii) above shall not adversely affect in any respect the interests of
any Certificateholder, as evidenced by (i) notice in writing to the Depositor,
the Servicer and the Trustee from the Rating Agencies that such action will not
result in the reduction or withdrawal of the rating of any outstanding Class of
Certificates with respect to which it is a Rating Agency, or (ii) an Opinion of
Counsel delivered to the Servicer and the Trustee.

         In addition, this Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee, with the consent of the Majority
Certificateholders for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders of Certificates; provided,
however, that no such amendment or waiver shall (x) reduce in any manner the
amount of, or delay the timing of, payments on the Certificates which are
required to be made on any Certificate without the consent of the Holder of such
Certificate, (y) adversely affect in any material respect the interests of the
Holders of any Class of Certificates in a manner other than as described in
clause (x) above, without the consent of the Holders of Certificates of such
Class evidencing at least a majority of the Percentage Interest in such Class,
or (z) reduce the percentage of Voting Rights required by clause (y) above
without the consent of the Holders of all Certificates of such Class then
outstanding. Upon approval of an amendment, a copy of such amendment shall be
sent to the Rating Agencies. Prior to the execution of any amendment to this
Agreement, the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel (at the expense of the Person seeking such amendment) stating that the
execution of such amendment is authorized or permitted by this Agreement. The
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustee's own rights, duties or immunities under this Agreement.

                                     -130-
<PAGE>

         Notwithstanding any provision of this Agreement to the contrary, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, delivered by (and at the expense of)
the Person seeking such Amendment, to the effect that such amendment will not
result in the imposition of a tax on any REMIC constituting part of the Trust
Fund pursuant to the REMIC Provisions or cause any REMIC constituting part of
the Trust Fund to fail to qualify as a REMIC at any time that any Certificates
are outstanding and that the amendment is being made in accordance with the
terms hereof.

         Promptly after the execution of any such amendment the Trustee shall
furnish, at the expense of the Person that requested the amendment if such
Person is the Servicer (but in no event at the expense of the Trustee),
otherwise at the expense of the Trust, a copy of such amendment and the Opinion
of Counsel referred to in the immediately preceding paragraph to the Servicer
and each Rating Agency.

         It shall not be necessary for the consent of Certificateholders under
this Section 11.01 to approve the particular form of any proposed amendment;
instead 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.

         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
Servicer at the expense of the Trust, but only upon direction of
Certificateholders, 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 together constitute but
one and the same instrument.

         Section 11.03. Limitation on Rights of Certificateholders.
                        ------------------------------------------

         The death or incapacity of any Certificateholder shall not (i) operate
to terminate this Agreement or the Trust, (ii) 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, or (iii)
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.

         Except as expressly provided for herein, no Certificateholder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth or contained in the terms of the 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

                                     -131-
<PAGE>

person by reason of any action taken by the parties to this Agreement pursuant
to any provision hereof.

         No Certificateholder shall have any right by virtue 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 such Holder previously
shall have given to the Trustee a written notice of default and of the
continuance thereof, as herein provided, and unless also 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 60 days after
its receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding. It 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 whatever 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, which priority or
preference is not otherwise provided for herein, 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 11.03 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; Jurisdiction.
                        ---------------------------

         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. With respect to any
claim arising out of this Agreement, each party irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York and the United
States District Court located in the Borough of Manhattan in The City of New
York, and each party irrevocably waives any objection which it may have at any
time to the laying of venue of any suit, action or proceeding arising out of or
relating hereto brought in any such courts, irrevocably waives any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and further irrevocably waives the right to object,
with respect to such claim, suit, action or proceeding brought in any such
court, that such court does not have jurisdiction over such party, provided that
service of process has been made by any lawful means.

         Section 11.05. Notices.
                        -------

         All directions, demands and notices hereunder 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 (a) in the
case of the Trustee, JPMorgan Chase Bank, 4 New York Plaza, 6th Floor, New York,
New York 10004-2477, Attention: Institutional Trust Services/Structured Finance:
ABFC 2003-AHL1, or such other address as may hereafter be furnished to the
Depositor and the Servicer in writing by the Trustee, (b) in the case of the
Depositor, Asset Backed Funding Corporation, 100 North Tryon Street, 11th Floor,
Charlotte,

                                     -132-
<PAGE>

North Carolina 28255, Attention: ABFC Asset-Backed Certificates, Series
2003-AHL1, or such other address as may be furnished to the Servicer and the
Trustee in writing by the Depositor, and (c) in the case of the Servicer, Litton
Loan Servicing LP, 4828 Loop Central Drive, Houston, Texas 77081, Attention:
Janice McClure, or such other address as may be hereafter furnished to the
Depositor and the Trustee by the Servicer in writing. Any notice required or
permitted to be mailed to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Notice of any Servicer Event of Termination shall be given by telecopy
and by certified mail. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have duly been given when mailed,
whether or not the Certificateholder receives such notice. A copy of any notice
required to be telecopied hereunder shall also 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 for any reason whatsoever be 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. 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 11.08. Notice to the Rating Agencies.
                        -----------------------------

         Each of the Trustee and the Servicer shall be obligated to use its best
reasonable efforts promptly to provide notice to the Rating Agencies with
respect to each of the following of which a Responsible Officer of the Trustee
or the Servicer, as the case may be, has actual knowledge:

                (i)     any material change or amendment to this Agreement;

                (ii)    the occurrence of any Servicer Event of Termination that
         has not been cured or waived;

                (iii)   the resignation or termination of the Servicer or the
         Trustee;

                (iv)    the final payment to Holders of the Certificates of any
         Class;

                (v)     any change in the location of any Account; and

                (vi)    if the Trustee is acting as successor servicer pursuant
         to Section 7.02 hereof, any event that would result in the inability
         of the Trustee to make Advances.

                (vii)   In addition, the Servicer shall promptly furnish to each
         Rating Agency copies of the following:

                                     -133-
<PAGE>

                        (A)  each annual statement as to compliance described in
                Section 3.19 hereof;

                        (B)  each annual independent public accountants'
                servicing report described in Section 3.20 hereof; and

                        (C)  each notice delivered pursuant to Section 7.01(a)
                hereof which relates to the fact that the Servicer has not made
                an Advance.

         Any such notice pursuant to this Section 11.08 shall be in writing and
shall be deemed to have been duly given if personally delivered or mailed by
first class mail, postage prepaid, or by express delivery service to: Fitch
Ratings, One State Street Plaza, New York, New York 10004, Attention: Managing
Director, Residential Mortgage-Backed Securities; Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007, Attention: Attention: Managing
Director, Residential Mortgage-Backed Securities; and Standard & Poor's, a
division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York
10041, Attention: Mortgage Surveillance Group.

         Section 11.09. Further Assurances.
                        ------------------

         Notwithstanding any other provision of this Agreement, neither the
Regular Certificateholders nor the Trustee shall have any obligation to consent
to any amendment or modification of this Agreement unless they have been
provided reasonable security or indemnity against their out-of-pocket expenses
(including reasonable attorneys' fees) to be incurred in connection therewith.

         Section 11.10. Benefits of Agreement.
                        ---------------------

         Nothing in this Agreement or in the Certificates, expressed or implied,
shall give to any Person, other than the Certificateholders and the parties
hereto and their successors hereunder, any benefit or any legal or equitable
right, remedy or claim under this Agreement.

         Section 11.11. Acts of Certificateholders.
                        --------------------------

         (a)    Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be given or taken by the
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Certificateholders in person or by
agent duly appointed in writing; and such action shall become effective when
such instrument or instruments are delivered to the Trustee and the Servicer.
Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "act" of the Certificateholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Agreement and conclusive in favor of the Trustee and the Trust,
if made in the manner provided in this Section 11.11.

         (b)    The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying

                                     -134-
<PAGE>

that the individual signing such instrument or writing acknowledged to him the
execution thereof. Whenever such execution is by a signer acting in a capacity
other than his or her individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority.

         (c)    Any request, demand, authorization, direction, notice, consent,
waiver or other action by any Certificateholder shall bind every future Holder
of such Certificate and the Holder of every Certificate issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof, in
respect of anything done, omitted or suffered to be done by the Trustee or the
Trust in reliance thereon, whether or not notation of such action is made upon
such Certificate.

                      [signatures follow on the next page]

                                     -135-
<PAGE>

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

                               ASSET BACKED FUNDING CORPORATION,
                               as Depositor

                               By:      /s/ Kirk B. Meyers
                                  ---------------------------------
                               Name:  Kirk B. Meyers

                               Title: Vice President

                               LITTON LOAN SERVICING LP

                               By:      /s/ Janice McClure
                                  ---------------------------------
                               Name:  Janice McClure

                               Title: Senior Vice President

                               JPMORGAN CHASE BANK,
                               as Trustee

                               By:      /s/ Aranka R. Paul
                                  ----------------------------------
                               Name:  Aranka R. Paul

                               Title: Assistant Vice President

<PAGE>

STATE OF NORTH CAROLINA)
                       ) ss.:
COUNTY OF UNION        )

         On the 8th day of May, 2003 before me, a notary public in and for said
State, personally appeared Kirk B. Meyers, known to me to be a Vice President of
Asset Backed Funding Corporation, a Delaware corporation, 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

                                         Angela Hinson

My Commission Expires: August 29, 2003

<PAGE>

STATE OF TEXAS          )
                        ) ss.:
COUNTY OF HARRIS        )

         On the 8th day of May, 2003 before me, a notary public in and for said
State, personally appeared Janice McClure, known to me to be a Senior Vice
President of Litton Loan Servicing LP, a Delaware limited partnership, that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said limited partnership, and acknowledged to me that
such association 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

                                         Amanda Rhodes

My Commission Expires: August 28, 2006

<PAGE>

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

         On the 8th day of May, 2003 before me, a notary public in and for said
State, personally appeared Aranka R. Paul, known to me to be a Assistant Vice
President of JPMorgan Chase Bank, a national banking association, that executed
the within instrument, and also known to me to be the person who executed it on
behalf of said association, 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

                                        Margaret M. Price

My Commission Expires: April 22, 2007

<PAGE>

                                   EXHIBIT A-1

                          FORM OF CLASS AI CERTIFICATES

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

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS AI

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

Series 2003-AHL1, Class AI                 Initial Certificate Principal Balance
                                           of this Certificate: $[  ]
Pass-Through Rate: Variable
                                           Servicer: Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
and Cut-off Date:  April 1, 2003           Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003     Final Scheduled Distribution Date:
                                           March 25, 2033
Closing Date:  May 8, 2003
                                           CUSIP: 04542B CJ 9
Original Class Certificate Principal
Balance of  the Class AI                   ISIN No. US04542BCJ98
Certificates:  $109,394,000

No. ___

                                     A-1-1

<PAGE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class AI Certificates) in that certain beneficial ownership interest
evidenced by all the Class AI Certificates in the Trust Fund created pursuant to
a Pooling and Servicing Agreement, dated as specified above (the "Agreement"),
among Asset Backed Funding Corporation (hereinafter called the "Depositor,"
which term includes any successor entity under the Agreement), the 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 last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs or, in the
case of the first Distribution Date, the Closing Date (the "Record Date"), from
funds in the Distribution Account 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 AI 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class AI
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                                     A-1-2

<PAGE>

                  Interest will accrue on the Class AI Certificates during each
Interest Accrual Period at a rate equal to the lesser of (i) 3.684% per annum,
or 4.184% per annum for any Distribution Date after the Optional Termination
Date, and (ii) the Group I Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class AI Certificates.

