Document:

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EXHIBIT 10.77

                        SEPARATION AND RELEASE AGREEMENT

         This SEPARATION AND RELEASE AGREEMENT (the "Agreement"), executed this
8th day of August, 2000, is entered into by and between Fidelity Holdings, Inc.
(together with its subsidiaries and affiliates being collectively referred to
herein as the "Company") and Doron Cohen (the "Executive").

                               W I T N E S S E T H

         WHEREAS, the Executive shall cease to be an employee of the Company as
of the Separation Date (as hereinafter defined);

         WHEREAS, the Executive and the Company desire to settle fully and
finally any and all employment-related matters between them as of the Separation
Date, including, but not limited to, any issues that may arise out of the
Executive's employment with the Company and the termination thereof.

         NOW, THEREFORE, in consideration of the mutual agreements and
understandings set forth herein, intending to be legally bound, the parties
hereto hereby agree as follows:

         Section 1. Termination of Employment; Benefits.

                (1) Termination of Employment. The Executive's employment with
the Company shall terminate as of the close of business on June 30, 2000 (the
"Separation Date").

                (2) Benefits. In consideration for the Executive's agreement to
be bound by the terms of this Agreement and subject to Section 13(a) hereof, the
Executive shall be entitled to receive from the Company the payments and
benefits set forth in subparagraphs (i) through (iv) of this Section 1(b).

                    (1) The Company agrees to pay the Executive:

                                    (1) $250,000 on the eighth day after the
         date hereof (the "Commencement Date");

                                    (2) $250,000 in 12 monthly installments,
         consisting of 11 monthly payments of $20,833.33 and a final monthly
         payment of $20,833.37, such monthly payments to commence on July 1,
         2001 and the final monthly payment to be made on June 1, 2002;

                                    (3) $50,000 in 12 monthly installments,
         consisting of 11 monthly payments of $4,166.66 and a final monthly
         payment of $4,166.74, such monthly payments to commence on July 1, 2002
         and the final monthly payment to be made on June 1, 2003;

                                    (4) $50,000 in 12 monthly installments,
         consisting of 11 monthly payments of

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         $4,166.66 and a final monthly payment of $4,166.74, such monthly
         payments to commence on July 1, 2003 and the final monthly payment to
         be made on June 1, 2004;

                                    (5) $50,000 in 12 monthly installments,
         consisting of 11 monthly payments of $4,166.66 and a final monthly
         payment of $4,166.74, such monthly payments to commence on July 1, 2004
         and the final monthly payment to be made on June 1, 2005; and

                                    (6) $500 per month for 24 months commencing
         on July 1, 2000 and ending on June 1, 2002.

         All payments pursuant to this Section 1(b)(i) shall be made by check of
the Company mailed to the Executive at the address set forth in Section 12
hereof on the dates specified above; provided, however, that if any such date is
not a Business Day, then payment shall be made on the next succeeding Business
Day; provided, further, that interest shall accrue at an annual rate of three
percent (3%) on any payment obligation pursuant to this Section 1(b)(i) which
remains unpaid by the Company more than 10 days following the due date for such
payment obligation; provided, further, that to the extent any such payment
obligation remains unpaid by the Company for five Business Days after written
notice is given by the Executive to the Company not less than 20 days following
the due date for such payment obligation, all payment obligations pursuant to
this Section 1(b)(i) that are then unpaid shall become immediately due and
payable on the day following such fifth Business Day.

                (2) The Executive's outstanding indebtedness to the Company in
the amount of $1,048,067 shall be forgiven and deemed satisfied as follows:
one-third (1/3) on the third anniversary of the Separation Date, one-third (1/3)
on the fourth anniversary of the Separation Date and one-third (1/3) on the
fifth anniversary of the Separation Date; provided, however, that in the event
of a Change in Control of the Company, any remaining amount of such outstanding
indebtedness to the Company, to the extent not previously forgiven, shall be
forgiven and deemed satisfied as of the date of such Change in Control.

                (3) For a period of two years beginning on the Commencement
Date, the Company will continue, at no expense to the Executive and at the
levels generally applicable to other executive officers of the Company as may be
changed by the Company from time to time, coverage of the Executive and the
Executive's spouse and dependents in the Company's health insurance plan.

                (4) For a period of two years beginning on the Commencement
Date, the Executive shall be entitled to retain possession and use of the
automobile provided to the Executive by the Company immediately prior to the
Separation Date or a substantially similar automobile. During such two year
period, all expenses related to the possession and use of such automobile by the
Executive shall be borne by the Executive with the exception of expenses related
to repairs (excluding normal wear and tear) and insurance, which shall be borne
by the Company during such period. Immediately following the end of such two
year period, the Executive shall return such automobile to the Company.

         Section 2. Mutual Release.

                (1) Release by the Executive.

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                    (1) The Executive knowingly and voluntarily releases and
forever discharges the Company and the Company's parents, subsidiaries and
affiliates, together with all of their respective past and present directors,
managers, officers, partners, employees and attorneys, and each of their
predecessors, successors and assigns, and any of the foregoing in their capacity
as a shareholder or agent of the Company (collectively, "Releasees") from any
and all claims, charges, complaints, promises, agreements, controversies, liens,
demands, causes of action, obligations, damages and liabilities of any nature
whatsoever, known or unknown, suspected or unsuspected, which against them the
Executive or his executors, administrators, successors or assigns ever had, now
have, or may hereafter claim to have against any of the Releasees by reason of
any matter, cause or thing whatsoever arising on or before the Separation Date
and whether or not previously asserted before any state or federal court or
before any state or federal agency or governmental entity (the "Release"). The
Release includes, without limitation, any rights or claims relating in any way
to the Executive's employment relationship with the Company or any of the
Releasees, or the termination thereof, or arising under any statute or
regulation, including the Age Discrimination in Employment Act of 1967, Title
VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans
with Disabilities Act of 1990, the Employee Retirement Income Security Act of
1974, and the Family Medical Leave Act of 1993, each as amended, or any other
federal, state or local law, regulation, ordinance or common law, or under any
policy, agreement, understanding or promise, whether written or oral, formal or
informal, between any of the Releasees and the Executive.

                    (2) Nothing herein shall be deemed to release any of the
Executive's rights under this Agreement.

                    (3) The Executive represents that the Company has advised
him to consult with an attorney of his choosing prior to signing this Agreement.
The Executive further represents that he understands and agrees that he has the
right and has in fact reviewed this Agreement and, specifically, the Release,
with an attorney of the Executive's choice. The Executive further represents
that he understands and agrees that the Company is under no obligation to offer
him this Agreement, and that the Executive is under no obligation to consent to
the Release, and that he has entered into this Agreement freely and voluntarily.

                    (4) The Executive shall have 21 days to consider this
Agreement and once he has signed this Agreement, the Executive shall have seven
additional days from the date of execution to revoke his consent to the Release
set forth above. Any such revocation shall be made by delivering written
notification to the Chairman of the Board of Directors of the Company and the
Chairman of the Audit Committee of the Board of Directors of the Company. In the
event that the Executive revokes his Release, all the terms of the other
sections and subsections of this Agreement, other than Section 1(a) hereof,
shall be null and void and shall not become effective. If no such revocation
occurs, the Release and this Agreement shall become effective as of the eighth
day after the date the Executive signs this Agreement.

                (2) Release by the Company. Except as provided below, as a
material inducement to enter into this Agreement, the Company, on its behalf and
that of its affiliates and their officers and directors, agents, employees,
successors and assigns (solely in their capacity as officers or directors of the
Company) hereby knowingly and voluntarily releases and forever discharges the
Executive and his agents, employees, successors, heirs, beneficiaries or assigns
(the "Executive Released Parties") from any and all claims, charges, complaints,
promises, agreements, controversies, liens, demands, causes of action,
obligations, damages and liabilities of any nature whatsoever that it had, now
has, or may hereafter claim to have against the Executive Released Parties
arising out of or relating in any way to the

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Executive's employment relationship with the Company, whether or not previously
asserted before any state or federal court or before any state, federal or
regulatory agency or governmental entity; provided, however, that neither the
Executive nor any of the Executive Released Parties shall be released or
discharged from any such claim, charge, complaint, promise, agreement,
controversy, lien, demand, cause of action, obligation, damage or liability
which arises in whole or in part out of or relates in any way to the willful
misconduct or gross negligence of the Executive or any of the Executive Released
Parties.

         Section 3. Mutual Non-Disparagement. The Executive agrees that he will
not make or publish any statement which is, or may reasonably be considered to
be, disparaging of the Company, the Company's subsidiaries or affiliates, or
directors, officers or employees of the businesses of the Company or any of the
Company's subsidiaries or affiliates. The Company agrees that it will not make
or publish any statement which is, or may reasonably be considered to be,
disparaging of the Executive.

         Section 4. Confidentiality; Intellectual Property; Disclosure.

                (1) Following the Separation Date, the Executive shall keep
secret and retain in strictest confidence, any and all Confidential Information
(as hereinafter defined) relating to the Company. For purposes of this
Agreement, "Confidential Information" shall mean any confidential or proprietary
information including, without limitation, plans, specifications, models,
samples, data, customer lists and customer information, computer programs and
documentation, and other technical and/or business information, in whatever
form, tangible or intangible, printed, electronic or magnetic, that can be
communicated by whatever means available at such time, that relates to the
Company's business during the period the Executive served as an executive
officer of the Company, products, services and/or developments, or information
received from others that the Company is obligated to treat as confidential or
proprietary, and the Executive shall not disclose such Confidential Information
to any person other than the Company, except as may be required by law or court
or administrative order (in which event the Executive shall so notify the
Company as promptly as practicable). The Executive shall promptly return to the
Company reproductions and summaries of Confidential Information in his
possession or control and erase the same from all media in his possession or
control, and, if the Company so requests, shall certify in writing that he has
done so. All Confidential Information is and shall remain the property of the
Company, or in the case of information that the Company receives from a third
party which it is obligated to treat as confidential, the property of such third
party.

                (2) All Intellectual Property (as hereinafter defined) created,
developed, co-developed, obtained or conceived of by the Executive during the
period the Executive served as an executive officer of the Company shall be
owned by and belong exclusively to the Company, provided that they reasonably
relate to any of the business of the Company on the date of such creation,
development, obtaining or conception, and the Executive shall (i) promptly
disclose any such Intellectual Property to the Company, and (ii) promptly
execute and deliver to the Company, without additional compensation, such
instruments as the Company may require from time to time to evidence its
ownership of any such Intellectual Property (the "Intellectual Property
Documents"). If the Company is unable because of the Executive's mental or
physical incapacity or for any other reason to secure the Executive's signature
for any Intellectual Property Document, then the Executive hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as his agent and attorney in fact, to act for and in his behalf and stead to
execute and file any Intellectual Property Document and to do all other lawfully
permitted acts to evidence or perfect the Company's ownership and rights of and
to any Intellectual Property or business opportunity with the same legal force
and effect as if executed by the Executive. For purposes of this Agreement, the
term "Intellectual Property" means any and all of the

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following and all statutory and/or common law rights throughout the world in,
arising out of, or associated therewith: (i) all patents and applications
therefor, including docketed patent disclosures awaiting filing, reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
inventions disclosures and improvements, all trade secrets, confidential
business information (including ideas, research and development, know-how,
compositions, designs, specifications, pricing and cost information and business
and market plans and proposals), proprietary information, manufacturing,
engineering and technical drawings and specifications, processes, designs and
technology; (iii) all works of authorship, "moral rights," copyrights (including
derivative works thereof), mask works, copyright and mask work registrations and
applications therefor; (iv) all trade names, trade dress, logos, product names,
collective marks, collective membership marks, trademarks certification marks
and service marks, trademark and service mark registrations and applications
together with the goodwill of the business symbolized by the names and the
marks; (v) all data and related documents, object code, databases, passwords,
encryption technology, firmware, development tools, files, records and data, and
all media on which any of the foregoing is recorded; (vi) any similar,
corresponding or equivalent rights to any of the foregoing; (vii) all
documentation related to any of the foregoing; and (viii) all goodwill
associated with any of the foregoing.

         Section 5. Non-Competition; Non-Solicitation.

                (1) During the period commencing on the Separation Date and
expiring two years following the Separation Date (the "Automotive Noncompetition
Period"), the Executive shall not, directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or control of, or
be connected as an officer, employee, consultant, partner, or director with, any
business conducted anywhere in any State within the eastern half of the United
States of America which is or which becomes during the Automotive Noncompetition
Period directly or indirectly competitive with the Automotive Division of the
Company (as such division is described in the Company's Form 10K-SB for the
Company's fiscal year ended December 31, 1999), as the same is conducted as of
the Separation Date (each such business, a "Competitive Automotive Operation").
During the Automotive Noncompetition Period, ownership by the Executive of not
more than 5% of the equity securities of any Competitive Automotive Operation
shall not constitute a violation of this Section 5(a).

                (2) During the period commencing on the Separation Date and
expiring three and one-half years following the Separation Date (the "Technology
Noncompetition Period"), the Executive shall not, directly or indirectly, own,
manage, operate, control or participate in the ownership, management, operation
or control of, or be connected as an officer, employee, consultant, partner, or
director with, any business conducted anywhere in North America which is or
which becomes during the Technology Noncompetition Period directly or indirectly
competitive with the Technology Division of the Company (as such division is
described in the Company's Form 10K-SB for the Company's fiscal year ended
December 31, 1999), as the same is conducted as of the Separation Date (each
such business, a "Competitive Technology Operation"). During the Technology
Noncompetition Period, ownership by the Executive of not more than 5% of the
equity securities of any Competitive Technology Operation shall not constitute a
violation of this Section 5(b).

                (3) During the period commencing on the Separation Date and
expiring three and one-half years following the Separation Date (the
"Nonsolicitation Period"), the Executive shall not, directly or indirectly,
solicit, interfere with, hire or offer to hire any person who is or was an
employee of the Company during the 12-month period prior to the Separation Date,
or induce such person to discontinue his or her relationship with the Company or
to accept employment by, or enter into a business

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relationship with, the Executive or any other entity or person; provided,
however, that the Executive may offer employment to Solisha Fischetti during the
Nonsolicitation Period if her employment with the Company is terminated for any
reason during the Nonsolicitation Period. During the Nonsolicitation Period, the
Executive shall not, directly or indirectly, (i) solicit, interfere with, induce
or entice away any person or entity that is or was a client, customer or agent
of the Company during the 24-month period prior to the Separation Date, with
respect to any product or service which is directly or indirectly competitive
with the Automotive Division or the Technology Division, as the same are
conducted as of the Separation Date, or (ii) in any manner persuade or attempt
to persuade any such person or entity (A) to discontinue a business relationship
with the Company or (B) to enter into a business relationship with the Executive
or any other entity or person which would be adverse to the interests of the
Automotive Division or the Technology Division.