                  The Class AI 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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.

                  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.

                                     A-1-3

<PAGE>

                  The Depositor, the Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                      A-1-4
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                                as Trustee

                                       By:
                                          --------------------------------------
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                       JPMorgan Chase Bank,
                                       as Certificate Registrar

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

Date of authentication:
                       ----------------

                                     A-1-5
<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
           of survivorship and not as                        ------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class AI 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

                                     A-1-6
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ______________________________, account number _____________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     A-1-7
<PAGE>

                                   EXHIBIT A-2

                         FORM OF CLASS AII CERTIFICATES

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

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS AII

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION
<TABLE>
<S>                                                <C>
Series 2003-AHL1, Class AII                        Initial Certificate Principal Balance of this
                                                   Certificate: $[ ]
Pass-Through Rate: Variable
                                                   Servicer: Litton Loan Servicing LP
Date of Pooling and Servicing Agreement and
Cut-off Date: April 1, 2003                        Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003             Final Scheduled Distribution Date:
                                                   March 25, 2033
Closing Date:  May 8, 2003
                                                   CUSIP:  04542B CK 6
Original Class Certificate Principal Balance of
the Class AII Certificates:  $191,962,000          ISIN No. US04542BCK61

No. __
</TABLE>

                                     A-2-1
<PAGE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class AII Certificates) in that certain beneficial ownership interest
evidenced by all the Class AII Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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 Business Day immediately preceding the related
Distribution Date (the "Record Date"); provided, however, that if any such
Certificate becomes a Definitive Certificate, the Record Date for such
Certificate shall be the last Business Day of the month immediately preceding
the month in which the related Distribution Date occurs, from funds in the
Distribution Account 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 AII 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class AII
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                                     A-2-2
<PAGE>

                  The Class AII Certificates will accrue interest at a rate
equal to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related
LIBOR Determination Date, plus the Class AII Certificate Margin and (b) the
Group II Maximum Cap Rate, and (ii) the Group II Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class AII Certificates.

                  The Class AII 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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.

                  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.

                                     A-2-3
<PAGE>

                  The Depositor, the Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     A-2-4
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                                as Trustee

                                       By:
                                          --------------------------------------
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

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

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                       ---------------

                                     A-2-5
<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
           of survivorship and not as                      --------------------
           tenants in common                                     (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class AII 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

                                     A-2-6
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ______________________, account number _____________________,
or, if mailed by check, to _____________________________________________________
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     A-2-7
<PAGE>

                                    EXHIBIT B

                                   [RESERVED]

                                      B-1-1
<PAGE>

                                   EXHIBIT C-1

                           FORM OF CLASS R CERTIFICATE

THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES PERSON.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS THE "RESIDUAL
INTEREST" IN TWO SEPARATE "REAL ESTATE MORTGAGE INVESTMENT CONDUITS," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE").

THIS CLASS R CERTIFICATE IS SUBORDINATE TO THE OFFERED CERTIFICATES OF THIS
SERIES TO THE EXTENT DESCRIBED HEREIN AND IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

THIS CLASS R CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS CLASS R CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES,
KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN WHICH SUCH
PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") (EACH, A "PLAN") OR ANY PERSON WHO IS DIRECTLY OR
INDIRECTLY PURCHASING THE CLASS R CERTIFICATE ON BEHALF OF, AS A NAMED FIDUCIARY
OF, AS TRUSTEE OF, OR WITH ASSETS OF A PLAN.

ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CLASS R CERTIFICATE MAY BE
MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A FORM OF ERISA REPRESENTATION AND
A RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT AND (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY

                                     C-1-1
<PAGE>

FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, OR ANY AGENCY OR
INSTRUMENTALITY OF ANY OF THE FOREGOING, (B) ANY ORGANIZATION (OTHER THAN A
COOPERATIVE DESCRIBED IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX
IMPOSED BY CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
IMPOSED BY SECTION 511 OF THE CODE, (C) ANY ORGANIZATION DESCRIBED IN SECTION
1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES
(A), (B) OR (C) BEING HEREINAFTER REFERRED TO AS A "DISQUALIFIED ORGANIZATION"),
(D) AN AGENT OF A DISQUALIFIED ORGANIZATION OR (E) ANY OTHER ENTITY IDENTIFIED
AS A DISQUALIFIED ORGANIZATION UNDER THE CODE AND (2) NO PURPOSE OF SUCH
TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX, AND (3) 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 CLASS R
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 A CLASS R CERTIFICATE BY
ACCEPTANCE OF THIS CERTIFICATE 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 CLASS R CERTIFICATE.

                                      C-1-2
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                            SERIES 2003-AHL1, CLASS R

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                           <C>
Series 2003-AHL1, Class R                     Percentage Interest:  100%

Date of Pooling and Servicing Agreement       Servicer: Litton Loan Servicing LP
and Cut-off Date: April 1, 2003
                                              Trustee:  JPMorgan Chase Bank
First Distribution Date:  May 27, 2003
                                              Closing Date:  May 8, 2003
Maturity Date:  N/A

No. ___
</TABLE>

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.

                  This certifies that _______________________ is the registered
owner of a Percentage Interest set forth above in that certain beneficial
ownership interest evidenced by the Class R Certificate in the Trust Fund
created pursuant to a Pooling and Servicing Agreement, dated as specified above
(the "Agreement"), among Asset Backed Funding Corporation (hereinafter called
the "Depositor," which term includes any successor entity under the Agreement),
the 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 last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs (the "Record
Date"), from funds in the Distribution Account in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holder of the Class R Certificate 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

                                     C-1-3
<PAGE>

available funds to the account of the Person entitled thereto if such Person
shall have so notified the Certificate Registrar in writing at least five
Business Days prior to the Record Date immediately prior to such Distribution
Date and is the registered owner of the Class R Certificate, or 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, provided that the
Certificate Registrar may deduct a reasonable wire transfer fee from any payment
made by wire transfer. 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 ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.

                  The Class R Certificate is 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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 Class R Certificate is issuable in fully registered form
only without coupons in the Class and denomination representing the Percentage
Interest specified in the Agreement. As provided in the Agreement and subject to
certain limitations therein set forth, Certificates are

                                     C-1-4
<PAGE>

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 shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and 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 a transfer is to be made
without registration or qualification, the Trustee shall require, in order to
assure compliance with such laws, either (i) in the case of a transfer made in
reliance on Rule 144A under the 1933 Act, that the proposed transferee delivers
to the Trustee a completed investment letter in substantially the form attached
to the Agreement as Exhibit J-2, or (ii) in the case of any other transfer, that
the Certificateholder desiring to effect the transfer and such
Certificateholder's prospective transferee each execute a representation letter
in substantially the forms of Exhibit L and Exhibit J-1 attached to the
Agreement, respectively, certifying to the Depositor and the Trustee the facts
surrounding the transfer as described in Section 5.02 of the Agreement, or as
provided in the Agreement the Depositor and the Trustee shall require an Opinion
of Counsel satisfactory to them 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 or the Certificate Registrar, in their respective
capacities as such. None of the Depositor, the Certificate Registrar 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 such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

                  The Trustee shall, as a condition to registration of the
transfer, require delivery to it, in form and substance satisfactory to it, an
affidavit in the form of Exhibit K attached to the Agreement executed by the
proposed transferee to the effect that, among other things, such transferee is a
Permitted Transferee and that it is not acquiring its Ownership Interest in the
Class R Certificate that is the subject of the proposed transfer as a nominee,
trustee or agent for any Person who is not a Permitted Transferee.

                  No transfer of a Certificate or any interest therein may be
made to employee benefit plans and certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA or Section 4975 of the Code or any person who
is directly or indirectly purchasing the Certificate or interest therein on
behalf of, as named fiduciary of, as trustee of, or with assets of a Plan.

                  The Holder of this Certificate, by its acceptance hereof,
shall be deemed for all purposes 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

                                     C-1-5
<PAGE>

will not cause the Trust to cease to qualify as two separate REMICs or cause the
imposition of a tax upon the Trust.

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-1-6
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                           -------------------------------------
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is the Class R Certificate referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                        ---------------

                                     C-1-7
<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
           of survivorship and not as                       -------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class R 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

                                     C-1-8
<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.

                                     C-1-9
<PAGE>

                                   EXHIBIT C-2

                         FORM OF CLASS M-1 CERTIFICATES

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

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS AI AND CLASS
AII CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

THE CLASS M-1 CERTIFICATES ARE ONLY OFFERED FOR SALE, AND ARE ONLY TRANSFERABLE
TO PLAN INVESTORS IF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF ERISA
AND THE CODE APPLIES. EACH PURCHASER OF A CLASS M-1 CERTIFICATE, OTHER THAN THE
INITIAL PURCHASER OF THE CLASS M-1 CERTIFICATE, BY VIRTUE OF ITS PURCHASE OF
SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT A
PLAN INVESTOR OR THAT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND THE CODE APPLIES TO THE ACQUISITION, HOLDING, AND RESALE OF SUCH
CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST.

                                     C-2-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS M-1

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                      <C>
Series 2003-AHL1, Class M-1              Initial Certificate Principal Balance of this
                                         Certificate: $[ ]
Pass-Through Rate:  Variable
                                         Servicer: Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2003          Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003   Final Scheduled Distribution Date:
                                         March 25, 2033
Closing Date: May 8, 2003
                                         CUSIP:  04542B CL 4

Original Class Certificate Principal
Balance of the Class M-1 Certificates    ISIN No. US04542BCL45
as of the Closing Date: $24,034,000

No. ___
</TABLE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class M-1 Certificates) in that certain beneficial ownership interest
evidenced by all the Class M-1 Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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.

                                     C-2-2
<PAGE>

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 Business Day preceding the related Distribution
Date (the "Record Date"); provided, however, that if any such Certificate
becomes a Definitive Certificate, the Record Date for such Certificate shall be
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs, from funds in the Distribution Account 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class M-1
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Class M-1 Pass-Through Rate will be a per annum rate equal
to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related LIBOR
Determination Date, plus the Class M-1 Certificate Margin and (b) the Pool
Maximum Cap Rate, and (ii) the Mezzanine Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-1 Certificates.

                  The Class M-1 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.

                  This certificate is subordinated in right of payment to the
Class AI and Class AII Certificates as described in the Agreement referred to
herein.

                                     C-2-3
<PAGE>

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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.

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as

                                     C-2-4
<PAGE>

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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-2-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                           -------------------------------------
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Class M-1 Certificates referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                        ---------------

                                     C-2-6
<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
           of survivorship and not as                       --------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class M-1 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

                                     C-2-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _____________________, account number ______________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-2-8
<PAGE>

                                   EXHIBIT C-3

                         FORM OF CLASS M-2 CERTIFICATES

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

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS AI, CLASS AII
AND CLASS M-1 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

THE CLASS M-2 CERTIFICATES ARE ONLY OFFERED FOR SALE, AND ARE ONLY TRANSFERABLE
TO PLAN INVESTORS IF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF ERISA
AND THE CODE APPLIES. EACH PURCHASER OF A CLASS M-2 CERTIFICATE, OTHER THAN THE
INITIAL PURCHASER OF THE CLASS M-2 CERTIFICATE, BY VIRTUE OF ITS PURCHASE OF
SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT A
PLAN INVESTOR OR THAT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND THE CODE APPLIES TO THE ACQUISITION, HOLDING, AND RESALE OF SUCH
CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST.

                                     C-3-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS M-2

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                        <C>
Series 2003-AHL1, Class M-2                Initial Certificate Principal Balance of this
                                           Certificate: $[ ]
Pass-Through Rate:  Variable
                                           Servicer:  Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2003            Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003     Final Scheduled Distribution Date:
                                           March 25, 2033
Closing Date:  May 8, 2003
                                           CUSIP:  04542B CM 2
Original Class Certificate Principal
Balance of the Class M-2 Certificates as   ISIN No. US04542BCM28
of the Closing Date:  $19,413,000

No. ___
</TABLE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class M-2 Certificates) in that certain beneficial ownership interest
evidenced by all the Class M-2 Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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

                                     C-3-2
<PAGE>

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 Business Day preceding the related Distribution
Date (the "Record Date"); provided, however, that if any such Certificate
becomes a Definitive Certificate, the Record Date for such Certificate shall be
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs, from funds in the Distribution Account 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class M-2
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Class M-2 Pass-Through Rate will be a per annum rate equal
to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related LIBOR
Determination Date, plus the Class M-2 Certificate Margin and (b) the Pool
Maximum Cap Rate, and (ii) the Mezzanine Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-2 Certificates.

                  The Class M-2 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.

                  This certificate is subordinated in right of payment to the
Class AI, Class AII and Class M-1 Certificates as described in the Agreement
referred to herein.

                                     C-3-3
<PAGE>

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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.

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as

                                     C-3-4
<PAGE>

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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-3-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Class M-2 Certificates referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                       ---------------

                                     C-3-6
<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
           of survivorship and not as                        -------------------
           tenants in common                                        (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class M-2 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

                                     C-3-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to__________________________________________________
for the account of ______________________, account number _____________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-3-8
<PAGE>

                                   EXHIBIT C-4

                         FORM OF CLASS M-3 CERTIFICATES

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

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS AI, CLASS AII,
CLASS M-1 AND CLASS M-2 CERTIFICATES AS DESCRIBED IN THE POOLING AND SERVICING
AGREEMENT REFERRED TO HEREIN.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

THE CLASS M-3 CERTIFICATES ARE ONLY OFFERED FOR SALE, AND ARE ONLY TRANSFERABLE
TO PLAN INVESTORS IF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF ERISA
AND THE CODE APPLIES. EACH PURCHASER OF A CLASS M-3 CERTIFICATE, OTHER THAN THE
INITIAL PURCHASER OF THE CLASS M-3 CERTIFICATE, BY VIRTUE OF ITS PURCHASE OF
SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT A
PLAN INVESTOR OR THAT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND THE CODE APPLIES TO THE ACQUISITION, HOLDING, AND RESALE OF SUCH
CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST.

                                     C-4-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS M-3

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                      <C>
Series 2003-AHL1, Class M-3              Initial Certificate Principal Balance of this
                                         Certificate: $[ ]
Pass-Through Rate:  Variable
                                         Servicer:  Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2003          Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003   Final Scheduled Distribution Date:
                                         March 25, 2033
Closing Date:  May 8, 2003
                                         CUSIP:  04542B CN 0

Original Class Certificate Principal
Balance of the Class M-3 Certificates    ISIN No. US04542BCN01
as of the Closing Date:  $10,168,000

No. ___
</TABLE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class M-3 Certificates) in that certain beneficial ownership interest
evidenced by all the Class M-3 Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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

                                     C-4-2
<PAGE>

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 Business Day preceding the related Distribution
Date (the "Record Date"); provided, however, that if any such Certificate
becomes a Definitive Certificate, the Record Date for such Certificate shall be
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs, from funds in the Distribution Account 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class M-3
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Class M-3 Pass-Through Rate will be a per annum rate equal
to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related LIBOR
Determination Date, plus the Class M-3 Certificate Margin and (b) the Pool
Maximum Cap Rate, and (ii) the Mezzanine Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-3 Certificates.

                  The Class M-3 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.

                  This certificate is subordinated in right of payment to the
Class AI, Class AII, Class M-1 and Class M-2 Certificates as described in the
Agreement referred to herein.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the

                                     C-4-3
<PAGE>

Trustee and the rights of the Certificateholders under the Agreement at any time
by the Depositor, the Servicer and the Trustee with the consent of the Holders
of Certificates entitled to the Voting Rights identified in the agreement. Any
such consent by the Holder of this Certificate shall be conclusive and binding
on such Holder and upon all future Holders of this Certificate and of any
Certificate issued upon 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.

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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

                                      C-4-4
<PAGE>

Certificates; however, such right to purchase is subject to the aggregate Pool
Balance at the time of purchase being 10% or less of the aggregate Pool Balance
as of 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.

                                     C-4-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION

                  This is one of the Class M-3 Certificates referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                       ---------------

                                     C-4-6
<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
           of survivorship and not as                        -------------------
           tenants in common                                       (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class M-3 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

                                     C-4-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ______________________, account number _____________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-4-8
<PAGE>

                                   EXHIBIT C-5

                         FORM OF CLASS M-4 CERTIFICATES

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

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS AI, CLASS AII,
CLASS M-1, CLASS M-2 AND CLASS M-3 CERTIFICATES AS DESCRIBED IN THE POOLING AND
SERVICING AGREEMENT REFERRED TO HEREIN.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

THE CLASS M-4 CERTIFICATES ARE ONLY OFFERED FOR SALE, AND ARE ONLY TRANSFERABLE
TO PLAN INVESTORS IF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF ERISA
AND THE CODE APPLIES. EACH PURCHASER OF A CLASS M-4 CERTIFICATE, OTHER THAN THE
INITIAL PURCHASER OF THE CLASS M-4 CERTIFICATE, BY VIRTUE OF ITS PURCHASE OF
SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT A
PLAN INVESTOR OR THAT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND THE CODE APPLIES TO THE ACQUISITION, HOLDING, AND RESALE OF SUCH
CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST.

                                     C-5-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS M-4

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                      <C>
Series 2003-AHL1, Class M-4              Initial Certificate Principal Balance of this
                                         Certificate: $[ ]
Pass-Through Rate:  Variable
                                         Servicer:  Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2003          Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003   Final Scheduled Distribution Date:
                                         March 25, 2033
Closing Date:  May 8, 2003
                                         CUSIP:  04542B CP 5

Original Class Certificate Principal
Balance of the Class M-4 Certificates    ISIN No. US04542BCP58
as of the Closing Date: $3,698,000

No. ___
</TABLE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class M-4 Certificates) in that certain beneficial ownership interest
evidenced by all the Class M-4 Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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

                                     C-5-2
<PAGE>

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 Business Day preceding the related Distribution
Date (the "Record Date"); provided, however, that if any such Certificate
becomes a Definitive Certificate, the Record Date for such Certificate shall be
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs, from funds in the Distribution Account 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-4 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class M-4
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Class M-4 Pass-Through Rate will be a per annum rate equal
to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related LIBOR
Determination Date, plus the Class M-4 Certificate Margin and (b) the Pool
Maximum Cap Rate, and (ii) the Mezzanine Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-4 Certificates.

                  The Class M-4 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.

                  This certificate is subordinated in right of payment to the
Class AI, Class AII, Class M-1, Class M-2 and Class M-3 Certificates as
described in the Agreement referred to herein.

                                     C-5-3
<PAGE>

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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.

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all Mortgage Loans
and all property acquired in respect of any Mortgage Loan at a price determined
as

                                     C-5-4
<PAGE>

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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                      C-5-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class M-4 Certificates referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                        -------------

                                     C-5-6
<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
           of survivorship and not as                       --------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class M-4 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

                                     C-5-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ______________________, account number _____________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-5-8
<PAGE>

                                   EXHIBIT C-6

                         FORM OF CLASS M-5 CERTIFICATES

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

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS AI, CLASS AII,
CLASS M-1, CLASS M-2, CLASS M-3 AND CLASS M-4 CERTIFICATES AS DESCRIBED IN THE
POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS BENEFICIAL
OWNERSHIP OF A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT
CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND CERTAIN OTHER
PROPERTY.

THIS CLASS M-5 CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

THE CLASS M-5 CERTIFICATES ARE ONLY OFFERED FOR SALE, AND ARE ONLY TRANSFERABLE
TO PLAN INVESTORS IF AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF ERISA
AND THE CODE APPLIES. EACH PURCHASER OF A CLASS M-5 CERTIFICATE, OTHER THAN THE
INITIAL PURCHASER OF THE CLASS M-5 CERTIFICATE, BY VIRTUE OF ITS PURCHASE OF
SUCH CERTIFICATE, WILL BE DEEMED TO HAVE REPRESENTED EITHER THAT IT IS NOT A
PLAN INVESTOR OR THAT AN EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND THE CODE APPLIES TO THE ACQUISITION, HOLDING, AND RESALE OF SUCH
CERTIFICATE AND TRANSACTIONS IN CONNECTION WITH THE SERVICING, MANAGEMENT AND
OPERATION OF THE TRUST.

                                     C-6-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                           SERIES 2003-AHL1, CLASS M-5

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                      <C>
Series 2003-AHL1, Class M-5              Initial Certificate Principal Balance of this
                                         Certificate: $[ ]
Pass-Through Rate:  Variable
                                         Servicer:  Litton Loan Servicing LP
Date of Pooling and Servicing Agreement
 and Cut-off Date: April 1, 2003         Trustee: JPMorgan Chase Bank

First Distribution Date:  May 27, 2003   Final Scheduled Distribution Date:
                                         March 25, 2033
Closing Date:  May 8, 2003
                                         CUSIP:  04542B DA 7
Original Class Certificate Principal
Balance of the Class M-5 Certificates    ISIN No. US04542BDA70
as of the Closing Date:  $6,286,000

No. ___
</TABLE>

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.

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial Certificate Principal
Balance of this Certificate by the Original Class Certificate Principal Balance
of the Class M-5 Certificates) in that certain beneficial ownership interest
evidenced by all the Class M-5 Certificates in the Trust Fund created pursuant
to a Pooling and Servicing Agreement, dated as specified above (the
"Agreement"), among Asset Backed Funding Corporation (hereinafter called the
"Depositor," which term includes any successor entity under the Agreement), the
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.