         In the event any restriction against engaging in a competitive activity
contained in this Section 5 shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its extending for too great a
period of time or over too great a geographical area or by reason of its being
too extensive in any other respect, it shall be interpreted to extend only over
the maximum period of time for which it may be enforceable, over the maximum
geographical area as to which it may be enforceable and to the maximum extent in
all other respects as to which it may be enforceable, all as determined by such
court in such action.

         Section 6. Knowledge of Claims. The Executive represents and warrants
that, to the knowledge of the Executive, there is no reasonable basis for any
third party to assert any claim against the Company or any of the Company's
parents, subsidiaries or affiliates, or any of the past or present officers or
directors of any of the forgoing (including the Executive) acting in their
capacities as such, under federal, state or local law, including a breach of any
applicable duty under common law. Except as set forth on Exhibit A hereto, the
Executive further represents and warrants that, to the knowledge of the
Executive, there are no claims, actions, suits, investigations or proceedings
threatened against the Company or any of the Company's parents, subsidiaries or
affiliates, or any of the past or present officers or directors of any of the
forgoing (including the Executive) acting in their capacities as such, under any
federal, state or local law, including a breach of any applicable duty under
common law. The Executive further represents and warrants that there is no
reasonable basis for the Company to assert any claim against the Executive for
violation of any federal, state, or local law, or breach of any applicable duty
under common law.

         Section 7. Cooperation. Subject to the provisions of Section 10 hereof,
the Executive agrees that he will fully cooperate in any litigation in which the
Company or any of the Company's parents, subsidiaries and affiliates may become
involved. Such cooperation shall include the Executive making himself available,
upon the request of the Company, for depositions, court appearances and
interviews by Company's counsel. To the maximum extent permitted by law, the
Executive agrees that he will notify the Chairman of the Board of Directors of
the Company and the Chairman of the Audit Committee of the Board of Directors of
the Company if he is contacted by any government agency or any other person
contemplating or maintaining any claim or legal action against the Company or
any of the Company's parents, subsidiaries and affiliates, or by any agent or
attorney of such person.

         Section 8. Proceedings. The Executive has not filed, and agrees not to
initiate or cause to be initiated on his behalf, any complaint, charge, claim or
proceeding against the Company before any local, state or federal agency, court
or other body relating to his employment or the separation or

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termination of his employment, other than with respect to the obligations of the
Company to the Executive under this Agreement, (each individually, a
"Proceeding"), and agrees not to voluntarily participate or join in any
Proceeding.

         Section 9. Standstill.

                (1) The Executive covenants to and agrees with the Company that
from and after the date hereof until the fifth anniversary of the Separation
Date (the "Standstill Period"), without the Company's prior written consent, the
Executive will not, directly or indirectly:

                    (1) Make any public announcement with respect to, or submit
to the Company or any of its respective directors, officers, representatives,
trustees, employees, attorneys, advisors, agents or Affiliates, any proposal
for, the acquisition of any Voting Securities or with respect to any merger,
consolidation, business combination or purchase of any substantial portion of
the assets of the Company, whether or not any parties other than the Executive
is involved, and whether or not such proposal might require the making of a
public announcement by the Company;

                    (2) Seek or propose to influence, advise, change or control
the management, board of directors, governing instruments or policies or affairs
of the Company, or make, or in any way participate in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act, to vote any Voting Securities or become a "participant" in any
"election contest" (as such terms are defined and used in Regulation 14A and
Schedule 14A under the Exchange Act) with respect to Voting Securities;

                    (3) Deposit any Voting Securities in a voting trust or
subject any Voting Securities to any arrangement or agreement (other than this
Agreement) with respect to the voting of such Voting Securities or any other
agreement having similar effect;

                    (4) Form or join a partnership, limited partnership,
syndicate or other group (as defined in Section 13(d)(3) of the Exchange Act)
with respect to any Voting Securities; or

                    (5) Other than a non-public request to waive the provisions
of clause (i) of this Section 9(a), make a request to amend or waive any
provision of this Section 9(a).

                (2) The Executive represents and covenants to the Company that,
as of the date of this Agreement, the Executive Beneficially Owns 2,992,054
shares of common stock, par value $.01 per share, of the Company ("Company
Common Stock"). At any meeting of the stockholders of the Company during the
Standstill Period at which any matter is submitted to a vote of such
stockholders, or with respect to any matter as to which written consents are
sought, in lieu of a meeting of shareholders, the Executive shall take all
necessary steps to cause all shares of Company Common Stock as to which the
Executive Beneficially Owns to be voted in accordance with the recommendation of
the majority of the Board of Directors of the Company provided that such
majority includes a majority of the non-employee directors of the Company.

         Section 10. Indemnification. From and after the Separation Date, the
Company shall indemnify, defend and hold harmless the Executive against all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") incurred in

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connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions of the Executive occurring prior to the Separation Date, which is
based upon or relates to the Executive's capacity as a director or officer of
the Company, to the fullest extent the Executive is permitted to be indemnified
under the Company's Articles of Incorporation and Bylaws as in effect on the
date of this Agreement. In the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted or arising before or
after the Separation Date), the Executive may retain counsel reasonable
satisfactory to the Executive and the Company; provided, however, that (1) the
Company shall have the right to assume the defense thereof and upon such
assumption the Company shall not be liable to the Executive for any legal
expenses of other counsel or any other expenses subsequently incurred by the
Executive in connection with the defense thereof, except that if the Company
elects not to assume such defense, or counsel for the Executive reasonably
advises the Executive that there are issues which raise conflicts of interest
between the Company and the Executive, the Executive may retain counsel
reasonably satisfactory to the Executive and the Company, and the Company shall
pay the reasonable fees and expenses of such counsel for the Executive and (2)
the Company shall not be liable for any settlement effected without its prior
written consent; provided, further, that nothing in this Section 10 shall
prevent the Executive from retaining separate counsel with the prior written
consent of the Company which consent shall not be unreasonably withheld. If the
Executive wishes to claim indemnification under this Section 10, upon learning
of any such claim, action, suit, proceeding or investigation, the Executive
shall promptly notify the Company thereof, provided that the failure to notify
shall not affect the obligation of the Company under this Section 10 except to
the extent such failure to notify materially prejudices the Company. The
Company's obligations under this Section 10 shall continue in full force and
effect for a period of six years after the Separation Date; provided that all
rights to indemnification in respect of any claim, action, suit, proceeding or
investigation made, asserted or commenced with such six year period shall
continue until the final disposition of such claim, action, suit, proceeding or
investigation.

         Section 11. Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:

                (1) "Affiliate" or "Affiliates" shall mean, with respect to any
Person, any other Person which directly or indirectly controls or is controlled
by or is under common control with such Person (as used in this definition,
"control" (including its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly, of power to direct
or cause the direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract or
otherwise)).

                (2) "Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.

                (3) "Beneficial Ownership" or "Beneficially Own" shall mean any
securities of which a Person or any such Person's Affiliates is considered to be
a Beneficial Owner or of which such Person or any of such Person's Affiliates or
associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time or upon the
satisfaction of conditions) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of conversion
rights, exchange rights, rights, warrants or options, or otherwise, it being
understood and agreed that Bruce Bendell shall be deemed to Beneficially Own
securities held in trust for the benefit of Bruce Bendell or any member of his
immediate family.

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                (4) "Business Day" shall mean any day, other than a Saturday,
Sunday or a day on which banking institutions in the City of New York are
authorized or obligated by law or executive order to close.

                (5) "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

                    (i) Bruce Bendell ceases to Beneficially Own of at least 15%
of the combined voting power of the Company's then outstanding securities; or

                    (ii) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the securities
Beneficially Owned by such person any securities acquired directly from the
Company or its affiliates) representing 50% or more of the combined voting power
of the Company's then outstanding securities, excluding any person who becomes
such a Beneficial Owner in connection with a transaction described in clause
(iii)(A) below; or

                    (iii) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with any other
corporation, other than (A) a merger or consolidation which results in the
directors of the Company immediately prior to such merger or consolidation
continuing to constitute at least a majority of the board of directors of the
Company, the surviving entity or any parent thereof immediately after such
merger or consolidation; or (B) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no Person is
or becomes the Beneficial Owner, directly or indirectly, of securities of the
Company (not including in the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its Affiliates) representing
50% or more of the combined voting power of the Company's then outstanding
securities.

                Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions (x) immediately following which the record
holders of the common stock of the Company immediately prior to such transaction
or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions or (y)
in which Bruce Bendell or any Person controlled by Bruce Bendell Beneficially
Owns 50% or more of the combined voting power of the Company's then outstanding
securities.

                (6) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

                (7) "Person" shall mean an individual, corporation, association,
partnership, group (as such term is used in Section 13(d)(3) of the Exchange
Act), trust, joint venture, business trust or unincorporated organization, or a
government or any agency or political subdivision thereof.

                (8) "Voting Securities" shall mean at any time shares of any
class of capital stock of the Company which are then entitled to vote generally
in the election of directors or any securities which are convertible into, or
exchangeable or exercisable for, any such shares.

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         Section 12. Notice. For purposes of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid as follows:

                           If to the Company:

                           Fidelity Holdings, Inc.
                           80-02 Kew Gardens Road, 4th Floor
                           Kew Gardens, New York  11415
                           Attention: Chairman of the Board of Directors and
                           Chairman of the Audit Committee of the Board of
                           Directors

                           If to the Executive:

                           47 Parker Boulevard
                           Monsey, New York  10952

                           With a copy to:

                           Robert L. Rimberg, Esq.
                           Rimberg & Associates, P.C.
                           600 Third Avenue
                           New York, New York  10016

or such other address as either party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.

         Section 13. Miscellaneous.

                (1) Enforcement; Governing Law; Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
New York without regard to its conflicts of law principles. The Company shall
have the right, without prejudice to any other rights or remedies it might have
under the law which are reserved, to obtain injunctive relief to restrain any
breach or threatened breach by the Executive of this Agreement or otherwise to
specifically enforce any provision of this Agreement; provided, however, that
such right to injunctive relief does not preclude the Company from seeking
monetary damages for a breach by the Executive of this Agreement; provided,
further, that in the event of a breach by the Executive of any representation,
warranty, covenant or agreement contained in this Agreement, the Company shall
be entitled to suspend any payments and benefits set forth in Section 1(b) above
not yet paid or provided to the Executive after providing the Executive notice
of such breach and the Company shall be permanently relieved of the Company's
obligations under Section 1(b) above if the Executive does not cure such breach
within 30 days of the date the Company provided such notice to the Executive;
and provided, further, that in the event the Company's obligations under Section
1(b) above are suspended or relieved pursuant to the preceding proviso, the
Company shall not be precluded from seeking monetary damages from the Executive
that exceed the amount of the Company's obligations under Section 1(b) above
that are suspended or relieved pursuant to the preceding proviso.

                                       10
<PAGE>   11
                (2) Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

                (3) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                (4) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes any and all prior agreements, and understandings, both
written and oral, between the parties hereto with respect to the subject matter
hereof except as otherwise provided herein.

                (5) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect.

                (6) Successors. This Agreement shall be binding upon and shall
inure to the benefit of each of the parties hereto, and their respective heirs,
legatees, executors, administrators, legal representatives, successors and
assigns. The provisions of Section 2(a) hereof are intended to be for the
benefit of, and shall be enforceable by, each Releasee and his, her or its,
heirs and representatives.

                (7) Withholding. All payments made by the Company to the
Executive pursuant to Section 1(b) of this Agreement shall be reduced by all
federal, state, city or other taxes that are required to be withheld pursuant to
any law or governmental regulation.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.

                                    FIDELITY HOLDINGS, INC.

                                    By: DORON COHEN
                                        -----------
                                        Name:
                                        Title:

                                       11
<PAGE>   12
                                    EXHIBIT A

         The following could be construed as threatened claims:

         Lawrence Hardge
         Harry Koval
         Master Agents
         Class actions

                                       12<PAGE>   1
                                                                     Exhibit 4.1

                     MELLON RESIDENTIAL FUNDING CORPORATION,

                                    Depositor

                     BOSTON SAFE DEPOSIT AND TRUST COMPANY,

                           Seller and Master Servicer

                               MELLON BANK, N.A.,

                                Standby Purchaser

                                       and

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION

                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                           Dated as of August 1, 2000

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

              MORTGAGE PASS-THROUGH CERTIFICATES, Series 2000-TBC3

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                    <C>
                                    ARTICLE I

                                   DEFINITIONS

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS

SECTION 2.01.         Conveyance of Mortgage Loans......................................................34
SECTION 2.02.         Acceptance by Trustee of the Mortgage Loans.......................................37
SECTION 2.03.         Representations, Warranties and Covenants of the Seller and Master
                      Servicer..........................................................................39
SECTION 2.04.         Representations and Warranties of the Depositor as to the Mortgage Loans..........41
SECTION 2.05.         Delivery of Opinion of Counsel in Connection with Substitutions...................41
SECTION 2.06.         Execution and Delivery of Certificates............................................41
SECTION 2.07.         REMIC Matters.....................................................................42
SECTION 2.08.         Converted Mortgage Loans..........................................................42
SECTION 2.09.         Subsequent Transfers..............................................................42

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING

SECTION 3.01.         Master Servicer to Service Mortgage Loans.........................................44
SECTION 3.02.         Subservicing; Enforcement of the Obligations of Servicers.........................45
SECTION 3.03.         Rights of the Depositor and the Trustee in Respect of the Master Servicer.........46
SECTION 3.04.         Trustee to Act as Master Servicer.................................................46
SECTION 3.05.         Collection of Mortgage Loan Payments; Certificate Account; Distribution
                      Account...........................................................................47
SECTION 3.06.         Collection of Taxes, Assessments and Similar Items; Escrow Accounts;
                      Maintenance of Records............................................................49
SECTION 3.07.         Access to Certain Documentation and Information Regarding the Mortgage
                      Loans.............................................................................50
SECTION 3.08.         Permitted Withdrawals from the Certificate Account and Distribution
                      Account...........................................................................50
SECTION 3.09.         Maintenance of Hazard Insurance...................................................52
SECTION 3.10.         Enforcement of Due-on-Sale Clauses; Assumption Agreements.........................53
SECTION 3.11.         Realization Upon Defaulted Mortgage Loans; Repurchase of Certain Mortgage
                      Loans.............................................................................54
SECTION 3.12.         Trustee to Cooperate; Release of Mortgage Files...................................57
SECTION 3.13.         Documents, Records and Funds in Possession of Master Servicer to be Held
                      for the Trustee...................................................................58
SECTION 3.14.         Servicing Compensation............................................................58
SECTION 3.15.         Access to Certain Documentation...................................................59
</TABLE>

                                       i

<PAGE>   3

<TABLE>
<S>                                                                                                    <C>
SECTION 3.16.         Annual Statement as to Compliance.................................................59
SECTION 3.17.         Annual Independent Public Accountants' Servicing Statement........................59
SECTION 3.18.         Errors and Omissions Insurance; Fidelity Bonds....................................60
SECTION 3.19.         Inspections.......................................................................60
SECTION 3.20.         Restoration of Mortgaged Property.................................................60
SECTION 3.21.         Put Option and Optional Call......................................................60
SECTION 3.22.         Modifications.....................................................................61

                                   ARTICLE IV

                DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER

SECTION 4.01.         Advances..........................................................................62
SECTION 4.02.         Priorities of Distribution........................................................62
SECTION 4.03.         Allocation of Realized Losses.....................................................65
SECTION 4.04.         Monthly Statements to Certificateholders..........................................66
SECTION 4.05.         Determination of Pass-Through Rates for COFI Certificates.........................69
SECTION 4.06.         Determination of Pass-Through Rates for LIBOR Certificates........................71
SECTION 4.07.         Determination of Pass-Through Rates for Variable Rate Certificates................71
SECTION 4.08.         Capitalized Interest Account and Pre-Funding Account..............................71

                                    ARTICLE V

                                THE CERTIFICATES

SECTION 5.01.         The Certificates..................................................................73
SECTION 5.02.         Certificate Register; Registration of Transfer and Exchange of Certificates.......74
SECTION 5.03.         Mutilated, Destroyed, Lost or Stolen Certificates.................................78
SECTION 5.04.         Persons Deemed Owners.............................................................78
SECTION 5.05.         Access to List of Certificateholders' Names and Addresses.........................78
SECTION 5.06.         Maintenance of Office or Agency...................................................79

                                   ARTICLE VI

                      THE DEPOSITOR AND THE MASTER SERVICER

SECTION 6.01.         Respective Liabilities of the Depositor and the Master Servicer...................79
SECTION 6.02.         Merger or Consolidation of the Depositor or the Master Servicer...................79
SECTION 6.03.         Limitation on Liability of the Depositor, the Seller, the Master Servicer
                      and Others........................................................................79
SECTION 6.04.         Limitation on Resignation of Master Servicer......................................80

                                   ARTICLE VII

                                     DEFAULT

SECTION 7.01.         Events of Default.................................................................80
SECTION 7.02.         Trustee to Act; Appointment of Successor..........................................82
SECTION 7.03.         Notification to Certificateholders................................................83
</TABLE>

                                       ii

<PAGE>   4

<TABLE>
<S>                                                                                                    <C>
                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

SECTION 8.01.         Duties of Trustee.................................................................83
SECTION 8.02.         Certain Matters Affecting the Trustee.............................................84
SECTION 8.03.         Trustee Not Liable for Certificates, Mortgage Loans or Additional
                      Collateral........................................................................85
SECTION 8.04.         Trustee May Own Certificates......................................................86
SECTION 8.05.         Trustee's Fees and Expenses.......................................................86
SECTION 8.06.         Eligibility Requirements for Trustee..............................................86
SECTION 8.07.         Resignation and Removal of Trustee................................................87
SECTION 8.08.         Successor Trustee.................................................................87
SECTION 8.09.         Merger or Consolidation of Trustee................................................88
SECTION 8.10.         Appointment of Co-Trustee or Separate Trustee.....................................88
SECTION 8.11.         Tax Matters.......................................................................89
SECTION 8.12.         Periodic Filings..................................................................92

                                   ARTICLE IX

                                   TERMINATION

SECTION 9.01.         Termination upon Liquidation or Purchase of all Mortgage Loans....................92
SECTION 9.02.         Final Distribution on the Certificates............................................92
SECTION 9.03.         Additional Termination Requirements...............................................93

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

SECTION 10.01.        Amendment.........................................................................94
SECTION 10.02.        Recordation of Agreement; Counterparts............................................96
SECTION 10.03.        Governing Law.....................................................................96
SECTION 10.04.        Intention of Parties..............................................................96
SECTION 10.05.        Notices...........................................................................97
SECTION 10.06.        Severability of Provisions........................................................97
SECTION 10.07.        Assignment........................................................................98
SECTION 10.08.        Limitation on Rights of Certificateholders........................................98
SECTION 10.09.        Inspection and Audit..............................................................98
SECTION 10.10.        Certificates Nonassessable and Fully Paid.........................................99

Exhibit A:        Form of Senior Certificate
                  (excluding Notional Amount Certificates).............................................A-1
Exhibit B:        Form of Subordinated Certificate.....................................................B-1
Exhibit C:        Form of Class A-R Certificate........................................................C-1
Exhibit D:        Form of Notional Amount Certificate..................................................D-1
Exhibit E:        Form of Reverse of Certificates......................................................E-1
Exhibit F:        [Reserved]...........................................................................F-1
Exhibit G:        Form of Initial Certification of Trustee.............................................G-1
</TABLE>

                                      iii

<PAGE>   5

<TABLE>
<S>                                                                                                    <C>
Exhibit H:        Form of Final Certification of Trustee...............................................H-1
Exhibit I:        Form of Transfer Affidavit...........................................................I-1
Exhibit J-1:      Form of Transferor Certificate (Private Certificates)................................J-1
Exhibit J-2:      Form of Transferor Certificate (Class A-R)...........................................J-2
Exhibit K:        Form of Investment Letter [Non-Rule 144A]............................................K-1
Exhibit L:        Form of Rule 144A Letter.............................................................L-1
Exhibit M:        Form of Request for Release (for Trustee)............................................M-1
Exhibit N:        Form of Request for Release (Mortgage Loan)
                  Paid in Full, Repurchased and Replaced)..............................................N-1
Exhibit O:        Form of Additional Pledged Collateral Custodial Agreement............................O-1
Exhibit P:        Form of Subsequent Transfer Agreement................................................P-1
Exhibit Q:        Subsequent Funding Parameters........................................................Q-1

                           SCHEDULES

Schedule I:       Mortgage Loan Schedule.............................................................S-I-1
Schedule II:      Representations and Warranties of the Seller/Master Servicer......................S-II-1
Schedule III:     Representations and Warranties as to the Mortgage Loans..........................S-III-1
Schedule IV:      [Reserved]........................................................................S-IV-1
Schedule V:       Form of Monthly Master Servicer Report.............................................S-V-1
</TABLE>

                                       iv

<PAGE>   6

         THIS POOLING AND SERVICING AGREEMENT, dated as of August 1, 2000, among
MELLON RESIDENTIAL FUNDING CORPORATION, a Delaware corporation, as depositor
(the "Depositor"), BOSTON SAFE DEPOSIT AND TRUST COMPANY, a Massachusetts trust
company, as seller (in such capacity, the "Seller") and as master servicer (in
such capacity, the "Master Servicer"), MELLON BANK, N.A., a national banking
association organized under the laws of the United States, as standby purchaser
(the "Standby Purchaser"), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
a national banking association organized under the laws of the United States, as
trustee (the "Trustee").

                                 WITNESSETH THAT

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

                             PRELIMINARY STATEMENT

         The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates. The Trust Fund for federal income
tax purposes will consist of two REMICs. The Subsidiary REMIC will consist of
all of the assets constituting the Trust Fund (other than the Put Option and the
Capitalized Interest Account and Pre-Funding Account) and will be evidenced by
the Subsidiary REMIC Regular Interests (which will be uncertificated and will
represent the "regular interests" in the Subsidiary REMIC) and the SR Interest
as the single "residual interest" in the Subsidiary REMIC. The Trustee will hold
the Subsidiary REMIC Regular Interests. The Master REMIC will consist of the
Subsidiary REMIC Regular Interests and will be evidenced by the Regular
Certificates (which will represent the "regular interests" in the Master REMIC)
and the MR Interest as the single "residual interest" in the Master REMIC. The
Class A-R Certificates will represent beneficial ownership of the SR Interest
and the MR Interest. The "latest possible maturity date" for federal income tax
purposes of all interests created hereby will be the Latest Possible Maturity
Date.

         The following table sets forth characteristics of the Certificates,
together with the minimum denominations and integral multiples in excess thereof
in which such Classes shall be issuable (except that one Certificate of each
Class of Certificates may be issued in a different amount and, in addition, one
Residual Certificate representing the Tax Matters Person Certificate may be
issued in a different amount):

<PAGE>   7

<TABLE>
<CAPTION>
====================================================================================================================
                                                                                                     Integral
                          Initial Class                                                              Multiples
                           Certificate              Pass-Through              Minimum              in Excess of
                             Balance                    Rate                Denomination              Minimum
--------------------------------------------------------------------------------------------------------------------
<S>                       <C>                       <C>                     <C>                    <C>
Class A-1                 $465,656,000                   (1)                   $25,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class X                        (2)                       (3)                   $25,000                $1,000(4)
--------------------------------------------------------------------------------------------------------------------
Class A-R                 $     100.00                   (5)                      $100                  N/A
--------------------------------------------------------------------------------------------------------------------
Class B-1                 $  4,800,000                   (5)                   $25,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-2                 $  1,920,000                   (5)                   $25,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-3                 $  2,400,000                   (5)                   $25,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-4                 $  2,161,000                   (5)                  $100,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-5                 $  1,441,000                   (5)                  $100,000                $1,000
--------------------------------------------------------------------------------------------------------------------
Class B-6                 $  1,680,060.83                (5)                  $100,000                $1,000
====================================================================================================================
</TABLE>

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

(1)      On each Distribution Date, the Pass-Through Rate will be equal to the
         lesser of (a) the lesser of (i) LIBOR plus the Margin and (ii) the
         Maximum Rate and (b) the Adjusted Net WAC. The Pass-Through Rate for
         the first Distribution Date is 6.83875% per annum.

(2)      The Class X Certificates will be Notional Amount Certificates, will
         have no principal balance and will bear interest on their Notional
         Amount, initially $480,058,160.83

(3)      The Pass-Through Rate for the Class X Certificates for any Distribution
         Date will be equal to the positive difference, if any, of (a) the Net
         WAC and (b) the weighted average of the Pass-Through Rates (the
         Adjusted Pass-Through Rate in the case of the Class A-1 Certificates)
         on the Certificates (other than the Class X Certificates) for such
         Distribution Date. The Pass-Through Rate of the Class X Certificates
         for the first Distribution Date is 0.55515% per annum.

(4)      Minimum denomination is based on the Notional Amount of such Class.

(5)      On each Distribution Date, the Pass-Through Rate will be equal to the
         Net WAC. The Pass-Through Rate for the first Distribution Date is
         7.63903% per annum.

         Principal of and interest on the Subsidiary REMIC Regular Interests and
the SR Interest shall be allocated to the Corresponding Classes of Certificates
in the manner set forth in the following table:

                                       2
<PAGE>   8

                     Corresponding Class of Certificates(1)

<TABLE>
<CAPTION>
Subsidiary
  REMIC            Initial Principal                                   Allocation             Allocation
 Interest               Balance               Interest Rate           of Principal          of Interest(3)
 --------               -------               -------------           ------------          --------------
<S>                <C>                        <C>                     <C>                   <C>
    1               $465,656,000                   (2)                     A-1                  A-1, X
    2                        100.00                (2)                     MR(5)                 MR(5)
    3               $  4,800,000                   (2)                     B-1                  B-1, X
    4               $  1,920,000                   (2)                     B-2                  B-2, X
    5               $  2,400,000                   (2)                     B-3                  B-3, X
    6               $  2,161,000                   (2)                     B-4                  B-4, X
    7               $  1,441,000                   (2)                     B-5                  B-5, X
    8               $  1,680,060.83                (2)                     B-6                  B-6, X
    SR                    (4)                      (4)                     NA                     NA
</TABLE>

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

(1)      The amount of principal and interest allocable from a Subsidiary REMIC
         Regular Interest to its Corresponding Class of Certificates on any
         Distribution Date shall be 100%.

(2)      The Interest Rate for this Subsidiary REMIC Interest for any
         Distribution Date will be equal to the Net WAC.

(3)      The interest on each Subsidiary REMIC Interest (other than the SR
         Interest) equal to the Pass-Through Rate applicable to its
         Corresponding Class (for receipt of principal) will be allocated to
         such Corresponding Class; the excess of the interest on each such
         Subsidiary REMIC Interest will be allocated to the Class X
         Certificates.

(4)      The SR Interest will have no principal balance and will not bear
         interest, but will be entitled to any funds remaining in the Subsidiary
         REMIC after the payment of the Subsidiary REMIC Regular Interests and
         all expenses of the Trust Fund.

(5)      The beneficial ownership of the MR Interest and the SR Interest is
         represented by the Class A-R Certificates. The owner of a Class A-R
         Certificate may separate the MR Interest and the SR Interest.

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

Accretion Directed
Certificates...........................     None.

Accrual Certificates...................     None.

                                       3
<PAGE>   9

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

Component Certificates.................     None.

Components.............................     For purposes of calculating
                                            distributions, the Component
                                            Certificates will be comprised of
                                            multiple payment components having
                                            the designations, Initial Component
                                            Notional Balances and Pass-Through
                                            Rates set forth below:

                                   Initial
                                  Component
                                  Notional
              Designation          Balance           Pass-Through Rate
              -----------         ---------          -----------------
                  N/A                N/A                    N/A

Delay Certificates.....................     All interest-bearing Classes of
                                            Certificates other than the
                                            Non-Delay Certificates, if any.