                                     C-6-2
<PAGE>

                  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 Business Day preceding the related Distribution
Date (the "Record Date"); provided, however, that if any such Certificate
becomes a Definitive Certificate, the Record Date for such Certificate shall be
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs, from funds in the Distribution Account 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-5 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class M-5
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Class M-5 Pass-Through Rate will be a per annum rate equal
to the lesser of (i) the lesser of (a) One-Month LIBOR as of the related LIBOR
Determination Date, plus the Class M-5 Certificate Margin and (b) the Pool
Maximum Cap Rate, and (ii) the Mezzanine Cap.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
a Percentage Interest in the Class M-5 Certificates.

                  The Class M-5 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.

                  This certificate is subordinated in right of payment to the
Class AI, Class AII, Class M-1, Class M-2, Class M-3 and Class M-4 Certificates
as described in the Agreement referred to herein.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor, the Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to

                                     C-6-3
<PAGE>

the Voting Rights identified in the agreement. Any such consent by the Holder of
this Certificate shall be conclusive and binding on such Holder and upon all
future Holders of this Certificate and of any Certificate issued upon 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.

                  No transfer of this Certificate shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and 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 a transfer is to be made
without registration or qualification, the Trustee shall require, in order to
assure compliance with such laws, either (i) in the case of a transfer made in
reliance on Rule 144A under the 1933 Act, that the proposed transferee delivers
to the Trustee a completed investment letter in substantially the form attached
to the Agreement as Exhibit J-2, or (ii) in the case of any other transfer, that
the Certificateholder desiring to effect the transfer and such
Certificateholder's prospective transferee each execute a representation letter
in substantially the forms of Exhibit L and Exhibit J-1 attached to the
Agreement, respectively, certifying to the Depositor and the Trustee the facts
surrounding the transfer as described in Section 5.02 of the Agreement, or as
provided in the Agreement the Depositor and the Trustee shall require an Opinion
of Counsel satisfactory to them 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 or the Certificate Registrar, in their respective
capacities as such. None of the Depositor, the Certificate Registrar 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 such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

                                     C-6-4
<PAGE>

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-6-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                           -------------------------------------
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class M-5 Certificates referred to in the
within-mentioned Agreement.

                                       JPMorgan Chase Bank,
                                       as Certificate Registrar

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

Date of authentication:
                       --------------

                                     C-6-6
<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
           of survivorship and not as                       --------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class M-5 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

                                     C-6-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ________________________, account number ___________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-6-8
<PAGE>

                                   EXHIBIT C-7

                          FORM OF CLASS X CERTIFICATES

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INDIRECT
BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND IN
CERTAIN OTHER PROPERTY.

THIS CLASS X CERTIFICATE IS SUBORDINATED TO OTHER CLASSES OF CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

THIS CLASS X CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS CLASS X CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES,
KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN WHICH SUCH
PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") (EACH, A "PLAN") OR ANY PERSON WHO IS DIRECTLY OR
INDIRECTLY PURCHASING THE CLASS X CERTIFICATE ON BEHALF OF, AS A NAMED FIDUCIARY
OF, AS TRUSTEE OF, OR WITH ASSETS OF A PLAN EXCEPT AS PROVIDED IN THE POOLING
AND SERVICING AGREEMENT.

                                     C-7-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                            SERIES 2003-AHL1, CLASS X

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                       <C>
Series 2003-AHL1, Class X                 Percentage Interest:  100%

Date of Pooling and Servicing Agreement   Servicer: Litton Loan Servicing LP
and Cut-off Date: April 1, 2003
                                          Trustee: JPMorgan Chase Bank
First Distribution Date:  May 27, 2003
                                          Final Scheduled Distribution Date:
Closing Date:  May 8, 2003                March 25, 2033

No. ___                                   CUSIP:  04542B DC 3

                                          ISIN No.:  US04542BDC37
</TABLE>

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT GUARANTEED BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED
STATES.

                  This certifies that __________________________________ is the
registered owner of the Percentage Interest set forth above in that certain
beneficial ownership interest evidenced by the Class X Certificate in the Trust
Fund created pursuant to a Pooling and Servicing Agreement, dated as specified
above (the "Agreement"), among Asset Backed Funding Corporation (hereinafter
called the "Depositor," which term includes any successor entity under the
Agreement), the 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 last Business Day of the month immediately
preceding the month in which the related Distribution Date occurs (the "Record
Date"), from funds in the Distribution Account in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holder of the Class X Certificate on such Distribution
Date pursuant to the Agreement.

                                     C-7-2
<PAGE>

                  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 Certificate Registrar
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 X
Certificate, or 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, provided that the Certificate Registrar may deduct a reasonable wire
transfer fee from any payment made by wire transfer. 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 ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest specified on the face hereof.

                  The Class X Certificate is 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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 Class X Certificate is issuable in fully registered form
only without coupons in the Class and denomination representing the Percentage
Interest specified in the Agreement. As provided in the Agreement and subject to
certain limitations therein set forth, Certificates are

                                     C-7-3
<PAGE>

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 shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and 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 a transfer is to be made
without registration or qualification, the Trustee shall require, in order to
assure compliance with such laws, either (i) in the case of a transfer made in
reliance on Rule 144A under the 1933 Act, that the proposed transferee delivers
to the Trustee a completed investment letter in substantially the form attached
to the Agreement as Exhibit J-2, or (ii) in the case of any other transfer, that
the Certificateholder desiring to effect the transfer and such
Certificateholder's prospective transferee each execute a representation letter
in substantially the forms of Exhibit L and Exhibit J-1 attached to the
Agreement, respectively, certifying to the Depositor and the Trustee the facts
surrounding the transfer as described in Section 5.02 of the Agreement, or as
provided in the Agreement the Depositor and the Trustee shall require an Opinion
of Counsel satisfactory to them 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 or the Certificate Registrar, in their respective
capacities as such. None of the Depositor, the Certificate Registrar 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 such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

                  No transfer of a Certificate or any interest therein may be
made to employee benefit plans and certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code or any person
who is directly or indirectly purchasing the Certificate or interest therein on
behalf of, as named fiduciary of, as trustee of, or with assets of a Plan except
as provided in the Pooling and Servicing 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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
Servicer, the Trustee, the Certificate Registrar nor any such agent shall be
affected by notice to the contrary.

                                     C-7-4
<PAGE>

                  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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-7-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                           -------------------------------------
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is the Class X Certificate referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                       ---------------

                                     C-7-6
<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
           of survivorship and not as                       --------------------
           tenants in common                                       (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class X 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

                                     C-7-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of _____________________, account number ______________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                     C-7-8
<PAGE>

                                   EXHIBIT C-8

                          FORM OF CLASS N CERTIFICATES

FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INDIRECT
BENEFICIAL INTEREST IN A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE
INVESTMENT CONDUIT," AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE") AND IN
CERTAIN OTHER PROPERTY.

THIS CLASS N CERTIFICATE IS SUBORDINATED TO OTHER CLASSES OF CERTIFICATES OF
THIS SERIES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT
REFERRED TO HEREIN.

THIS CLASS N CERTIFICATE WILL NOT BE ENTITLED TO PAYMENTS UNTIL SUCH TIME AS
DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

THIS CLASS N CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF
ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT
SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION THAT DOES
NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 5.02 OF THE POOLING AND SERVICING AGREEMENT REFERRED TO
HEREIN.

NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO AN EMPLOYEE BENEFIT PLAN OR OTHER
RETIREMENT ARRANGEMENT, INCLUDING INDIVIDUAL RETIREMENT ACCOUNTS AND ANNUITIES,
KEOGH PLANS AND COLLECTIVE INVESTMENT FUNDS AND SEPARATE ACCOUNTS IN WHICH SUCH
PLANS, ACCOUNTS OR ARRANGEMENTS ARE INVESTED, THAT IS SUBJECT TO THE FIDUCIARY
RESPONSIBILITY PROVISIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA") OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED (THE "CODE") (EACH, A "PLAN") OR ANY PERSON WHO IS DIRECTLY OR
INDIRECTLY PURCHASING THE CLASS N CERTIFICATE ON BEHALF OF, AS A NAMED FIDUCIARY
OF, AS TRUSTEE OF, OR WITH ASSETS OF A PLAN EXCEPT AS PROVIDED IN THE POOLING
AND SERVICING AGREEMENT.

                                     C-8-1
<PAGE>

                         ABFC ASSET-BACKED CERTIFICATES
                            SERIES 2003-AHL1, CLASS N

evidencing a beneficial ownership interest in a portion of a Trust Fund
consisting primarily of a pool of conventional fixed-rate and adjustable-rate
one- to four-family first lien mortgage loans formed and sold by

                        ASSET BACKED FUNDING CORPORATION

<TABLE>
<S>                                        <C>
Series 2003-AHL1, Class N                  Original  Class N  Principal  Amount  as of the  Closing
                                           Date: $26,275,000
Pass-Through Rate:  9.32%
                                           Initial Principal Amount:  $_______
Date of Pooling and Servicing Agreement
and Cut-off Date: April 1, 2003            Servicer:  Litton Loan Servicing LP

First Distribution Date:  May 27, 2003     Trustee: JPMorgan Chase Bank

Closing Date:  May 8, 2003                 CUSIP:  04542B DB 5

No. ___                                    ISIN No.:  US04542BDB53

Final Scheduled Distribution Date:
March 25, 2033
</TABLE>

THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN ASSET BACKED
FUNDING CORPORATION, THE SERVICER, THE TRUSTEE OR ANY OF THEIR AFFILIATES. THIS
CERTIFICATE IS NOT 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 Initial
Principal Amount of this Certificate by the Original Class N Principal Amount)
in that certain beneficial ownership interest evidenced by all the Class N
Certificates in the Trust Fund created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Asset Backed
Funding Corporation (hereinafter called the "Depositor," which term includes any
successor entity under the Agreement), the 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

                                      C-8-2
<PAGE>

following (a "Distribution Date"), commencing on the first Distribution Date
specified above, to the Person in whose name this Certificate is registered on
the last Business Day of the month immediately preceding the month in which the
related Distribution Date occurs (the "Record Date"), from funds in the
Distribution Account 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 N 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 Certificate Registrar
in writing at least five Business Days prior to the Record Date immediately
prior to such Distribution Date and is the registered owner of such Class N
Certificates, or 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, provided that the Certificate Registrar may deduct a
reasonable wire transfer fee from any payment made by wire transfer.
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.

                  The Pass-Through Rate for this Class N Certificate on the
Distribution Date will be the per annum rate specified above.

                  This Certificate is one of a duly authorized issue of
Certificates designated as ABFC Asset-Backed Certificates of the Series
specified on the face hereof (herein called the "Certificates") and representing
the Percentage Interest in the Class N Certificates.