ERISA-Restricted
Certificates...........................     Residual Certificates and
                                            Subordinated Certificates.

Fixed Rate Certificates................     None.

Floating Rate Certificates.............     LIBOR Certificates.

Inverse Floating Rate
Certificates...........................     None.

COFI Certificates......................     None.

LIBOR Certificates.....................     Class A-1 Certificates.

Non-Delay Certificates.................     LIBOR Certificates.

Notional Amount
Certificates...........................     Class X Certificates.

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

Physical Certificates..................     Private Certificates and Residual
                                            Certificates.

Planned Principal Classes..............     None.

Primary Planned Principal
Classes................................     None.

                                       4
<PAGE>   10

Principal Only
Certificates...........................     None.

Private Certificates...................     Class B-4, Class B-5 and Class B-6
                                            Certificates.

Rating Agencies........................     S&P and Moody's.

Regular Certificates...................     All Classes of Certificates other
                                            than the Residual Certificates.

Residual Certificates..................     Class A-R Certificates.

Scheduled Principal
Classes................................     None.

Secondary Planned Principal
Class..................................     None.

Senior Certificates....................     Class A-1, Class X, and Class A-R
                                            Certificates.

Subordinated Certificates..............     Class B-1, Class B-2, Class B-3,
                                            Class B-4, Class B-5 and Class B-6
                                            Certificates.

Support Classes........................     None.

Targeted Principal
Classes................................     None.

Variable Rate Certificates.............     The Class X, Class A-R Certificates
                                            and the Subordinated Certificates.

         With respect to any of the foregoing designations as to which the
corresponding reference is "None," all defined terms and provisions herein
relating solely to such designations shall be of no force or effect, and any
calculations herein incorporating references to such designations shall be
interpreted without reference to such designations and amounts. Defined terms
and provisions herein relating to statistical rating agencies not designated
above as Rating Agencies shall be of no force or effect.

                                    ARTICLE I

                                   DEFINITIONS

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

         Accepted Servicing Practices: With respect to any Mortgage Loan, those
mortgage servicing practices of prudent mortgage lending institutions which
service mortgage loans of the same type as such Mortgage Loan in the
jurisdiction where the related Mortgaged Property is located.

                                       5
<PAGE>   11

         Accretion Directed Certificates: As specified in the Preliminary
Statement.

         Accrual Amount: With respect to any Class of Accrual Certificates and
any Distribution Date prior to the Accrual Termination Date, the amount
allocable to interest on each such Class of Accrual Certificates with respect to
such Distribution Date pursuant to Section 4.02(a)(1)(ii).

         Accrual Certificates: As specified in the Preliminary Statement.

         Accrual Termination Date: Not applicable.

         Addition Notice: The notice given pursuant to Section 2.09 with respect
to the transfer of Subsequent Mortgage Loans to the Trust Fund pursuant to such
Section.

         Additional Collateral: Any real or personal property, securities, cash,
instruments, contracts or other documents constituting or evidencing collateral
pledged as additional security for a Mortgage Loan (other than the Mortgaged
Property).

         Additional Pledged Collateral Custodial Agreement: The agreement
governing the retention of Additional Collateral, a form of which is annexed
hereto as Exhibit O.

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

         Adjusted Net Mortgage Rate: As to each Mortgage Loan, and at any time,
the per annum rate equal to the Mortgage Rate less the related Expense Rate.

         Adjusted Net WAC: A rate equal to the product of the Net WAC for the
related Interest Accrual Period multiplied by a fraction, the numerator of which
is 30 and the denominator of which is the actual number of days in the Interest
Accrual Period.

         Adjusted Pass-Through Rate: As to the Class A-1 Certificates and any
Distribution Date, a rate equal to the product of the Pass-Through Rate for the
related Interest Accrual Period multiplied by a fraction, the numerator of which
is the number of days in such Interest Accrual Period and the denominator of
which is 30.

         Adjustment Date: The Due Date on which the Mortgage Rate on each
Mortgage Loan is subject to adjustment.

         Advance: The payment required to be made by the Master Servicer with
respect to any Distribution Date pursuant to Section 4.01, the amount of any
such payment being equal to the aggregate of payments of principal and interest
(net of the Master Servicing Fee and net of any net income in the case of any
REO Property) on the Mortgage Loans that were due on the related Due Date and
not received as of the close of business on the related Determination Date, less
the aggregate amount of any such delinquent payments that the Master Servicer
has determined would constitute a Nonrecoverable Advance if advanced.

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

                                       6
<PAGE>   12

         ALTA: The American Land Title Association or any successor thereto.

         Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the Certificate Account at the close of business on the
related Determination Date on account of (i) Principal Prepayments and
Liquidation Proceeds received in the month of such Distribution Date and (ii)
all Scheduled Payments due after the related Due Date.

         Applicable Credit Support Percentage: As defined in Section 4.02(e).

         Applicable Purchase Price Percentage: With respect to any Class of
Certificates, other than the Class X and Class A-R Certificates, (i) 100% in the
case of the Offered Certificates, (ii) 80% in the case of the Class B-4 and
Class B-5 Certificates and (iii) 20% in the case of the Class B-6 Certificates.

         Available Funds: As to any Distribution Date, the sum of (a) the
aggregate amount held in the Certificate Account at the close of business on the
related Determination Date net of the related Amount Held for Future
Distribution and net of amounts permitted to be withdrawn from the Certificate
Account pursuant to clauses (i)-(viii), inclusive, of Section 3.08(a) and
amounts permitted to be withdrawn from the Distribution Account pursuant to
clauses (i)-(iii) inclusive of Section 3.08(b), (b) the amount of the Advance,
(c) in connection with Defective Mortgage Loans, as applicable, the aggregate of
the Purchase Prices and Substitution Adjustment Amounts deposited on the related
Distribution Account Deposit Date, (d) the Capitalized Interest Requirement, if
any, and (e) the Excess Funding Amount, if any.

         Bankruptcy Code: The United States Bankruptcy Reform Act of 1978, as
amended.

         Bankruptcy Coverage Termination Date: The point in time at which the
Bankruptcy Loss Coverage Amount is reduced to zero.

         Bankruptcy Loss: With respect to any Mortgage Loan, a Deficient
Valuation or Debt Service Reduction; provided, however, that a Bankruptcy Loss
shall not be deemed a Bankruptcy Loss hereunder so long as the Master Servicer
has notified the Trustee in writing that the Master Servicer is diligently
pursuing any remedies that may exist in connection with the related Mortgage
Loan and either (A) the related Mortgage Loan is not in default with regard to
payments due thereunder or (B) delinquent payments of principal and interest
under the related Mortgage Loan and any related escrow payments in respect of
such Mortgage Loan are being advanced on a current basis by the Master Servicer,
in either case without giving effect to any Debt Service Reduction or Deficient
Valuation.

         Bankruptcy Loss Coverage Amount: As of any Determination Date, the
Bankruptcy Loss Coverage Amount shall equal the Initial Bankruptcy Coverage
Amount as reduced by (i) the aggregate amount of Bankruptcy Losses allocated to
the Certificates since the Cut-off Date and (ii) any permissible reductions in
the Bankruptcy Loss Coverage Amount as evidenced by a letter from each Rating
Agency to the Trustee to the effect that any such reduction will not result in a
downgrading of the then current ratings assigned to the Classes of Certificates
rated by it.

         Base Value: With respect to any Mortgage Loan for which Additional
Collateral has been pledged, the original principal balance of the Mortgage Loan
less the maximum principal balance permitted with respect to such Mortgage Loan
in accordance with the Seller's underwriting guidelines.

                                       7
<PAGE>   13

         Blanket Mortgage: The mortgage or mortgages encumbering the Cooperative
Property.

         Book-Entry Certificates: As specified in the Preliminary Statement.

         Business Day: Any day other than (i) a Saturday or a Sunday, or (ii) a
day on which banking institutions in the City of New York, New York, or the
Commonwealth of Massachusetts, or the cities in which the Corporate Trust Office
of the Trustee is located are authorized or obligated by law or executive order
to be closed.

         Capitalized Interest Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.08 in the name of the Trustee
for the benefit of the Certificateholders and designated "Wells Fargo Bank
Minnesota, National Association in trust for registered holders of Mellon
Residential Funding Corporation Mortgage Pass-Through Certificates, Series
2000-TBC3." Funds in the Capitalized Interest Account shall be held in trust for
the Certificateholders for the uses and purposes set forth in this Agreement.

         Capitalized Interest Requirement: As to any Pre-Funding Distribution
Date, the excess, if any, of (i) the sum of the portion of the Class Optimal
Interest Distribution Amounts for each Class of Certificates for such
Distribution Date calculated pursuant to clause (i) of the definition thereof
and without reduction pursuant to Section 4.02(d) over (ii) the sum of the
interest portion (calculated at the applicable Adjusted Net Mortgage Rate) of
the Scheduled Payment of each Mortgage Loan due on the Due Date occurring in the
month of such Distribution Date.

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

         Certificate Account: The separate Eligible Account or Accounts created
and maintained by the Master Servicer pursuant to Section 3.05 with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of Certificateholders and designated "Boston Safe Deposit and Trust
Company in trust for the registered holders of Mellon Residential Funding
Corporation, Mortgage Pass-Through Certificates Series 2000-TBC3."

         Certificate Balance: With respect to any Certificate, other than the
Notional Amount Certificates, at any date, the maximum dollar amount of
principal to which the Holder thereof is then entitled hereunder, such amount
being equal to the Denomination thereof (A) minus the sum of (i) all
distributions of principal previously made with respect thereto and (ii) all
Realized Losses allocated thereto and, in the case of any Subordinated
Certificates, all other reductions in Certificate Balance previously allocated
thereto pursuant to Section 4.03 and (B) in the case of any Class of Accrual
Certificates, increased by the Accrual Amount added to the Class Certificate
Balance of such Class prior to such date.

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

         Certificate Register: The register maintained pursuant to Section 5.02
hereof.

         Certificateholder or Holder: The Person in whose name a Certificate is
registered in the Certificate Register, except that, solely for the purpose of
giving any consent pursuant to this Agreement, any Certificate registered in the
name of the Depositor or any affiliate of the Depositor shall be deemed

                                       8
<PAGE>   14

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

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

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

         Class Interest Shortfall: As to any Distribution Date and Class or
interest bearing Component, the amount by which the amount described in clause
(i) of the definition of Class Optimal Interest Distribution Amount for such
Class exceeds the amount of interest actually distributed on such Class on such
Distribution Date pursuant to such clause (i).

         Class Optimal Interest Distribution Amount: With respect to any
Distribution Date and interest bearing Class, the sum of (i) one month's
interest accrued during the related Interest Accrual Period at the Pass-Through
Rate for such Class on the related Class Certificate Balance or Notional Amount,
as applicable, subject to reduction as provided in Section 4.02(d) and (ii) any
Class Unpaid Interest Amounts for such Class.

         Class PO Deferred Amount: Not applicable.

         Class Subordination Percentage: With respect to any Distribution Date
and each Class of Subordinated Certificates, the quotient (expressed as a
percentage) of (a) the Class Certificate Balance of such Class of Certificates
immediately prior to such Distribution Date divided by (b) the aggregate of the
Class Certificate Balances immediately prior to such Distribution Date of all
Classes of Certificates.

         Class Unpaid Interest Amounts: As to any Distribution Date and Class of
interest bearing Certificates, the amount by which the aggregate Class Interest
Shortfalls for such Class on prior Distribution Dates exceeds the amount
distributed on such Class on prior Distribution Dates pursuant to clause (ii) of
the definition of Class Optimal Interest Distribution Amount.

         Closing Date: August 15, 2000.

         CMT: The weekly average of yields on United States treasury securities
as adjusted to a constant maturity of one year.

         CMT Loan: A Mortgage Loan for which: the Loan Index is CMT; the
Adjustment Date occurs on the date set forth in the related Mortgage Note and
every twelfth month thereafter; the Periodic Rate Cap is 200 basis points; the
Maximum Mortgage Rate is 500 basis points higher than the initial Mortgage Rate;
and the Minimum Mortgage Rate is the Gross Margin.

                                       9
<PAGE>   15

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

         COFI: The Monthly Weighted Average Cost of Funds Index for the Eleventh
District Savings Institutions published by the Federal Home Loan Bank of San
Francisco.

         COFI Certificates: As specified in the Preliminary Statement.

         Component: As specified in the Preliminary Statement.

         Component Notional Balance: With respect to any Component and any
Distribution Date, as specified in the Preliminary Statement.

         Component Certificates: As specified in the Preliminary Statement.

         Converted Mortgage Loan: Any Mortgage Loan with respect to which the
Mortgagor has exercised the option to convert the Mortgage Rate to a fixed rate.

         Coop Shares: Shares issued by a Cooperative Corporation.

         Cooperative Corporation: The entity that holds title to the real
property and improvements constituting the Cooperative Property and which
governs the Cooperative Property, which Cooperative Corporation must qualify as
a Cooperative Housing Corporation under Section 216 of the Code.

         Cooperative Loan: Any Mortgage Loan secured by Coop Shares and a
Proprietary Lease.

         Cooperative Property: The real property and improvements owned by the
Cooperative Corporation, including the allocation of individual dwelling units
to the holders of the Coop Shares of the Cooperative Corporation.

         Cooperative Unit: A single family dwelling located in a Cooperative
Property.

         Corporate Trust Office: The designated offices of the Trustee at which
at any particular time its corporate trust business with respect to this
Agreement shall be administered, which offices at the date of the execution of
this Agreement are located, for Certificate transfer services, at Wells Fargo
Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113,
Attn: Corporate Trust Services - Mellon Residential Funding Corporation Mortgage
Pass-Through Certificates Series 2000-TBC3, and for all other purposes at 11000
Broken Land Parkway, Columbia, Maryland 21044-3562, Attn: Corporate Trust
Services-Mellon Residential Funding Corporation Mortgage Pass-Through
Certificates Series, 2000-TBC3, and which are the respective addresses to which
notices to and correspondence with the Trustee should be directed.

         Corresponding Classes of Certificates: With respect to each Subsidiary
REMIC Regular Interest, any Class of Certificates appearing opposite such
Subsidiary REMIC Regular Interest in the Preliminary Statement.