                  The Class N Certificate is 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 Servicer, the Trustee and the rights of the
Certificateholders under the Agreement at any time by the Depositor, the
Servicer and the Trustee with the consent of the Holders of Certificates
entitled to the Voting Rights identified in the agreement. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and upon all future Holders of this Certificate and of any Certificate issued
upon 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

                                     C-8-3
<PAGE>

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 Class N Certificate is issuable in fully registered form
only without coupons in the Class and denomination representing the Percentage
Interest 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 shall be made unless that
transfer is made pursuant to an effective registration statement under the 1933
Act and 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 a transfer is to be made
without registration or qualification, the Trustee shall require, in order to
assure compliance with such laws, either (i) in the case of a transfer made in
reliance on Rule 144A under the 1933 Act, that the proposed transferee delivers
to the Trustee a completed investment letter in substantially the form attached
to the Agreement as Exhibit J-2, or (ii) in the case of any other transfer, that
the Certificateholder desiring to effect the transfer and such
Certificateholder's prospective transferee each execute a representation letter
in substantially the forms of Exhibit L and Exhibit J-1 attached to the
Agreement, respectively, certifying to the Depositor and the Trustee the facts
surrounding the transfer as described in Section 5.02 of the Agreement, or as
provided in the Agreement the Depositor and the Trustee shall require an Opinion
of Counsel satisfactory to them 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 or the Certificate Registrar, in their respective
capacities as such. None of the Depositor, the Certificate Registrar 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 such Certificateholder
desiring to effect such transfer shall, and does hereby agree to, indemnify the
Trustee, the Depositor, the Certificate Registrar and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

                  No transfer of a Certificate or any interest therein may be
made to employee benefit plans and certain other retirement plans and
arrangements, including individual retirement accounts and annuities, Keogh
plans and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested that are subject to the fiduciary
responsibility provisions of ERISA and Section 4975 of the Code or any person
who is directly or indirectly purchasing the Certificate or interest therein on
behalf of, as named fiduciary of, as trustee of, or with assets of a Plan except
as provided in the Pooling and Servicing Agreement.

                                     C-8-4
<PAGE>

                  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 Servicer, the Trustee and the Certificate
Registrar and any agent of the Depositor, the 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
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 the Trust Fund, and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from the
Trust Fund of all 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 the Trust Fund all 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 Pool Balance at the time of purchase being 10% or less of the
aggregate Pool Balance as of 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.

                                     C-8-5
<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

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

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is the Class N Certificate referred to in the
within-mentioned Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Certificate Registrar

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

Date of authentication:
                       --------------

                                     C-8-6
<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
           of survivorship and not as                      ---------------------
           tenants in common                                      (State)

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 ABFC Asset-Backed
Certificates, Series 2003-AHL1, Class N 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

                                     C-8-7
<PAGE>

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________________________
________________________________________________________________________________
for the account of ________________________, account number ___________________,
or, if mailed by check, to ____________________________________________________.
Applicable statements should be mailed to _____________________________________.
This information is provided by _______________________________________________,
the assignee named above, or ____________________________________, as its agent.

                                      C-8-8
<PAGE>

                                   EXHIBIT D-1

                         GROUP I MORTGAGE LOAN SCHEDULE

                         Copy on file with the Trustee

                                     D-1-1
<PAGE>

                                   EXHIBIT D-2

                         GROUP II MORTGAGE LOAN SCHEDULE

                         Copy on file with the Trustee

                                      D-2-1
<PAGE>

                                    EXHIBIT E

                           FORM OF REQUEST FOR RELEASE

To:      JPMorgan Chase Bank
         1111 Fannin Street, 12th Floor
         Houston, Texas 77002
         Attn:  Institutional Trust Services

         Re:      Pooling and Servicing Agreement, dated as of April 1, 2003,
                  among Asset Backed Funding Corporation, as depositor, Litton
                  Loan Servicing LP, as servicer and JPMorgan Chase Bank, as
                  trustee.

         All capitalized terms used herein shall have the meaning ascribed to
them in the Pooling and Servicing Agreement (the "Agreement") referenced above.

         In connection with the administration of the Mortgage Loans held by you
as the Trustee pursuant to the Agreement, we request the release, and
acknowledge receipt, of the Mortgage File for the Mortgage Loan described below,
for the reason indicated.

Mortgagor's Name Address & Zip Code:
-----------------------------------

Mortgage Loan Number:
--------------------

Reason for Requesting Documents (check one)
-------------------------------

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

                                       E-1
<PAGE>

                                       LITTON LOAN SERVICING LP,
                                       as Servicer

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

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

Acknowledgment of Documents returned to the Trustee:

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

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

                                      E-1
<PAGE>

                                   EXHIBIT F-1

                          FORM OF INITIAL CERTIFICATION

                                                                __________, 20__

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

Litton Loan Servicing LP
482 Loop Central Drive
Houston, Texas  77081

         Re:      ABFC Asset-Backed Certificates, Series 2003-AHL1

Ladies and Gentlemen:

         The undersigned, as Trustee, hereby certifies that, as except as noted
on the schedule of exceptions attached hereto as Schedule A, as to each Mortgage
Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan listed on the attachment hereto) it has reviewed the
Mortgage Files and has determined that (i) all documents required to be
delivered to it pursuant to Section 2.01(a), (b), (c), (d) and (e) of the
Pooling and Servicing Agreement, dated as of April 1, 2003, among Asset Backed
Funding Corporation, as depositor, Litton Loan Servicing LP, as servicer and the
undersigned, as trustee (the "Agreement") are in its possession, and if
indicated as applicable in a separate writing delivered to the Trustee, that all
documents delivered to it pursuant to Section 2.01(f) of the Agreement are in
its possession; (ii) such documents have been reviewed by it and appear regular
on their face and related to such Mortgage Loan, (iii) each Mortgage Note has
been endorsed as provided in Section 2.01(a) of the Agreement and each Mortgage
has been assigned in accordance with Section 2.01(c) and (d) of the Agreement
and (iv) based on its examination of the documents in the Mortgage File and only
as to such documents, the Mortgage Loan information attached hereto as Schedule
B set forth for each Mortgage Loan on the related Mortgage Loan Schedule with
respect to such Mortgage Loan accurately reflects information set forth in the
related Mortgage File. The Trustee makes no representations as to (i) the
validity, legality, enforceability, sufficiency, due authorization or
genuineness of any of the documents contained in each Mortgage File or of any of
the Mortgage Loans or (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan.

         This Final Certification is not divisible or negotiable.

         The Trustee will accept and act on instructions with respect to the
Mortgage Loans subject hereto upon surrender of this Final Certification at its
office at 1111 Fannin Street, 12th Floor, Houston, Texas 77002, Attention:
Institutional Trust Services.

                                     F-1-1
<PAGE>

         Capitalized terms used herein shall have the meaning ascribed to them
in the Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                     F-1-2
<PAGE>

                      SCHEDULE A - TO INITIAL CERTIFICATION
                      -------------------------------------

                                   EXCEPTIONS

                                     F-1-3
<PAGE>

                      SCHEDULE B - TO INITIAL CERTIFICATION

                            MORTGAGE LOAN INFORMATION

1.       Loan Identification Number

2.       Mortgagor's Name

3.       State and Zip Code of Mortgaged Property

4.       Initial Mortgage Interest Rate

5.       Original Principal Balance

6.       Scheduled Maturity Date

7.       Initial Monthly Payment

8.       Initial Payment Date

9.       Gross Margin (for Adjustable Rate Mortgage Loans)

10.      Initial Adjustment Date (for Adjustable Rate Mortgage Loans)

11.      Maximum Mortgage Interest Rate (for Adjustable Rate Mortgage Loans)

12.      Minimum Mortgage Interest Rate (for Adjustable Rate Mortgage Loans)

13.      Periodic Interest Rate (for Adjustable Rate Mortgage Loans)

                                     C-1-4
<PAGE>

                                   EXHIBIT F-2

                           FORM OF FINAL CERTIFICATION

                                                                __________, 20__

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

Litton Loan Servicing LP
482 Loop Central Drive
Houston, Texas  77081

         Re:      ABFC Asset-Backed Certificates, Series 2003-AHL1

Ladies and Gentlemen:

         The undersigned, as Trustee, hereby certifies that, as except as noted
on the schedule of exceptions attached hereto as Schedule A, as to each Mortgage
Loan listed on the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan listed on the attachment hereto) it has reviewed the
Mortgage Files and has determined that (i) all documents required to be
delivered to it pursuant to Section 2.01(a), (b), (c), (d) and (e) of the
Pooling and Servicing Agreement, dated as of April 1, 2003, among Asset Backed
Funding Corporation, as depositor, Litton Loan Servicing LP, as servicer and the
undersigned, as trustee (the "Agreement") are in its possession, and if
indicated as applicable in a separate writing delivered to the Trustee, that all
documents delivered to it pursuant to Section 2.01(f) of the Agreement are in
its possession; (ii) such documents have been reviewed by it and appear regular
on their face and related to such Mortgage Loan, (iii) each Mortgage Note has
been endorsed as provided in Section 2.01(a) of the Agreement and each Mortgage
has been assigned in accordance with Section 2.01(c) and (d) of the Agreement
and (iv) based on its examination of the documents in the Mortgage File and only
as to such documents, the Mortgage Loan information attached hereto as Schedule
B set forth for each Mortgage Loan on the related Mortgage Loan Schedule with
respect to such Mortgage Loan accurately reflects information set forth in the
related Mortgage File. The Trustee makes no representations as to (i) the
validity, legality, enforceability, sufficiency, due authorization or
genuineness of any of the documents contained in each Mortgage File or of any of
the Mortgage Loans or (ii) the collectability, insurability, effectiveness or
suitability of any such Mortgage Loan.

         This Final Certification is not divisible or negotiable.

         The Trustee will accept and act on instructions with respect to the
Mortgage Loans subject hereto upon surrender of this Final Certification at its
office at 1111 Fannin Street, 12th Floor, Houston, Texas 77002, Attention:
Institutional Trust Services.

                                      F-2-1
<PAGE>

         Capitalized terms used herein shall have the meaning ascribed to them
in the Agreement.

                                       JPMORGAN CHASE BANK,
                                       as Trustee

                                       By:
                                           -------------------------------------

                                       Name:
                                             -----------------------------------

                                       Title:
                                              ----------------------------------

                                     F-2-2
<PAGE>

                       SCHEDULE A - TO FINAL CERTIFICATION
                       -----------------------------------

                                   EXCEPTIONS

                                     F-2-3
<PAGE>

                       SCHEDULE B - TO FINAL CERTIFICATION
                       -----------------------------------

                            MORTGAGE LOAN INFORMATION

1.       Loan Identification Number

2.       Mortgagor's Name

3.       State and Zip Code of Mortgaged Property

4.       Initial Mortgage Interest Rate

5.       Original Principal Balance

6.       Scheduled Maturity Date

7.       Initial Monthly Payment

8.       Initial Payment Date

9.       Gross Margin (for Adjustable Rate Mortgage Loans)

10.      Initial Adjustment Date (for Adjustable Rate Mortgage Loans)

11.      Maximum Mortgage Interest Rate (for Adjustable Rate Mortgage Loans)

12.      Minimum Mortgage Interest Rate (for Adjustable Rate Mortgage Loans)

13.      Periodic Interest Rate (for Adjustable Rate Mortgage Loans)

                                     F-2-4
<PAGE>

                                    EXHIBIT G

                        MORTGAGE LOAN PURCHASE AGREEMENT

                         Copy on file with the Trustee

                                       G-1
<PAGE>

                                    EXHIBIT H

                         FORM OF AFFIDAVIT OF LOST NOTE

         I, ________________ being duly sworn, do hereby state under oath that:

1.       I, as _______________ [title] of Bank of America, N.A., (the "Seller"),
         am authorized to make this Affidavit on behalf of the Seller.