                                       10
<PAGE>   16

         Cut-off Date: As to any Initial Mortgage Loan, August 1, 2000. As to
any Subsequent Mortgage Loan, the later of the first day of the month of the
related Subsequent Transfer Date and the date of origination of such Mortgage
Loan.

         Cut-off Date Pool Principal Balance: $380,058,160.83.

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

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

         Defective Mortgage Loan: Any Mortgage Loan which is required to be
repurchased pursuant to Section 2.02 or 2.03.

         Deficient Valuation: With respect to any Mortgage Loan, a valuation by
a court of competent jurisdiction of the Mortgaged Property in an amount less
than the then-outstanding indebtedness under the Mortgage Loan, or any reduction
in the amount of principal to be paid in connection with any Scheduled Payment
that results in a permanent forgiveness of principal, which valuation or
reduction results from an order of such court which is final and non-appealable
in a proceeding under the Bankruptcy Code.

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

         Delay Certificates: As specified in the Preliminary Statement.

         Deleted Mortgage Loan: As defined in Section 2.03(c) hereof.

         Denomination: With respect to each Certificate, the amount set forth on
the face thereof as the "Initial Certificate Balance of this Certificate" or the
"Initial Notional Amount of this Certificate" or, if neither of the foregoing,
the Percentage Interest appearing on the face thereof.

         Depositor: Mellon Residential Funding Corporation, a Delaware
corporation, or its successor in interest.

         Depository: The initial Depository shall be The Depository Trust
Company, the nominee of which is CEDE & Co., as the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a "clearing
corporation" as defined in Section 8-102(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: As to any Distribution Date, the 10th day of each
month or if such day is not a Business Day the next preceding Business Day.

                                       11
<PAGE>   17

         Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Certificateholders and designated "Wells Fargo Bank
Minnesota, National Association in trust for registered holders of Mellon
Residential Funding Corporation, Mortgage Pass-Through Certificates, Series
2000-TBC3." Funds in the Distribution Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

         Distribution Account Deposit Date: As to any Distribution Date, 9:30
a.m. Massachusetts time on the Business Day immediately preceding such
Distribution Date.

         Distribution Date: The 15th day of each calendar month after the
initial issuance of the Certificates, or if such 15th day is not a Business Day,
the next succeeding Business Day, commencing in September 2000.

         DTC: The Depository Trust Company, or any successor thereto.

         Due Date: With respect to any Distribution Date, the first day of the
month in which the related Distribution Date occurs.

         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 debt obligations of such holding company) have the highest
short-term ratings of each Rating Agency at the time any amounts are held on
deposit therein, or (ii) an account or accounts in a depository institution or
trust company in which such accounts are insured by the FDIC (to the limits
established by the FDIC) and the uninsured deposits in which accounts are
otherwise secured such that, as evidenced by an Opinion of Counsel delivered to
the Trustee and to each Rating Agency, the Certificateholders have a claim with
respect to the funds in such account or a perfected first priority security
interest against any collateral (which shall be limited to Permitted
Investments) securing such funds that is superior to claims of any other
depositors or creditors of the depository institution or trust company in which
such account is maintained, or (iii) a trust account or accounts maintained with
(a) the trust department of a federal or state chartered depository institution
or (b) a trust company, acting in its fiduciary capacity or (iv) any other
account acceptable to each Rating Agency. Eligible Accounts may bear interest,
and may include, if otherwise qualified under this definition, accounts
maintained with the Trustee.

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

         ERISA-Restricted Certificate: As specified in the Preliminary
Statement.

         Escrow Account: The Eligible Account or Accounts established and
maintained pursuant to Section 3.06(a) hereof.

         Escrow Payments: With respect to any Mortgage Loan, the amounts
constituting ground rents, taxes, assessments, water rates, sewer rents,
municipal charges, mortgage insurance premiums, fire and hazard insurance
premiums, condominium charges, and any other payments required to be escrowed by
the Mortgagor with the mortgagee pursuant to the Mortgage or any other related
document.

                                       12
<PAGE>   18

         Event of Default: As defined in Section 7.01 hereof.

         Excess Funding Amount: The Pre-Funded Amount, if any, at the end of the
Pre-Funding Period.

         Excess Loss: The amount of any (i) Fraud Loss realized after the Fraud
Loss Coverage Termination Date, (ii) Special Hazard Loss realized after the
Special Hazard Coverage Termination Date or (iii) Bankruptcy Loss realized after
the Bankruptcy Coverage Termination Date.

         Excess Proceeds: With respect to any Liquidated Mortgage Loan, the
amount, if any, by which any Liquidation Proceeds of such Mortgage Loan received
in the calendar month in which such Mortgage Loan became a Liquidated Mortgage
Loan, net of any amounts previously reimbursed to the Master Servicer as
Nonrecoverable Advance(s) with respect to such Mortgage Loan pursuant to Section
3.08(a)(iii), exceeds (i) the Stated Principal Balance of such Liquidated
Mortgage Loan as of the Due Date in the month in which such Mortgage Loan became
a Liquidated Mortgage Loan plus (ii) accrued interest at the Mortgage Rate from
the Due Date as to which interest was last paid or advanced (and not reimbursed)
to Certificateholders up to the Due Date applicable to the Distribution Date
immediately following the calendar month during which such liquidation occurred.

         Expense Rate: As to each Mortgage Loan, the sum of the related Master
Servicing Fee Rate and Trustee Fee Rate.

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

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

         FIRREA: The Financial Institutions Reform, Recovery, and Enforcement
Act of 1989.

         Fiscal Year: The calendar year or such other 12 month period as the
Master Servicer shall designate by notice to the Trustee.

         Fitch: Fitch, Incorporated, or any successor thereto. If Fitch is
designated as a Rating Agency in the Preliminary Statement, for purposes of
Section 10.05(b) the address for notices to Fitch shall be Fitch, Incorporated,
One State Street Plaza, New York, New York 10004, Attention: Residential
Mortgage Surveillance Group, or such other address as Fitch may hereafter
furnish to the Depositor, the Master Servicer and the Trustee.

         Floating Rate Certificate: As specified in the Preliminary Statement.

         FNMA: The Federal National Mortgage Association, a federally chartered
and privately owned corporation organized and existing under the Federal
National Mortgage Association Charter Act, or any successor thereto.

         Formula Principal Amount: As to any Distribution Date, the sum of (a)
the principal portion of each Scheduled Payment (without giving effect, prior to
the Bankruptcy Coverage Termination Date, to any reductions thereof caused by
any Debt Service Reductions or Deficient Valuations) due on each Mortgage Loan
on the related Due Date, (b) the Stated Principal Balance of each

                                       13
<PAGE>   19

Mortgage Loan that was repurchased by the Seller or the Master Servicer pursuant
to this Agreement as of such Distribution Date, (c) the Substitution Adjustment
Amount in connection with any Deleted Mortgage Loan received with respect to
such Distribution Date, (d) any Insurance Proceeds or Liquidation Proceeds
allocable to recoveries of principal of Mortgage Loans that are not yet
Liquidated Mortgage Loans received during the calendar month preceding the month
of such Distribution Date, (e) with respect to each Mortgage Loan that became a
Liquidated Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the amount of Liquidation Proceeds allocable to principal
received with respect to such Mortgage Loan in such preceding month, and (f) all
partial and full Principal Prepayments received during the related Prepayment
Period and the Excess Funding Amount, if any.

         Formula Rate: As to the Floating Rate Certificates, the amount
determined pursuant to clause (a) of footnote (1), in the Preliminary Statement.

         Fraud Loan: A Liquidated Mortgage Loan as to which a Fraud Loss has
occurred.

         Fraud Loss Coverage Amount: As of the Closing Date, $3,800,582 subject
to reduction from time to time, by the amount of Fraud Losses allocated to the
Certificates. In addition, on each anniversary of the Cut-off Date, the Fraud
Loss Coverage Amount will be reduced as follows: (a) on the first, second, third
and fourth anniversaries of the Cut-off Date, to an amount equal to the lesser
of (i) 1% of the then current Pool Stated Principal Balance in the case of the
first anniversary and 0.50% of the then current Pool Stated Principal Balance in
the case of the second, third and fourth anniversaries and (ii) the excess of
the Fraud Loss Coverage Amount as of the preceding anniversary of the Cut-off
Date over the cumulative amount of Fraud Losses allocated to the Certificates
since such preceding anniversary; and (b) on the fifth anniversary of the
Cut-off Date, to zero.

         Fraud Loss Coverage Termination Date: The point in time at which the
Fraud Loss Coverage Amount is reduced to zero.

         Fraud Losses: Realized Losses on Mortgage Loans as to which a loss is
sustained by reason of a default arising from fraud, dishonesty or
misrepresentation in connection with the related Mortgage Loan.

         Gross Margin: With respect to each Mortgage Loan, the number of basis
points set forth in the related Mortgage Note which is added to the Loan Index
to determine the Mortgage Rate on the related Adjustment Date, subject to the
applicable Periodic Rate Cap, Maximum Mortgage Rate and Minimum Mortgage Rate.

         Index: With respect to any Interest Accrual Period for the COFI
Certificates, the then-applicable index used by the Trustee pursuant to Section
4.05 to determine the applicable Pass-Through Rate for such Interest Accrual
Period for the COFI Certificates.

         Indirect Participant: A broker, dealer, bank or other financial
institution or other Person that clears through or maintains a custodial
relationship with a Depository Participant.

         Initial Bankruptcy Coverage Amount: $100,000.

         Initial Component Balance: As specified in the Preliminary Statement.

                                       14
<PAGE>   20

         Initial LIBOR Rate: 6.61875%.

         Initial Mortgage Loans: The Mortgage Loans delivered on the Closing
Date.

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

         Insurance Proceeds: Proceeds paid by an insurer pursuant to any
Insurance Policy, in each case other than any amount included in such Insurance
Proceeds in respect of Insured Expenses.

         Insured Expenses: Expenses covered by an Insurance Policy or any other
insurance policy with respect to the Mortgage Loans.

         Interest Accrual Period: With respect to each Class of Delay
Certificates, corresponding Subsidiary REMIC Regular Interest and any
Distribution Date, the calendar month prior to the month of such Distribution
Date. With respect to any Non-Delay Certificates, corresponding Subsidiary REMIC
Regular Interest and any Distribution Date, the period commencing on the
preceding Distribution Date (or in the case of the first Distribution Date,
commencing on the Closing Date) and ending on the day preceding such
Distribution Date.

         Interest Determination Date: With respect to any Interest Accrual
Period after the first Interest Accrual Period for any Floating Rate
Certificates, the second LIBOR Business Day prior to the first day of such
Interest Accrual Period.

         Interest Rate: With respect to each Subsidiary REMIC Interest, the
applicable rate set forth or calculated in the manner described in the
Preliminary Statement.

         Latest Possible Maturity Date: The Distribution Date following the
third anniversary of the scheduled maturity date of the Mortgage Loan having the
latest scheduled maturity date as of the Cut-off Date.

         LIBOR: The London interbank offered rate for one-month United States
dollar deposits calculated in the manner described in Section 4.06.

         LIBOR Business Day: Any day other than a Saturday, a Sunday or any day
on which banking institutions in the State of New York or in the city of London,
England are required or authorized by law to be closed.

         LIBOR Certificates: As specified in the Preliminary Statement.

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

         Liquidation Proceeds: Amounts, including Insurance Proceeds, received
in connection with the partial or complete liquidation of defaulted Mortgage
Loans, whether through trustee's sale,

                                       15
<PAGE>   21

foreclosure sale or otherwise or amounts received in connection with any
condemnation or partial release of a Mortgaged Property and any other proceeds
received in connection with an REO Property, less the sum of related
unreimbursed Master Servicing Fees, Servicing Advances and Advances.

Loan Index:       Each of the following:

         o        the rate for one month U.S. dollar deposits in the London
                  interbank offered market ("1-month LIBOR") as published in The
                  Wall Street Journal of the edition specified in the related
                  Mortgage Note on the last business day of the month preceding
                  the month of the applicable Adjustment Date.

         o        the prime rate (the "Prime Rate") reported in the money rates
                  section of The Wall Street Journal as in effect on the day
                  before the applicable Adjustment Date.

         o        the weekly average yield of the secondary market interest
                  rates on six-month negotiable Certificates of Deposit (the
                  "6-month CD Rate") as made available by the Federal Reserve
                  Board in Federal Reserve Statistical Releases H-15 and G-13 as
                  most recently available 45 days before the applicable
                  Adjustment Date.

         o        the rate for six month dollar deposits in the London interbank
                  offered market ("6-month LIBOR") reported in the money rates
                  section of the Tuesday edition of The Wall Street Journal on
                  or immediately preceding the date that is 45 days before the
                  applicable Adjustment Date.

         o        the typical one-month Certificate of Deposit rate (the
                  "1-month CD Rate") in the secondary market as reported in the
                  money rates section of The Wall Street Journal as in effect on
                  the day before the applicable Adjustment Date.

         Loan-to-Collateral Value Ratio: With respect to any Mortgage Loan and
as to any date of determination, the fraction (expressed as a percentage) the
numerator of which is the principal balance of the related Mortgage Loan at such
date of determination less the Base Value of any Additional Collateral and the
denominator of which is the Property Value.

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

         Maintenance: With respect to any Cooperative Unit, the rent or fee paid
by the Mortgagor to the Cooperative Corporation pursuant to the Proprietary
Lease.

         Majority in Interest: As to any Class of Regular Certificates, the
Holders of Certificates of such Class evidencing, in the aggregate, at least 51%
of the Percentage Interests evidenced by all Certificates of such Class.

         Margin: As to any Distribution Date through the Put Date, 0.22%. As to
any Distribution Date thereafter, 0.44%.

                                       16
<PAGE>   22

         Master REMIC: As described in the Preliminary Statement.

         Master Servicer: Boston Safe Deposit and Trust Company, a Massachusetts
trust company, and its successors and assigns, in its capacity as master
servicer hereunder. For purposes of representations and warranties and other
provisions relating to servicing, FNMA or FHLMC qualifications, "Master
Servicer" is deemed to include the Subservicer.

         Master Servicer Advance Date: As to any Distribution Date, 9:30 a.m.
Massachusetts time on the Business Day immediately preceding such Distribution
Date.