2.       The Seller is the current payee under the following described mortgage
         note (the Note"):

                          Loan No:        < < LoanNumber > >

                          Borrower(s):    < < BorrowersNames > >

                          Original Amount:  $ < < LoanAmt > >

                          Rate of Interest: < < InterestRate > > %

         Address of Mortgaged Property: < < Address > > , < < City > > ,
                                        < < State > > < < Zip > >

3.       The Note was not located after a thorough and diligent search.

4.       Attached hereto is a true and correct copy of the Note, endorsed in
         blank by Lender.

5.       The Seller hereby agrees to indemnify and hold harmless, its
successors, and assigns, against any loss, from the unavailability of the
original Note, provided that in no event shall the Seller be liable for special
or consequential damages with respect to the foregoing, including but not
limited to, any claim for lost profits.

                                       EXECUTED THIS ___ day of ______, on
                                       behalf of the Seller by:

                                       -----------------------------------------
                                       [Name]

         On ____ day of _____________, before me appeared [_______] to me
personally known, who being, duly sworn did say that [he/she] is the [Vice
President] of [Asset Backed Funding Corporation], and that said Affidavit of
Lost Note was signed and sealed on behalf of such corporation and said [_______]
acknowledged this instrument to be the free act of deed of said corporation.

                 -----------------------------------------------
                 Notary Public in and for the State of [_______]

                  My Commission expires: __________________

                                       H-1
<PAGE>

                                    EXHIBIT I

                          FORM OF ERISA REPRESENTATION

                                     [DATE]

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

JPMorgan Chase Bank
2001 Bryan Street, 9th Floor
Dallas, Texas  75201
Attention:  Institutional Trust Services

         Re:      ABFC Asset-Backed Funding Certificates, Series 2003-AHL1
                  --------------------------------------------------------

Ladies and Gentlemen:

                  1. The undersigned is the ______________________ of
___________________ (the "Transferee") a [corporation duly organized] and
existing under the laws of __________, on behalf of which he makes this
affidavit.] [The undersigned, ___________________, is the transferee (the
"Transferee").

                  2. The Transferee hereby acknowledges that under the terms of
the Pooling and Servicing Agreement (the "Agreement") dated as of April 1, 2003,
among Asset Backed Funding Corporation, as depositor (the "Depositor"), Litton
Loan Servicing LP, as servicer, and JPMorgan Chase Bank, as trustee (the
"Trustee"), no transfer of the ERISA-Restricted Certificates shall be permitted
to be made to any person unless the Depositor and the Certificate Registrar (as
defined in the Agreement) have received a certificate from such transferee in
the form hereof.

                  3. The Transferee either (x) (i) is not an employee benefit
plan subject to Section 406 or Section 407 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Trustee of any such plan or a
person acting on behalf of any such plan nor a person using the assets of any
such plan or (ii) (except in the case of the Class N, Class X or Class R
Certificates) (1) is an insurance company which is purchasing such Certificates
with funds contained in an "insurance company general account" (as such term is
defined in Section V(e) of Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60"), (2) there is no plan with respect to which the amount of such general
account's reserves and liabilities for the contract(s) held by or on behalf of
such plan and all other plans maintained by the same employer (or affiliate
thereof as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization exceeds 10% of the total of all reserves and liabilities of such
general account (as such amounts are determined under Section I(a) of PTCE
95-60) at the date of acquisition and (3) all plans that have an interest in
such general account are plans to which PTCE 95-60 applies or (y) (except in

                                      I-1
<PAGE>

the case of a Class R Certificate) shall deliver to the Certificate Registrar
and the Depositor an opinion of counsel (a "Benefit Plan Opinion") satisfactory
to the Certificate Registrar, and upon which the Certificate Registrar and the
Depositor shall be entitled to rely, to the effect that the purchase or holding
of such Certificate by the Transferee will not result in the assets of the Trust
Fund being deemed to be plan assets, will not be subject to the prohibited
transaction provisions of ERISA or the Code, and will not subject the Trustee or
the Depositor to any obligation in addition to those undertaken by such entities
in the Agreement, which opinion of counsel shall not be an expense of the
Trustee or the Depositor.

                  Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Agreement.

                                      I-2
<PAGE>

                  IN WITNESS WHEREOF, the Transferee has executed this
certificate as of the date first written above.

                                       -----------------------------------------
                                       [Transferee]

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                      I-3
<PAGE>

                                   EXHIBIT J-1

                    FORM OF INVESTMENT LETTER (NON-RULE 144A)

                                     [DATE]

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

JPMorgan Chase Bank
2001 Bryan Street, 9th Floor
Dallas, Texas  75201
Attention:  Institutional Trust Services

         Re:      ABFC Asset-Backed Certificates, Series 2003-AHL1

Ladies and Gentlemen:

                  In connection with our acquisition of the ABFC Asset-Backed
Certificates, Series 2003-AHL1 (the "Certificates"), we certify that (a) we
understand that the Certificates are not being registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we are an "institutional
accredited investor," meaning an "accredited investor," as defined in
subparagraphs (1), (2), (3) or (7) of the definition of "accredited investor"
set forth in Rule 501(a) under the Act, and have such knowledge and experience
in financial and business matters that we are capable of evaluating the merits
and risks of investments in the Certificates, (c) we have had the opportunity to
ask questions of and receive answers from the Depositor concerning the purchase
of the Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificates, (d)
we are acquiring the Certificates for investment for our own account and not
with a view to any distribution of such Certificates (but without prejudice to
our right at all times to sell or otherwise dispose of the Certificates in
accordance with clause (g) below), (e) we agree that the Certificates must be
held indefinitely by us and we acknowledge that we are able to bear the economic
risk of investment in the Certificates, (f) we have not offered or sold any
Certificates to, or solicited offers to buy any Certificates from, any person,
or otherwise approached or negotiated with any person with respect thereto, or
taken any other action which would result in a violation of Section 5 of the
Act, (g) we will not sell, transfer or otherwise dispose of any Certificates
unless (1) such sale, transfer or other disposition is made pursuant to an
effective registration statement under the Act or is exempt from such
registration requirements, and if requested, we will at our expense provide an
opinion of counsel satisfactory to the addressees of this Certificate that such
sale, transfer or other disposition may be made pursuant to an exemption from
the Act, (2) the purchaser or transferee of such Certificate has executed and
delivered to you a certificate to substantially the same effect as this
certificate, and (3) the purchaser or transferee has otherwise complied with any
conditions for transfer set forth in the Pooling and Servicing Agreement and (h)
we acknowledge that the Certificates will bear a legend setting forth the
applicable restrictions on transfer.

                                     J-1-1
<PAGE>

                                       Very truly yours,

                                       [NAME OF TRANSFEREE]

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                     J-1-2
<PAGE>

                                   EXHIBIT J-2

                      FORM OF INVESTMENT LETTER (RULE 144A)

                                     [DATE]

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

JPMorgan Chase Bank
2001 Bryan Street, 9th Floor
Dallas, Texas  75201
Attention:  Institutional Trust Services

         Re:      ABFC Asset-Backed Certificates, Series 2003-AHL1

Ladies and Gentlemen:

                  In connection with our acquisition of the ABFC Asset-Backed
Certificates, Series 2003-AHL1 (the "Certificates"), we certify that (a) we
understand that the Certificates are not being registered under the Securities
Act of 1933, as amended (the "Act"), or any state securities laws and are being
transferred to us in a transaction that is exempt from the registration
requirements of the Act and any such laws, (b) we have had the opportunity to
ask questions of and receive answers from the Depositor concerning the purchase
of the Certificates and all matters relating thereto or any additional
information deemed necessary to our decision to purchase the Certificates, (c)
we have not, nor has anyone acting on our behalf offered, transferred, pledged,
sold or otherwise disposed of the Certificates, any interest in the Certificates
or any other similar security to, or solicited any offer to buy or accept a
transfer, pledge or other disposition of the Certificates, any interest in the
Certificates or any other similar security from, or otherwise approached or
negotiated with respect to the Certificates, any interest in the Certificates or
any other similar security with, any person in any manner, or made any general
solicitation by means of general advertising or in any other manner, or taken
any other action, that would constitute a distribution of the Certificates under
the Securities Act or that would render the disposition of the Certificates a
violation of Section 5 of the Securities Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person to act,
in such manner with respect to the Certificates, (d) we are a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act and have completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. We are aware that the sale to us is being
made in reliance on Rule 144A. We are acquiring the Certificates for our own
account or for resale pursuant to Rule 144A and further, understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the resale, pledge or transfer is being made in reliance on Rule
144A, and who executes a certification in the form of this letter and a

                                     J-2-1
<PAGE>

certification in the form of either Annex 1 or Annex 2 attached hereto, or (ii)
pursuant to another exemption from registration under the Securities Act.

                                       Very truly yours,

                                       [NAME OF TRANSFEREE]

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                     J-2-2
<PAGE>

                                                          ANNEX 1 TO EXHIBIT J-2
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

                  The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

                  i. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.

                  ii. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A ("Rule
144A") under the Securities Act of 1933, as amended (the "1933 Act") because (i)
the Buyer 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
Buyer's most recent fiscal year (such amount being calculated in accordance with
Rule 144A) and (ii) the Buyer satisfies the criteria in the category marked
below.

                  ___ Corporation, etc. The Buyer is a corporation (other than a
                  bank, savings and loan association or similar institution),
                  Massachusetts or similar business trust, partnership, or
                  charitable organization described in Section 501(c)(3) of the
                  Internal Revenue Code of 1986, as amended.

                  ___ Bank. The Buyer (a) is a national bank or banking
                  institution as defined in Section 3(a)(2) of the 1933 Act
                  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 as of a date not more than
                  16 months preceding the date of this certification in the case
                  of a U.S. bank, and not more than 18 months preceding the date
                  of this certification in the case of a foreign bank or
                  equivalent institution, a copy of which financial statements
                  are attached hereto.

                  ___ Savings and Loan. The Buyer (a) is a savings and loan
                  association, building and loan association, cooperative bank,
                  homestead association or similar institution referenced in
                  Section 3(a)(5)(A) of the 1933 Act, which is supervised and
                  examined by a State or Federal authority having supervisory
                  authority 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, as of a date not more
                  than 16 months preceding the date of this certification in the
                  case of a U.S. bank, and

----------
(1) Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must own and/or
invest on a discretionary basis at least $10,000,000 in securities.

                                     J-2-3
<PAGE>

                  not more than 18 months preceding the date of this
                  certification in the case of a foreign bank or equivalent
                  institution, a copy of which financial statements are attached
                  hereto.