         Master Servicing Fee: As to each Mortgage Loan and any Distribution
Date, an amount payable out of each full payment of interest received on such
Mortgage Loan and equal to one-twelfth of the Master Servicing Fee Rate
multiplied by the Stated Principal Balance of such Mortgage Loan as of the Due
Date in the month prior to the month of such Distribution Date, subject to
reduction as provided in Section 3.14.

         Master Servicing Fee Rate: With respect to each Mortgage Loan, 0.375%
per annum.

         Maximum Mortgage Rate: With respect to each Mortgage Loan, the highest
Mortgage Rate that may be borne by the related Mortgage Note over the life of
such Mortgage Loan.

         Maximum Rate: On each Distribution Date, 10.00% per annum multiplied by
a fraction, the numerator of which is 30 and the denominator of which is the
actual number of days in the related Interest Accrual Period.

         Minimum Mortgage Rate: With respect to each Mortgage Loan, the lowest
Mortgage Rate that may be borne by the related Mortgage Note over the life of
such Mortgage Loan.

         Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.04.

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

         Mortgage: The mortgage, deed of trust or other instrument creating a
first lien on an estate in fee simple or leasehold interest in real property
securing a Mortgage Note.

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

         Mortgage Loan Schedule: The list of Initial Mortgage Loans (as from
time to time amended by the Master Servicer to reflect the addition of
Substitute Mortgage Loans and the deletion of Deleted Mortgage Loans pursuant to
the provisions of this Agreement) transferred to the Trustee as part of the
Trust Fund and from time to time subject to this Agreement, attached hereto as
Schedule I and as

                                       17
<PAGE>   23

modified by each list of Subsequent Mortgage Loans attached to each Subsequent
Transfer Agreement setting forth the following information with respect to each
Mortgage Loan:

                  (i)     the loan number;

                  (ii)    the Mortgagor's name and the street address of the
         Mortgaged Property, including the zip code;

                  (iii)   the maturity date;

                  (iv)    the original principal balance;

                  (v)     the Cut-off Date Principal Balance;

                  (vi)    the first payment date of the Mortgage Loan;

                  (vii)   the Scheduled Payment in effect as of the
         Cut-off Date;

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

                  (ix)    a code indicating whether the residential dwelling at
         the time of origination was represented to be owner-occupied;

                  (x)     a code indicating whether the residential dwelling is
         either (a) a detached single family dwelling (b) a dwelling in a PUD,
         (c) a condominium unit, (d) a two- to four-unit residential property or
         (e) a Cooperative Unit (and a code indicating whether the related
         Cooperative Loan is an Unrecognized Cooperative Loan);

                  (xi)    the Mortgage Rate at the Cut-off Date;

                  (xii)   the purpose for the Mortgage Loan;

                  (xiii)  the Loan-to-Collateral Value Ratio at origination;

                  (xiv)   a description of the Additional Collateral, if any,
         and the value thereof at the close of business on the Cut-off Date;

                  (xv)    the original months to maturity or the remaining
         months to maturity from the Cut-off Date, in any case based on the
         original amortization schedule, and if different, the maturity
         expressed in the same manner but based on the actual amortization
         schedule;

                  (xvi)   the date on which the Mortgage Loan was originated;

                  (xvii)  the Loan Index;

                  (xviii) the next Adjustment Date;

                  (xix)   the Gross Margin;

                                       18
<PAGE>   24

                  (xx) the initial and subsequent Periodic Rate Cap, Maximum
         Mortgage Rate and Minimum Mortgage Rate; and

                  (xxi) the minimum value of any Additional Collateral required
         under the terms of the Mortgage Loan.

         With respect to the Initial Mortgage Loans or Subsequent Mortgage
Loans, as applicable, in the aggregate, such schedule shall also set forth the
following information, as of the applicable Cut-off Date: (1) the number of
Mortgage Loans; (2) the Cut-off Date Principal Balance; and (3) the weighted
average Mortgage Rate of the Mortgage Loans.

         Mortgage Loans: Such of the mortgage loans transferred and assigned to
the Trustee pursuant to the provisions hereof as from time to time are held as a
part of the Trust Fund (including any REO Property), the mortgage loans so held
being identified in the Mortgage Loan Schedule, notwithstanding foreclosure or
other acquisition of title of the related Mortgaged Property.

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

         Mortgage Rate: The annual rate of interest borne by a Mortgage Note
from time to time.

         Mortgaged Property: The underlying property securing a Mortgage Loan,
which, with respect to a Cooperative Loan, is the related Coop Shares and
Proprietary Lease.

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

         MR Interest: The sole class of "residual interest" in the Master REMIC.

         National Cost of Funds Index: The National Monthly Median Cost of Funds
Ratio to SAIF-Insured Institutions published by the Office of Thrift
Supervision.

         Net Prepayment Interest Shortfalls: As to any Distribution Date, the
amount by which the aggregate of Prepayment Interest Shortfalls during the
related Prepayment Period exceeds an amount equal to the aggregate Master
Servicing Fee for such Distribution Date before reduction of the Master
Servicing Fee in respect of such Prepayment Interest Shortfalls.

         Net WAC: For any Distribution Date, the weighted average of the
Adjusted Net Mortgage Rates of the Mortgage Loans, based on the Stated Principal
Balances of such Mortgage Loans as of the close of business on the Due Date in
the month preceding the month of the applicable Distribution Date, including the
Pre-Funded Amount as of the close of business on the Due Date in the month
preceding the month of the applicable Distribution Date, if any, assuming the
Adjusted Net Mortgage Rate on the Pre-Funded Amount is equal to the weighted
average of the Adjusted Net Mortgage Rates of the Mortgage Loans with a Loan
Index of 1-month LIBOR, excluding such Mortgage Loans with an initial six month
fixed rate period.

         Non-Delay Certificates: As specified in the Preliminary Statement.

         Non-Discount Mortgage Loan: Not applicable.

                                       19
<PAGE>   25

         Non-PO Formula Principal Amount: Not applicable.

         Non-PO Percentage: Not applicable.

         Nonrecoverable Advance: Any portion of an Advance previously made or
proposed to be made by the Master Servicer that, in the good faith judgment of
the Master Servicer, will not be ultimately recoverable by the Master Servicer
from the related Mortgagor, related Liquidation Proceeds or otherwise.

         Notice of Final Distribution: The notice to be provided pursuant to
Section 9.02 to the effect that final distribution on any of the Certificates
shall be made only upon presentation and surrender thereof.

         Notional Amount: As to the Class X Certificates and any Distribution
Date, the aggregate of the Class Certificate Balances of all Classes of
Certificates immediately prior to such Distribution Date.

         Notional Amount Certificates: As specified in the Preliminary
Statement.

         Offered Certificates: As specified in the Preliminary Statement.

         Officer's Certificate: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, a Managing Director, a
Vice President (however denominated), an Assistant Vice President, the
Treasurer, the Secretary, or one of the Assistant Treasurers or Assistant
Secretaries of the Depositor or the Master Servicer, or (ii), if provided for in
this Agreement, signed by a Servicing Officer, as the case may be, and delivered
to the Depositor and the Trustee, as the case may be, as required by this
Agreement.

         Opinion of Counsel: A written opinion of counsel, who may be counsel
for the Depositor or the Master Servicer, including, in-house counsel,
reasonably acceptable to the Trustee; provided, however, that with respect to
the interpretation or application of the REMIC Provisions, such counsel must (i)
in fact be independent of the Depositor and the Master Servicer, (ii) not have
any direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the-Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

         Optional Call: If the Put Option is exercised with respect to more than
90% of the outstanding aggregate Class Certificate Balance of the Certificates,
the Standby Purchaser's option to purchase on the same terms as the Put Option
all of the outstanding Certificates (other than the Class X and Class A-R
Certificates) at the Optional Call Purchase Price, including Certificates with
respect to which the applicable Holder has not exercised the Put Option.

         Optional Call Purchase Price: The aggregate of the Put Purchase Prices
for all the Certificates.

         Optional Termination: The termination of the trust created hereunder in
connection with the purchase of the Mortgage Loans pursuant to Section 9.01(a)
hereof.

                                       20
<PAGE>   26

         Original Capitalized Interest Amount: $1,432,057.

         Original Pre-Funded Amount: $100,000,000.

         Original Applicable Credit Support Percentage: With respect to each of
the following Classes of Subordinated Certificates, the corresponding percentage
described below, as of the Closing Date:

         Class B-1                             3.00%
         Class B-2                             2.00%
         Class B-3                             1.60%
         Class B-4                             1.10%
         Class B-5                             0.65%
         Class B-6                             0.35%

         Original Mortgage Loan: The mortgage loan refinanced in connection with
the origination of a Refinancing Mortgage Loan.

         Original Subordinated Principal Balance: The aggregate of the Class
Certificate Balances of the Subordinated Certificates as of the Closing Date.

         OTS: The Office of Thrift Supervision.

         Outside Reference Date: As to any Interest Accrual Period for the COFI
Certificates, the close of business on the tenth Business Day thereof.

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

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

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

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

         Overfunded Amount: As to any Subsequent Transfer Date or Pre-Funding
Distribution Date, the excess, if any, of (x) the sum of (i) the amount on
deposit in the Capitalized Interest Account on such date and, (ii) investment
earnings on such amount at the rate of 2.5% per annum from such date to the
final Pre-Funding Distribution Date and, (iii) investment earnings on the
Pre-Funded Amount at the rate of 2.5% per annum from such date to the final
Pre-Funding Distribution Date over (y) the sum of the Capitalized Interest
Requirement for each remaining Pre-Funding Distribution Date, based on LIBOR of
6.61875% and Net WAC of 8.26403%.

                                       21
<PAGE>   27

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

         Pass-Through Rate: For any interest bearing Class of Certificates, the
per annum rate set forth or calculated in the manner described in the
Preliminary Statement.

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

         Periodic Rate Cap: The provision, if any, in the Mortgage Note for each
Mortgage Loan which limits increases or decreases in the Mortgage Rate on any
particular or each Adjustment Date.

         Permitted Investments: At any time, any one or more of the following
obligations and securities:

                  (i)   obligations of the United States or any agency thereof,
         provided such obligations are backed by the full faith and credit of
         the United States;

                  (ii)  general obligations of or obligations guaranteed by any
         state of the United States or the District of Columbia receiving the
         highest long-term debt rating of each Rating Agency, or such lower
         rating as will not result in the downgrading or withdrawal of the
         ratings then assigned to the Certificates by each Rating Agency;

                  (iii) commercial or finance company paper which is then
         receiving the highest commercial or finance company paper rating of
         each Rating Agency, or such lower rating as will not result in the
         downgrading or withdrawal of the ratings then assigned to the
         Certificates by each Rating Agency;

                  (iv)  certificates of deposit, demand or time deposits, or
         bankers' acceptances issued by any depository institution or trust
         company incorporated under the laws of the United States or of any
         state thereof and subject to supervision and examination by federal
         and/or state banking authorities, provided that the commercial paper
         and/or long term unsecured debt obligations of such depository
         institution or trust company (or in the case of the principal
         depository institution in a holding company system, the commercial
         paper or long-term unsecured debt obligations of such holding company,
         but only if Moody's is not a Rating Agency) are then rated one of the
         two highest long-term and the highest short-term ratings of each Rating
         Agency for such securities, or such lower ratings as will not result in
         the downgrading or withdrawal of the rating then assigned to the
         Certificates by either Rating Agency;

                  (v)   demand or time deposits or certificates of deposit
         issued by any bank or trust company or savings institution to the
         extent that such deposits are fully insured by the FDIC;

                  (vi)  guaranteed reinvestment agreements issued by any bank,
         insurance company or other corporation containing, at the time of the
         issuance of such agreements,

                                       22
<PAGE>   28

         such terms and conditions as will not result in the downgrading or
         withdrawal of the rating then assigned to the Certificates by either
         Rating Agency;

                  (vii)  repurchase obligations with respect to any security
         described in clauses (i) and (ii) above, in either case entered into
         with a depository institution or trust company (acting as principal)
         described in clause (iv) above;

                  (viii) securities (other than stripped bonds, stripped coupons
         or instruments sold at a purchase price in excess of 115% of the face
         amount thereof) bearing interest or sold at a discount issued by any
         corporation incorporated under the laws of the United States or any
         state thereof which, at the time of such investment, have one of the
         two highest ratings of each Rating Agency (except if the Rating Agency
         is Moody's, such rating shall be the highest commercial paper rating of
         Moody's for any such securities), or such lower rating as will not
         result in the downgrading or withdrawal of the rating then assigned to
         the Certificates by either Rating Agency, as evidenced by a signed
         writing delivered by each Rating Agency;

                  (ix)   units of a taxable money-market portfolio having the
         highest rating assigned by each Rating Agency (except if Fitch or Duff
         & Phelps is a Rating Agency and has not rated the portfolio, the
         highest rating assigned by Moody's) and restricted to obligations
         issued or guaranteed by the United States of America or entities whose
         obligations are backed by the full faith and credit of the United
         States of America and repurchase agreements collateralized by such
         obligations; and

                  (x)    such other investments bearing interest or sold at a
         discount acceptable to each Rating Agency as will not result in the
         downgrading or withdrawal of the rating then assigned to the
         Certificates by either Rating Agency, as evidenced by a signed writing
         delivered by each Rating Agency;

provided that no such instrument shall be a Permitted Investment if such
instrument evidences the right to receive interest only payments with respect to
the obligations underlying such instrument.

         Permitted Transferee: Any Person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in section 521 of the Code)
which is exempt from tax imposed by Chapter 1 of the Code (including the tax
imposed by section 511 of the Code on unrelated business taxable income) on any
excess inclusions (as defined in section 860E(c)(l) of the Code) with respect to
any Residual Certificate, (iv) rural electric and telephone cooperatives
described in section 1381(a)(2)(C) of the Code, (v) an "electing partnership" as
defined in Code Section 775, (vi) a Person that is not a citizen or resident of
the United States, a corporation, partnership, or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or an estate or trust whose income from sources without the United
States is includible in gross income for United States federal income tax
purposes regardless of its connection with the conduct of a trade or business
within the United States or a trust if a court within the United States is able
to exercise primary supervision over the administration of the trust and one or
more United States fiduciaries have the authority to control all substantial
decisions of the trust unless such Person has furnished the transferor and the
Trustee with a duly completed Internal Revenue Service Form 4224, and (vii) any
other Person

                                       23
<PAGE>   29

so designated by the Depositor based upon an Opinion of Counsel that the
Transfer of an Ownership Interest in a Residual Certificate to such Person may
cause either REMIC hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding. The terms "United States," "State" and
"International Organization" shall have the meanings set forth in section 7701
of the Code or successor provisions. A corporation will not be treated as an
instrumentality of the United States or of any State or political subdivision
thereof for these purposes if all of its activities are subject to tax and, with
the exception of the Federal Home Loan Mortgage Corporation, a majority of its
board of directors is not selected by such government unit.

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

         Physical Certificate: As specified in the Preliminary Statement.

         Planned Balance: Not applicable.

         Planned Principal Classes: As specified in the Preliminary Statement.

         PO Formula Principal Amount: Not applicable.

         PO Percentage: Not applicable.

         Pool Stated Principal Balance: As to any Distribution Date, the
aggregate of the Stated Principal Balances as of the Due Date in the month
preceding the month of such Distribution Date of the Mortgage Loans which were
Outstanding Mortgage Loans on such Due Date.

         Pre-Funded Amount: As of the Closing Date, the Original Pre-Funded
Amount. As of any date thereafter, the amount on deposit in the Pre-Funding
Account, excluding any Pre-Funding Earnings included therein.

         Pre-Funding Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.08 in the name of the Trustee
for the benefit of the Certificateholders and designated "Wells Fargo Bank
Minnesota, National Association in trust for the registered holders of Mellon
Residential Funding Corporation, Mortgage Pass-Through Certificates, Series
2000-TBC3." Funds in the Pre-Funding Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

         Pre-Funding Distribution Date: Each Distribution Date during and
immediately after the Pre-Funding Period and the Distribution Date in the month
following the end of the Pre-Funding Period.

         Pre-Funding Earnings: As of any date of determination, the amount of
investment earnings or income, net of any losses from such investments, on
deposit in the Pre-Funding Account.

         Pre-Funding Period: The period from the Closing Date until the earliest
of (i) the date on which the amount on deposit in the Pre-Funding Account is
less than $100,000, (ii) the date on which an Event of Default occurs under this
Agreement or (iii) the close of business on October 13, 2000.

                                       24
<PAGE>   30

         Prepayment Interest Shortfall: As to any Distribution Date, Mortgage
Loan and Principal Prepayment received during the related Prepayment Period, the
amount, if any, by which one month's interest at the related Mortgage Rate, net
of the Master Servicing Fee Rate, on such Principal Prepayment exceeds the
amount of interest paid in connection with such Principal Prepayment.

         Prepayment Period: As to any Distribution Date, the calendar month
preceding the month of such Distribution Date.

         Primary Insurance Policy: Each policy of primary mortgage guaranty
insurance or any replacement policy therefor with respect to any Mortgage Loan.

         Primary Planned Principal Classes: As specified in the Preliminary
Statement.

         Principal Only Certificates: As specified in the Preliminary Statement.

         Principal Prepayment: Any payment of principal by a Mortgagor on a
Mortgage Loan that is received in advance of its scheduled Due Date and is not
accompanied by an amount representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment. Partial
Principal Prepayments shall be applied by the Master Servicer in accordance with
the terms of the related Mortgage Note.

         Principal Prepayment in Full: Any Principal Prepayment made by a
Mortgagor of the entire principal balance of a Mortgage Loan.

         Private Certificate: As specified in the Preliminary Statement.

         Property Value: With respect to any Mortgage Loan, the Property Value
of the related Mortgaged Property shall be: (i) with respect to a Mortgage Loan
other than a Refinancing Mortgage Loan, the least of (a) the value of the
Mortgaged Property based upon the appraisal made at the time of the origination
of such Mortgage Loan, (b) the sales price of the Mortgaged Property at the time
of the origination of such Mortgage Loan and (c) the value of the Mortgaged
Property determined by the Seller based upon a review of the appraisal made in
accordance with clause (a); and (ii) with respect to a Refinancing Mortgage
Loan, the lesser of (a) the value of the Mortgaged Property based upon the
appraisal made at the time of the origination of such Refinancing Mortgage Loan
and (b) the value of the Mortgaged Property determined by the Seller based upon
a review of the appraisal made in accordance with clause (a).

         Pro Rata Share: As to any Distribution Date, the Subordinated Principal
Distribution Amount and any Class of Subordinated Certificates, the portion of
the Subordinated Principal Distribution Amount allocable to such Class, equal to
the product of the Subordinated Principal Distribution Amount on such
Distribution Date and a fraction, the numerator of which is the related Class
Certificate Balance thereof and the denominator of which is the aggregate of the
Class Certificate Balances of the Subordinated Certificates.

         Proprietary Lease: With respect to any Cooperative Unit, a lease or
occupancy agreement between a Cooperative Corporation and a holder of related
Coop Shares.

         Prospectus Supplement: The Prospectus Supplement dated August 10, 2000
relating to the Offered Certificates.

                                       25
<PAGE>   31

         PUD: Planned Unit Development.

         Purchase Price: With respect to any Mortgage Loan required to be
purchased by the Seller pursuant to Section 2.02, 2.03 or 2.08 hereof or
purchased by the Master Servicer pursuant to Section 3.11 or Section 3.22, an
amount equal to the sum of (i) 100% of the unpaid principal balance of the
Mortgage Loan on the date of such purchase, and (ii) accrued interest thereon at
the applicable Mortgage Rate (or at the applicable Adjusted Mortgage Rate if (x)
the purchaser is the Master Servicer or (y) if the purchaser is the Seller and
the Seller is the Master Servicer) from the date through which interest was last
paid by the Mortgagor to the Due Date in the month in which the Purchase Price
is to be distributed to Certificateholders.

         Put Date: The Distribution Date in August 2002.

         Put Option: The option of each Certificateholder (other than Holders of
the Class X Certificates and the Residual Certificates) to require the Standby
Purchaser to purchase such Certificateholder's Certificates on the Put Date,
exercisable during the Put Period.

         Put Period: The period from June 11, 2002 through June 17, 2002.

         Put Purchase Price: With respect to any Certificate for which the
related Certificateholder has exercised the Put Option or, the Standby Purchaser
has exercised the Optional Call, the sum of (A) the outstanding Certificate
Principal Balance of such Certificate on the Put Date (after giving effect to
distributions otherwise made on such date) multiplied by the Applicable Purchase
Price Percentage plus (B) accrued and unpaid interest on the outstanding
Certificate Principal Balance of such Certificate immediately prior to the Put
Date at the applicable Pass-Through Rate.

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

         Rating Agency: Each of the Rating Agencies specified in the Preliminary
Statement. If any such organization or a successor is no longer in existence,
"Rating Agency" shall be such nationally recognized statistical rating
organization, or other comparable Person, as is designated by the Depositor,
notice of which designation shall be given to the Trustee. References herein to
a given rating category of a Rating Agency shall mean such rating category
without giving effect to any modifiers. For purposes of Section 10.05(b), the
addresses for notices to each Rating Agency shall be (i) Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., 55 Water
Street, 41st Floor, New York, New York 10041, Attention: Mortgage Surveillance
Monitoring, and (ii) Moody's Investors Service, Inc., 99 Church Street, New
York, New York 10007, Attention: Mortgage Surveillance Group, or such other
address as either such Rating Agency may hereafter furnish to the Depositor and
the Master Servicer.

         Realized Loss: With respect to each Liquidated Mortgage Loan, an amount
(not less than zero or more than the Stated Principal Balance of the Mortgage
Loan) as of the date of such

                                       26
<PAGE>   32

liquidation, equal to (i) the Stated Principal Balance of the Liquidated
Mortgage Loan as of the date of such liquidation, plus (ii) interest at the
Adjusted Net Mortgage Rate from the Due Date as to which interest was last paid
or advanced (and not reimbursed) to Certificateholders up to the Due Date in the
month in which Liquidation Proceeds are required to be distributed on the Stated
Principal Balance of such Liquidated Mortgage Loan from time to time, minus
(iii) the Liquidation Proceeds, if any, received during the month in which such
liquidation occurred, to the extent applied as recoveries of interest at the
Adjusted Net Mortgage Rate and to principal of the Liquidated Mortgage Loan.
With respect to each Mortgage Loan which has become the subject of a Deficient
Valuation, if the principal amount due under the related Mortgage Note has been
reduced, the difference between the principal balance of the Mortgage Loan
outstanding immediately prior to such Deficient Valuation and the principal
balance of the Mortgage Loan as reduced by the Deficient Valuation. With respect
to each Mortgage Loan which has become the subject of a Debt Service Reduction
and any Distribution Date, the amount, if any, by which the principal portion of
the related Scheduled Payment has been reduced.

         Recognition Agreement: With respect to any Cooperative Loan, an
agreement between the Cooperative Corporation and the originator of such
Mortgage Loan which establishes the rights of such originator in the Cooperative
Property.

         Record Date: With respect to any Distribution Date and the
Certificates, other than the Class A-1 Certificates, the close of business on
the last Business Day of the month preceding the month in which such
Distribution Date occurs and, for the Class A-1 Certificates, the Business Day
immediately preceding the applicable Distribution Date.

         Reference Bank Rate: As to any Interest Accrual Period relating to the
Floating Rate Certificates as follows: the arithmetic mean (rounded upwards, if
necessary, to the nearest one sixteenth of a percent) of the offered rates for
United States dollar deposits for one month which are offered by the Reference
Banks as of 11:00 A.M., London time, on the Interest Determination Date to prime
banks in the London interbank market for a period of one month in amounts
approximately equal to the aggregate Class Certificate Balance of the Floating
Rate Certificates; provided that at least two such Reference Banks provide such
rate. If fewer than two offered rates appear, the Reference Bank Rate will 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 Master Servicer, as of
11:00 A.M., New York City time, on such date for loans in U.S. Dollars to
leading European banks for a period of one month in amounts approximately equal
to the aggregate Class Certificate Balance of the Floating Rate Certificates. If
no such quotations can be obtained, the Reference Bank Rate shall be the
Reference Bank Rate applicable to the preceding Interest Accrual Period.

         Reference Banks: Three major banks that are engaged in the London
interbank market, selected by the Trustee after consultation with the Master
Servicer.

         Refinancing Mortgage Loan: Any Mortgage Loan originated in connection
with the refinancing of an existing mortgage loan.

         Regular Certificates: As specified in the Preliminary Statement.

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

                                       27
<PAGE>   33

         Relief Act Reductions: With respect to any Distribution Date and any
Mortgage Loan as to which there has been a reduction in the amount of interest
collectible thereon for the most recently ended calendar month as a result of
the application of the Relief Act, the amount, if any, by which (i) interest
collectible on such Mortgage Loan for the most recently ended calendar month is
less than (ii) interest accrued thereon for such month pursuant to the Mortgage
Note.

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

         REMIC Change of Law: Any proposed, temporary or final regulation,
revenue ruling, revenue procedure or other official announcement or
interpretation relating to REMICs and the REMIC Provisions issued after the
Closing Date.

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

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

         Request for Release: The Request for Release signed by a Servicing
Officer and submitted by the Master Servicer to the Trustee, substantially in
the form of Exhibits M and N, as appropriate.

         Required Coupon: Not applicable.

         Required Insurance Policy: With respect to any Mortgage Loan, any
insurance policy that is required to be maintained from time to time under this
Agreement.

         Residual Certificates: As specified in the Preliminary Statement.

         Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, 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
also to whom, with respect to a particular matter, such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.

         Restricted Classes: As defined in Section 4.02(e).

         Scheduled Balances: Not applicable.

         Scheduled Classes: As specified in the Preliminary Statement.

         Scheduled Payment: The scheduled monthly payment on a Mortgage Loan due
on any Due Date allocable to principal and/or interest on such Mortgage Loan
which, unless otherwise specified herein, shall give effect to any related Debt
Service Reduction and any Deficient Valuation that affects the amount of the
monthly payment due on such Mortgage Loan.

                                       28
<PAGE>   34

         Secondary Planned Principal Clauses: As specified in the Preliminary
Statement.

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

         Seller: Boston Safe Deposit and Trust Company, a Massachusetts trust
company, and its successors and assigns, in its capacity as seller of the
Mortgage Loans to the Depositor.

         Senior Certificates: As specified in the Preliminary Statement.

         Senior Credit Support Depletion Date: The date on which the Class
Certificate Balance of each Class of Subordinated Certificates has been reduced
to zero.

         Senior Percentage: As to any Distribution Date occurring prior to the
Distribution Date in September 2010, 100%, unless the aggregate of the Class
Certificate Balance of the Senior Certificates immediately prior to such date is
zero, in which case the Senior Percentage is 0%. As to any Distribution Date on
or after the Distribution Date in September 2010, the percentage equivalent of a
fraction the numerator of which is the aggregate of the Class Certificate
Balances of each Class of Senior Certificates immediately prior to such
Distribution Date and the denominator of which is the aggregate of the Class
Certificate Balances of all Classes of Certificates immediately prior to such
date.

         Senior Prepayment Percentage: For any Distribution Date during the ten
years beginning on the first Distribution Date, 100%. The Senior Prepayment
Percentage for any Distribution Date occurring on or after the tenth anniversary
of the first Distribution Date will, except as provided herein, be as follows:
for any Distribution Date in the first year thereafter, the Senior Percentage
plus 70% of the Subordinated Percentage for such Distribution Date; for any
Distribution Date in the second year thereafter, the Senior Percentage plus 60%
of the Subordinated Percentage for such Distribution Date; for any Distribution
Date in the third year thereafter, the Senior Percentage plus 40% of the
Subordinated Percentage for such Distribution Date; for any Distribution Date in
the fourth year thereafter, the Senior Percentage plus 20% of the Subordinated
Percentage for such Distribution Date; and for any Distribution Date thereafter,
the Senior Percentage for such Distribution Date (unless on any Distribution
Date the Senior Percentage exceeds the aggregate of the initial Class
Certificate Balances of each Class of Senior Certificates divided by the
aggregate of the initial Class Certificate Balances of all Classes of
Certificates, in which case such Senior Prepayment Percentage for such
Distribution Date will once again equal 100%). Notwithstanding the foregoing, no
decrease in the Senior Prepayment Percentage will occur unless both of the
Senior Step Down Conditions are satisfied.