                  ___ Broker-dealer. The Buyer is a dealer registered pursuant
                  to Section 15 of the Securities Exchange Act of 1934, as
                  amended.

                  ___ Insurance Company. The Buyer is an insurance company, as
                  defined in Section 2(13) of the 1933 Act, 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 Buyer is a plan established and
                  maintained by a State, its political subdivisions, or any
                  agency or instrumentality of the State or its political
                  subdivisions, for the benefit of its employees.

                  ___ ERISA Plan. The Buyer is an employee benefit plan within
                  the meaning of Title I of the Employee Retirement Income
                  Security Act of 1974.

                  ___ Investment Advisor. The Buyer is an investment advisor
                  registered under the Investment Advisors Act of 1940.

                  ___ Small Business Investment Company. Buyer is a small
                  business investment company licensed by the U.S. Small
                  Business Administration under Section 301(c) or (d) of the
                  Small Business Investment Act of 1958.

                  ___ Business Development Company. Buyer is a business
                  development company as defined in Section 202(a)(22) of the
                  Investment Advisors Act of 1940.

                  ___ Other. (Please supply a brief description of the entity
                  and a cross-reference to the paragraph and subparagraph under
                  subsection (a)( 1) of Rule 144A pursuant to which it
                  qualifies. Note that registered investment companies should
                  complete Annex 2 rather than this Annex 1.)

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

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

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

                  iii. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) bank deposit notes and certificates of deposit, (iv) loan
participations, (v) repurchase agreements, (vi) securities owned but subject to
a repurchase agreement and (vii) currency, interest rate and commodity swaps.
For purposes of determining the aggregate amount of securities owned and/or
invested on a discretionary basis by the Buyer, the Buyer did not include any of
the securities referred to in this paragraph.

                  iv. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph,

                                     J-2-4
<PAGE>

except (i) where the Buyer reports its securities holdings in its financial
statements on the basis of their market value, and (ii) no current information
with respect to the cost of those securities has been published. If clause (ii)
in the preceding sentence applies, the securities may be valued at market.
Further, in determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such subsidiaries are
consolidated with the Buyer in its financial statements prepared in accordance
with generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Buyer's direction. However, such securities
were not included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company under the
Securities Exchange Act of 1934, as amended.

                  v. The Buyer acknowledges that it is familiar with Rule 144A
and understands that the seller to it and other parties related to the
Certificates are relying and will continue to rely on the statements made herein
because one or more sales to the Buyer may be in reliance on Rule 144A.

                  vi. Will the Buyer be purchasing the
                      Certificates only for the Buyer's       -----   -----
                      own account?                             YES     NO

                  If the answer to the foregoing question is "NO," the Buyer
agrees that, in connection with any purchase of securities sold to the Buyer for
the account of a third party (including any separate account) in reliance on
Rule 144A, the Buyer 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 Buyer agrees that the Buyer will not purchase securities for a
third party unless the Buyer 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.

                  vii. Until the date of purchase of the Rule 144A Securities,
the Buyer will notify each of the parties to which this certification is made of
any changes in the information and conclusions herein. Until such notice is
given, the Buyer's purchase of the Certificates will constitute a reaffirmation
of this certification as of the date of such purchase. In addition, if the Buyer
is a bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.

                          [SIGNATURE ON FOLLOWING PAGE]

                                     J-2-5
<PAGE>

                                       -----------------------------------------
                                       Print Name of Buyer

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

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

                                     J-2-6
<PAGE>

                                                          ANNEX 2 TO EXHIBIT J-2
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That are Registered Investment Companies]

                  The undersigned (the "Buyer") hereby certifies as follows to
the parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

                  1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A ("Rule
144A") under the Securities Act of 1933, as amended (the "1933 Act") because
Buyer is part of a Family of Investment Companies (as defined below), is such an
officer of the Adviser.

                  2. In connection with purchases by Buyer, the Buyer is a
"qualified institutional buyer" as defined in SEC Rule 144A because (i) the
Buyer is an investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act") and (ii) as marked below, the Buyer alone, or
the Buyer's Family of Investment Companies, owned at least $100,000,000 in
securities (other than the excluded securities referred to in paragraph 4 below)
as of the end of the Buyer's most recent fiscal year. For purposes of
determining the amount of securities owned by the Buyer or the Buyer's Family of
Investment Companies, the cost of such securities was used, except (i) where the
Buyer or the Buyer's Family of Investment Companies reports its securities
holdings in its financial statements on the basis of their market value, and
(ii) no current information with respect to the cost of those securities has
been published. If clause (ii) in the preceding sentence applies, the securities
may be valued at market.

                  ___ The Buyer owned $___ in securities (other than the
                  excluded securities referred to in paragraph 4 below) as of
                  the end of the Buyer's most recent fiscal year (such amount
                  being calculated in accordance with Rule 144A).

                  ___ The Buyer is part of a Family of Investment Companies
                  which owned in the aggregate $___ in securities (other than
                  the excluded securities referred to in paragraph 4 below) as
                  of the end of the Buyer's most recent fiscal year (such amount
                  being calculated in accordance with Rule 144A).

                  3. The term "Family of Investment Companies" as used herein
means two or more Registered Investment Companies, except for a unit investment
trust whose assets consist solely of shares of one or more Registered Investment
Companies (provided that each series of a "series company," as defined in Rule
18f-2 under the 1940 Act, shall be deemed to be a separate investment company)
that have the same investment adviser (or, in the case of unit investment
trusts, the same depositor) or investment advisers (or depositors) 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).

                                     J-2-7
<PAGE>

                  4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) bank deposit notes and certificates
of deposit, (iii) loan participations, (iv) repurchase agreements, (v)
securities owned but subject to a repurchase agreement and (vi) currency,
interest rate and commodity swaps. For purposes of determining the aggregate
amount of securities owned and/or invested on a discretionary basis by the
Buyer, or owned by the Buyer's Family of Investment Companies, the securities
referred to in this paragraph were excluded.

         5. The Buyer 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 Buyer
will be in reliance on Rule I 44A.

         -----    -----    Will the Buyer be purchasing the Transferred Owner
          Yes      No      Trust Certificates only for the Buyer's own account?

         6. If the answer to the foregoing question is "NO," the Buyer agrees
that, in connection with any purchase of securities sold to the Buyer for the
account of a third party (including any separate account) in reliance on Rule
144A, the Buyer 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 Buyer agrees that the Buyer will not purchase securities for a
third party unless the buyer 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 undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Buyer's purchase of the Transferred Owner Trust Certificates will
constitute a reaffirmation of this certification by the undersigned as of the
date of such purchase.

                                       -----------------------------------------
                                       Print Name of Buyer or Adviser

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

                                       IF AN ADVISER:

                                       -----------------------------------------
                                       Print Name of Buyer

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

                                     J-2-8
<PAGE>

                                    EXHIBIT K

                 FORM OF RESIDUAL CERTIFICATE TRANSFER AFFIDAVIT

                ABFC ASSET-BACKED CERTIFICATES, SERIES 2003-AHL1

STATE OF            )
                    )
COUNTY OF           )  ss.:

                  The undersigned, being first duly sworn, deposes and says as
follows:

                  1. The undersigned is [an officer of] _______________________,
the proposed Transferee of an Ownership Interest in a Class R Certificates (the
"Certificates") issued pursuant to the Pooling and Servicing Agreement, (the
"Agreement"), relating to the above-referenced Certificates, among Asset Backed
Funding Corporation, as depositor, Litton Loan Servicing LP, as servicer, and
JPMorgan Chase Bank, as trustee (the "Trustee"). Capitalized terms used, but not
defined herein shall have the meanings ascribed to such terms in the Agreement.
The Transferee has authorized the undersigned to make this affidavit on behalf
of the Transferee.

                  2. The Transferee is, as of the date hereof, and will be, as
of the date of the Transfer, a Permitted Transferee. The Transferee is acquiring
its Ownership Interest in the Certificates either (i) for its own account or
(ii) as nominee, trustee or agent for another Person and has attached hereto an
affidavit from such Person in substantially the same form as this affidavit. The
Transferee has no knowledge that any such affidavit is false.

                  3. The Transferee has been advised of, and understands that
(i) a tax will be imposed on Transfers of the Certificates to Persons that are
not Permitted Transferees; (ii) such tax will be imposed on the transferor, or,
if such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.

                  4. The Transferee has been advised of, and understands that a
tax will be imposed on a "pass-through entity" holding the Certificates if at
any time during the taxable year of the pass-through entity a Person that is not
a Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual knowledge that such affidavit is false. (For this
purpose, a "pass-through entity" includes a regulated investment company, a real
estate investment trust or common trust fund, a partnership, trust or estate,
and certain cooperatives and, except as may be provided in Treasury Regulations,
persons holding interests in pass-through entities as a nominee for another
Person.)

                                       K-1
<PAGE>

                  5. The Transferee has reviewed the provisions of Section
5.02(d) of the Agreement and understands the legal consequences of the
acquisition of an Ownership Interest in the Certificates including, without
limitation, the restrictions on subsequent Transfers and the provisions
regarding voiding the Transfer and mandatory sales. The Transferee expressly
agrees to be bound by and to abide by the provisions of Section 5.02(d) of the
Agreement and the restrictions noted on the face of the Certificates. The
Transferee understands and agrees that any breach of any of the representations
included herein shall render the Transfer to the Transferee contemplated hereby
null and void.

                  6. The Transferee agrees to require a Transfer Affidavit from
any Person to whom the Transferee attempts to Transfer its Ownership Interest in
the Certificates, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth in this Exhibit K to the Agreement (a "Transferor Certificate")
to the effect that such Transferee has no actual knowledge that the Person to
which the Transfer is to be made is not a Permitted Transferee.

                  7.   The Transferee does not have the intention to impede the
assessment or collection of any tax legally required to be paid with respect to
the Certificates.

                  8.   The Transferee's taxpayer identification
number is________________________.

                  9.   The Transferee is a U.S. Person as defined in the
Agreement.

                  10. The Transferee is not an employee benefit plan that is
subject to ERISA or a plan that is subject to Section 4975 of the Code, nor are
we acting on behalf of such a plan.

                  11. The Transferee is aware that the Certificates may be a
"noneconomic residual interest" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with respect
to the income on such residual interest, unless no significant purpose of the
transfer was to impede the assessment or collection of tax.

                  12. The Transferee has filed all required federal and state
income tax returns and has paid all federal and state income tax due and intends
to file and pay all such returns and taxes in the future.

                  13. The Transferee historically has paid its debts as they
come due and fully intends to be financially able to pay its debts, including
any and all tax liabilities, as they become due.

                  14. The Transferee understands that, as the holder of an
Ownership Interest in a Certificate, it may incur tax liabilities in excess of
any cash flows generated by such Ownership Interest and intends to pay all taxes
associated with holding such Ownership Interest as such taxes become due.

                                      K-2
<PAGE>

                  15.   The Transferee agrees that it will not cause income from
the Certificate to be attributable to a foreign permanent establishment or fixed
base (within the meaning of an applicable income tax treaty) of the Transferee
or of another U.S. taxpayer.

                                      K-3
<PAGE>

                  IN WITNESS WHEREOF, the Transferee has caused this instrument
to be executed on its behalf, pursuant to authority of its Board of Directors,
by its duly authorized officer and its corporate seal to be hereunto affixed,
duly attested, this ___ day of __________, 20__.

                                       [NAME OF TRANSFEREE]

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

[Corporate Seal]

ATTEST:

[Assistant] Secretary

                  Personally appeared before me the above-named _______________,
known or proved to me to be the same person who executed the foregoing
instrument and to be the of the Transferee, and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Transferee.

                  Subscribed and sworn before me this ___ day of ________, 20__.

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

                                       My Commission expires the ____ day of
                                       _____________, 20__.

                                      K-4
<PAGE>

                                    EXHIBIT L

                         FORM OF TRANSFEROR CERTIFICATE

                                     [DATE]

Asset Backed Funding Corporation
100 North Tryon Street
Charlotte, North Carolina  28255

JPMorgan Chase Bank
2001 Bryan Street, 9th Floor
Dallas, Texas  75201
Attention:  Institutional Trust Services

         Re:      ABFC Asset-Backed Certificates, Series 2003-AHL1

Ladies and Gentlemen:

                  In connection with our disposition of the ABFC Asset-Backed
Certificates, Series 2003-AHL1 (the "Certificates"), we certify that (a) we
understand that the Certificates have not been registered under the Securities
Act of 1933, as amended (the "Act"), and are being disposed by us in a
transaction that is exempt from the registration requirements of the Act, (b) we
have not offered or sold any Certificates to, or solicited offers to buy any
Certificates from, any person, or otherwise approached or negotiated with any
person with respect thereto, in a manner that would be deemed, or taken any
other action which would result in, a violation of Section 5 of the Act, (c) to
the extent we are disposing of a Class R Certificate, we have no knowledge the
Transferee is not a Permitted Transferee and (d) no purpose of the proposed
disposition of a Class R Certificate is to impede the assessment or collection
of tax.

                                       Very truly yours,

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

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                      L-1
<PAGE>

                                    EXHIBIT M

                    MONTHLY INFORMATION PROVIDED BY SERVICER

1.       With respect to the Mortgage Pool, the number and Principal Balances of
         all Mortgage Loans which were the subject of Principal Prepayments
         during the related Collection Period.

2.       With respect to the Mortgage Pool, the amount of all curtailments which
         were received during the related Collection Period.

3.       With respect to the Mortgage Pool, the aggregate amount of principal
         portion of all Monthly Payments received during the related Collection
         Period.

4.       With respect to the Mortgage Pool, the amount of interest received on
         the Mortgage Loans during the related Collection Period.

5.       With respect to the Mortgage Pool, the aggregate amount of the Advances
         made and recovered with respect to such Distribution Date.

6.       With respect to the Mortgage Pool, the delinquency and foreclosure
         information and the amount of Mortgage Loan Losses during the related
         Collection Period.

7.       With respect to the Mortgage Pool, the weighted average maturity, the
         weighted average Mortgage Interest Rate and the weighted average Net
         Mortgage Interest Rate as of the last day of the Collection Period
         preceding the related Accrual Period.

8.       The Servicing Fees paid and Servicing Fees accrued during the related
         Collection Period.

9.       The amount of all payments or reimbursements to the Servicer paid or to
         be paid since the prior Distribution Date (or in the case of the first
         Distribution Date, since the Closing Date).

10.      The Pool Balance as of the beginning and as of the end of the preceding
         Collection Period.

11.      With respect to the Mortgage Pool, the number of Mortgage Loans
         outstanding at the beginning and at the end of the related Collection
         Period.

12.      The aggregate interest accrued on the Mortgage Loans at their
         respective Mortgage Interest Rates for the related Collection Period.

13.      The amount deposited in the Collection Account which may not be
         withdrawn therefrom pursuant to an Order of a United States Bankruptcy
         Court of competent jurisdiction imposing a stay pursuant to Section 362
         of U.S. Bankruptcy Code.

14.      The aggregate Realized Losses since the Cut-off Date as of the end of
         the related Collection Period.

                                      M-1
<PAGE>

                                    EXHIBIT N

                       FORM OF YIELD MAINTENANCE AGREEMENT

                         Copy on file with the Trustee

                                      N-1
<PAGE>

                                    EXHIBIT O

                                   [RESERVED]

                                       O-1
<PAGE>

                                    EXHIBIT P

                                   [RESERVED]

                                       P-1
<PAGE>

                                    EXHIBIT Q

                   FORM OF SARBANES-OXLEY CERTIFICATION TO BE
                             PROVIDED WITH FORM 10-K

                    ABFC 2003-AHL1 Asset-Backed Certificates
                                Series 2003-AHL1

I, [identify the certifying individual], certify, in connection with that
certain Pooling and Servicing Agreement (the "Pooling and Servicing Agreement"),
dated as of April 1, 2003, among Asset Backed Funding Corporation, as depositor
(the "Depositor"), Litton Loan Servicing LP, as servicer (the "Servicer"), and
JPMorgan Chase Bank, as trustee (the "Trustee"), that I am the senior officer of
the Depositor in charge of its securitizations, and that:

         1. I have reviewed this annual report on Form 10-K, and all reports on
Form 8-K containing distribution or servicing reports filed in respect of
periods included in the year covered by this annual report, of Asset Backed
Funding Corporation (the "Depositor") relating to the above-referenced trust;

         2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
last day of the period covered by this annual report;

         3. Based on my knowledge, the distribution or servicing information
required to be provided to the Trustee by the Servicer under the Pooling and
Servicing Agreement referred to above is included in these reports;

         4. Based on my knowledge and upon the annual compliance statements
included in the report and required to be delivered to the Trustee in accordance
with the terms of the Pooling and Servicing Agreement, and except as disclosed
in the report, the Servicer has fulfilled its obligations under the Pooling and
Servicing Agreement; and

         5. The reports disclose all significant deficiencies relating to the
Servicer's compliance with the minimum servicing standards based upon the report
provided by an independent public accountant, after conducting a review in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
similar standard as set forth in the Pooling and Servicing Agreement, that is
included in these reports.

         In giving the certifications above, I have reasonably relied on the
information provided to me by the following unaffiliated parties: Litton Loan
Servicing LP, as Servicer, and JPMorgan Chase Bank, as Trustee.

                                      Q-1
<PAGE>

         Capitalized terms used but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement.

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

                                       By:
                                           -------------------------------------

                                       Name:
                                             -----------------------------------

                                       Title:
                                             -----------------------------------

                                      Q-2
<PAGE>
                                   EXHIBIT R-1

                      FORM OF CERTIFICATION OF THE TRUSTEE
                           TO BE PROVIDED TO DEPOSITOR
                       ABFC 2003-AHL1 Trust (the "Trust")
                   Asset-Backed Certificates, Series 2003-AHL1

         JPMorgan Chase Bank, as Trustee of the Trust (the "Trustee"), hereby
certifies to Asset Backed Funding Corporation (the "Depositor") and each Person,
if any, who "controls" the Depositor within the meaning of the Securities Act of
1933, as amended, and its officers, directors and affiliates, and with the
knowledge and intent that they will rely upon this certification, in connection
with that certain Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), dated as of April 1, 2003, among the Depositor, Litton Loan
Servicing LP, as servicer (the "Servicer"), and the Trustee, that:

         1. The Trustee has reviewed the annual report on Form 10-K for the
fiscal year [___], and all reports on Form 8-K containing distribution reports
filed in respect of periods included in the year covered by that annual report,
relating to the above-referenced Trust;

         2. Subject to paragraph (4), the distribution information in the
distribution reports contained in all monthly Form 8-K's included in the year
covered by the annual report on Form 10-K for the calendar year [____], taken as
a whole, does not contain any untrue statement of a material fact or omit to
state a material fact required by the Pooling and Servicing Agreement to be
included therein and necessary to make the statements made, in light of the
circumstances under which statements were made, not misleading as of the last
day of the period covered by that annual report;

         3. The distribution information required to be provided by the Trustee
under the Pooling and Servicing Agreement is included in these reports; and

         4. In compiling the distribution information and making the foregoing
certifications, the Trustee has relied upon information furnished to it by the
Servicer under the Pooling and Servicing Agreement. The Trustee shall have no
responsibility or liability for any inaccuracy in such reports resulting from
information so provided by the Servicer.

         Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.

                                       Date:
                                            ------------------------------------
                                       JPMorgan Chase Bank,
                                       as Trustee
                                       By:
                                           -------------------------------------

                                       Name:
                                            ------------------------------------

                                       Title:
                                             -----------------------------------

                                     R-1-1
<PAGE>

                                   EXHIBIT R-2

                      FORM OF CERTIFICATION OF THE SERVICER
                           TO BE PROVIDED TO DEPOSITOR

                    ABFC 2003-AHL1 Asset-Backed Certificates
                                Series 2003-AHL1

         I, Larry B. Litton, Sr., President and Chief Executive Officer of
Litton Loan Servicing LP, as Servicer for the Trust (the "Servicer"), hereby
certify to Asset Backed Funding Corporation (the "Depositor"), JPMorgan Chase
Bank (the "Trustee"), and their respective officers, directors and affiliates,
and with the knowledge and intent that they will rely on this certification,
pursuant to Section 3.22(d) of that certain Pooling and Servicing Agreement (the
"Pooling and Servicing Agreement"), dated as of April 1, 2003, among the
Depositor, the Servicer and the Trustee, that:

         1. Based on my knowledge, the servicing information submitted by the
Servicer to the Trustee, which is used in connection with the preparation of
reports on Form 8-K and the annual report on Form 10-K filed with the Securities
and Exchange Commission with respect to the ABFC 2003-AHL1 Trust (the "Trust"),
taken as a whole, does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements required by the
Pooling and Servicing Agreement made, in light of the circumstances under which
such statements were made, not misleading as of the date of this certification;

         2. The servicing information required to be provided to the Trustee by
the Servicer under the Pooling and Servicing Agreement has been provided to the
Trustee;

         3. I am responsible for reviewing the activities performed by the
Servicer under the Pooling and Servicing Agreement and based upon my knowledge
and the annual compliance review required by the Pooling and Servicing
Agreement, and except as disclosed in the annual compliance statement required
to be delivered to the Trustee in accordance with the terms of the Pooling and
Servicing Agreement (which has been so delivered to the Trustee), the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement; and

         4. All significant deficiencies relating to the Servicer's compliance
with the minimum servicing standards for purposes of the report provided by an
independent public accountant, after conducting a review in compliance with the
Uniform Single Attestation Program for Mortgage Bankers or similar procedure, as
set forth in the Pooling and Servicing Agreement, have been disclosed to such
accountant and are included in such report.

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

                                       -----------------------------------------
                                       Larry B. Litton, Sr.
                                       President and Chief Executive Officer

                                      R-2-1
<PAGE>

                                   SCHEDULE I

               LITTON LOAN SERVICING LP PREPAYMENT CHARGE SCHEDULE

                         Copy on file with the Trustee

                                       I-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]