         Senior Principal Distribution Amount: As to any Distribution Date, the
sum of (i) the Senior Percentage of all amounts described in clauses (a) through
(d) of the definition of "Formula Principal Amount" for such Distribution Date,
(ii) with respect to each Mortgage Loan that became a Liquidated Mortgage Loan
during the calendar month preceding the month of such Distribution Date, the
lesser of (x) the Senior Percentage of the Stated Principal Balance of such
Mortgage Loan and (y) either (A) the Senior Prepayment Percentage, or (B) if an
Excess Loss was sustained with respect to such Liquidated Mortgage Loan during
such prior calendar month, the Senior Pro Rata Percentage, of the amount of the
Liquidation Proceeds allocable to principal received with respect to such
Mortgage Loan, and (iii) the Senior Prepayment Percentage of the amounts
described in clause (f) of the definition of "Formula Principal Amount" for such
Distribution Date; provided, however that if a Bankruptcy Loss that is an Excess
Loss is sustained with respect to a Mortgage Loan that is not a Liquidated
Mortgage

                                       29
<PAGE>   35

Loan, the Senior Principal Distribution Amount will be reduced on the related
Distribution Date by the Senior Pro Rata Percentage of the principal portion of
such Bankruptcy Loss.

         Senior Pro Rata Percentage: As to any Distribution Date, the percentage
equivalent of a fraction the numerator of which is the aggregate of the Class
Certificate Balances of each Class of Senior Certificates immediately prior to
such Distribution Date and the denominator of which is the aggregate of the
Class Certificate Balances of all Classes of Certificates immediately prior to
such date.

         Senior Step Down Conditions: As of the first Distribution Date as to
which any decrease in the Senior Prepayment Percentage applies, (i) the
outstanding principal balance of all Mortgage Loans delinquent 60 days or more
(averaged over the preceding six month period), as a percentage of the aggregate
Class Certificate Balance of the Subordinated Certificates on such Distribution
Date, does not equal or exceed 50% or (ii) cumulative Realized Losses with
respect to the Mortgage Loans do not exceed (a) with respect to the Distribution
Date on the tenth anniversary of the first Distribution Date, 30% of the
Original Subordinated Principal Balance, (b) with respect to the Distribution
Date on the eleventh anniversary of the first Distribution Date, 35% of the
Original Subordinated Principal Balance, (c) with respect to the Distribution
Date on the twelfth anniversary of the first Distribution Date, 40% of the
Original Subordinated Principal Balance, (d) with respect to the Distribution
Date on the thirteenth anniversary of the first Distribution Date, 45% of the
Original Subordinated Principal Balance and (e) with respect to the Distribution
Date on the fourteenth anniversary of the first Distribution Date, 50% of the
Original Subordinated Principal Balance.

         Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing obligations, including, but not limited to, the cost of (i) the
preservation, restoration and protection of a Mortgaged Property, (ii) any
expenses reimbursable to the Master Servicer pursuant to Section 3.11 and any
enforcement or judicial proceedings, including foreclosures, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.09.

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

         Special Hazard Coverage Termination Date: The point in time at which
the Special Hazard Loss Coverage Amount is reduced to zero.

         Special Hazard Loss: Any Realized Loss suffered by a Mortgaged Property
on account of direct physical loss but not including (i) any loss of a type
covered by a hazard insurance policy or a flood insurance policy required to be
maintained with respect to such Mortgaged Property pursuant to Section 3.09 to
the extent of the amount of such loss covered thereby, or (ii) any loss caused
by or resulting from:

         (a) normal wear and tear;

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<PAGE>   36

         (b) fraud, conversion or other dishonest act on the part of the
Trustee, the Master Servicer or any of their agents or employees (without regard
to any portion of the loss not covered by any errors and omissions policy);

         (c) errors in design, faulty workmanship or faulty materials, unless
the collapse of the property or a part thereof ensues and then only for the
ensuing loss;

         (d) nuclear or chemical reaction or nuclear radiation or radioactive or
chemical contamination, all whether controlled or uncontrolled, and whether such
loss be direct or indirect, proximate or remote or be in whole or in part caused
by, contributed to or aggravated by a peril covered by the definition of the
term "Special Hazard Loss";

         (e) hostile or warlike action in time of peace and war, including
action in hindering, combating or defending against an actual, impending or
expected attack:

                  1. by any government or sovereign power, de jure or de facto,
         or by any authority maintaining or using military, naval or air forces;
         or

                  2. by military, naval or air forces; or

                  3. by an agent of any such government, power, authority or
         forces;

         (f) any weapon of war employing nuclear fission, fusion or other
radioactive force, whether in time of peace or war; or

         (g) insurrection, rebellion, revolution, civil war, usurped power or
action taken by governmental authority in hindering, combating or defending
against such an occurrence, seizure or destruction under quarantine or customs
regulations, confiscation by order of any government or public authority or
risks of contraband or illegal transportation or trade.

         Special Hazard Loss Coverage Amount: With respect to the first
Distribution Date, $6,638,770. With respect to any Distribution Date after the
first Distribution Date, the lesser of (a) the greatest of (i) 1% of the
aggregate of the principal balances of the Mortgage Loans, (ii) twice the
principal balance of the largest Mortgage Loan and (iii) the aggregate of the
principal balances of all Mortgage Loans secured by Mortgaged Properties located
in the single California postal zip code area having the highest aggregate
principal balance of any such zip code area and (b) the Special Hazard Loss
Coverage Amount as of the Closing Date less the amount, if any, of Special
Hazard Losses allocated to the Certificates since the Closing Date. All
principal balances for the purpose of this definition will be calculated as of
the first day of the calendar month preceding the month of such Distribution
Date after giving effect to Scheduled Payments on the Mortgage Loans then due,
whether or not paid.

         Special Hazard Mortgage Loan: A Liquidated Mortgage Loan as to which a
Special Hazard Loss has occurred.

         SR Interest: The sole class of "residual interest" in the Subsidiary
REMIC.

         S&P: Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. If S&P is designated as a Rating Agency in the Preliminary
Statement, for purposes of Section 10.05(b) the address for notices to S&P shall
be Standard & Poor's Ratings Services, a division of The

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<PAGE>   37

McGraw-Hill Companies, Inc., 55 Water Street, 41st Floor, New York, New York
10041, Attention: Mortgage Surveillance Monitoring, or such other address as S&P
may hereafter furnish to the Depositor, the Master Servicer and the Trustee.

         Standby Purchaser: Mellon Bank, N.A., a national banking association,
or its successor in interest.

         Startup Day: The Closing Date.

         Stated Principal Balance: As to any Mortgage Loan and Due Date, the
unpaid principal balance of such Mortgage Loan as of such Due Date as specified
in the amortization schedule at the time relating thereto (before any adjustment
to such amortization schedule by reason of any moratorium or similar waiver or
grace period) after giving effect to any previous partial Principal Prepayments
and Liquidation Proceeds allocable to principal (other than with respect to any
Liquidated Mortgage Loan) and to the payment of principal due on such Due Date
and irrespective of any delinquency in payment by the related Mortgagor.

         Subordinated Certificates: As specified in the Preliminary Statement.

         Subordinated Percentage: As to any Distribution Date, 100% minus the
Senior Percentage for such Distribution Date.

         Subordinated Prepayment Percentage: As to any Distribution Date, 100%
minus the Senior Prepayment Percentage for such Distribution Date.

         Subordinated Principal Distribution Amount: With respect to any
Distribution Date: the sum of (i) the Subordinated Percentage of all amounts
described in clauses (a) through (d) of the definition of "Formula Principal
Amount" with respect to such Mortgage Loans for such Distribution Date, (ii)
with respect to each such Mortgage Loan that became a Liquidated Mortgage Loan
during the calendar month preceding the month of such Distribution Date, the
Liquidation Proceeds allocable to principal received with respect to such
Mortgage Loan, after application of such amounts pursuant to clause (ii) of the
definition of Senior Principal Distribution Amount and (iii) the Subordinated
Prepayment Percentage of the amounts described in clause (f) of the definition
of "Formula Principal Amount" for such Distribution Date.

         Subsequent Mortgage Loans: The Mortgage Loans identified on each
Subsequent Mortgage Loan Transfer Agreement as being sold pursuant thereto.

         Subsequent Transfer Agreement: The Subsequent Transfer Agreement
entered into among the Seller, the Depositor and the Trustee, substantially in
the form attached as Exhibit P.

         Subsequent Transfer Date: Each date during the Pre-Funding Period on
which Subsequent Mortgage Loans are sold to the Trust.

         Subservicer: Dovenmuehle Mortgage, Inc., or any other person to whom
the Master Servicer has contracted for the servicing of all or a portion of the
Mortgage Loans pursuant to Section 3.02 hereof.

                                       32
<PAGE>   38

         Subsidiary REMIC: With respect to each Subsidiary REMIC Interest, the
applicable rate set forth or calculated in the manner described in the
Preliminary Statement.

         Subsidiary REMIC Interest: Any one of the Subsidiary REMIC Regular
Interest or the SR Interest.

         Subsidiary REMIC Regular Interest: Any one of the "regular interests"
in the Subsidiary REMIC described in the Preliminary Statement.

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

         Substitution Adjustment Amount: The meaning ascribed to such term
pursuant to Section 2.03.

         Support Classes: As specified in the Preliminary Statement.

         Targeted Balance: Not applicable.

         Targeted Principal Classes: As specified in the Preliminary Statement.

         Tax Matters Person: The person designated as "tax matters person" in
the manner provided under Treasury regulation " 1.860F-4(d) and temporary
Treasury regulation " 301.6231(a)(7)1T.

         Tax Matters Person Certificate: The Class A-R Certificate with a
Denomination of $1.00.

         Telerate Page 3750: The display designated as page 3750 on Bridge
Telerate Service (or such other page as may replace page 3750 on that service
for the purpose of displaying London interbank offered rates of major banks).

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

         Trustee: Wells Fargo Bank Minnesota, National Association and its
successors and, if a successor trustee is appointed hereunder, such successor.

                                       33
<PAGE>   39

         Trustee Fee: As to any Distribution Date, an amount equal to
one-twelfth of the Trustee Fee Rate multiplied by the sum of (i) the Pool Stated
Principal Balance with respect to such Distribution Date and (ii) the Pre-Funded
Amount.

         Trustee Fee Rate: With respect to each Mortgage Loan and the funds in
the Pre-Funding Account, 0.009% of the Outstanding Mortgage Loan balance and the
Pre-Funded Amount.

         Trust Fund: The trust created hereunder which shall be known as MRFC
Mortgage Pass-Through Trust, Series 2000-TBC3 and the corpus of which consists
of (i) the Mortgage Loans and all interest and principal received on or with
respect thereto after the Cut-off Date to the extent not applied in computing
the Cut-off Date Principal Balance thereof; (ii) the Certificate Account, the
Pre-Funding Account, Capitalized Interest Account and the Distribution Account
and all amounts deposited therein pursuant to the applicable provisions of this
Agreement; (iii) property that secured a Mortgage Loan and has been acquired by
foreclosure, deed-in-lieu of foreclosure or otherwise; and (iv) all proceeds of
the conversion, voluntary or involuntary, of any of the foregoing.

         Unrecognized Cooperative Loan: A Cooperative Loan which is not
recognized by the related Cooperative Corporation.

         Voting Rights: The portion of the voting rights of all of the
Certificates which is allocated to any Certificate. As of any date of
determination, (a) 1% of all Voting Rights shall be allocated to each Class of
Notional Amount Certificates, if any (such Voting Rights to be allocated among
the holders of Certificates of each such Class in accordance with their
respective Percentage Interests), and (b) the remaining Voting Rights (or 100%
of the Voting Rights if there is no Class of Notional Amount Certificates) shall
be allocated among Holders of the remaining Classes of Certificates in
proportion to the Certificate Balances of their respective Certificates on such
date.

                                   ARTICLE II

                         CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

         SECTION 2.01. Conveyance of Mortgage Loans.

         (a) The Seller, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the
Depositor, without recourse, all the right, title and interest of the Seller in
and to Initial Mortgage Loans, including all interest and principal received or
receivable by the Seller on or with respect to Initial Mortgage Loans after the
Cut-off Date and all interest and principal payments on Initial Mortgage Loans
received prior to the Cut-off Date in respect of installments of interest and
principal due thereafter, but not including payments of principal and interest
due and payable on Initial Mortgage Loans on or before the Cut-off Date and the
Seller's security interest in any Additional Collateral. Except as provided by
the Additional Pledged Collateral Custodial Agreement delivered herewith, on or
prior to the Closing Date, the Seller shall deliver to the Depositor or, at the
Depositor's direction, to the Trustee or other designee of the Depositor, the
Mortgage File for each Initial Mortgage Loan listed in the Mortgage Loan
Schedule. Such delivery of the Mortgage Files shall be made against payment by
the Depositor of the purchase price, previously agreed to by the Seller and
Depositor, for the Initial Mortgage Loans. With respect to any Initial Mortgage
Loan that does not

                                       34
<PAGE>   40

have a first payment date on or before the Due Date in the month of the first
Distribution Date, the Seller shall deposit into the Distribution Account on or
before the Distribution Account Deposit Date relating to the first Distribution
Date, an amount equal to one month's interest at the related Adjusted Mortgage
Rate on the Cut-off Date Principal Balance of such Initial Mortgage Loan.

         (b) The Depositor, concurrently with the execution and delivery hereof,
hereby sells, transfers, assigns, sets over and otherwise conveys to the Trustee
in trust for the benefit of the Certificateholders, without recourse, all the
right, title and interest of the Depositor in and to the Trust Fund and the
security interest in the Additional Collateral, together with the Depositor's
right to require the Seller to cure any breach of a representation or warranty
made herein by the Seller or to repurchase or substitute for any affected
Mortgage Loan in accordance herewith. In addition, the Depositor has caused to
be paid to the Trustee the Original Capitalized Interest Amount and the Original
Pre-Funded Amount.

         (c) In connection with the transfer and assignment set forth in clause
(b) above, the Depositor has delivered or caused to be delivered to the Trustee
for the benefit of the Certificateholders the following documents or instruments
with respect to each Mortgage Loan so assigned:

                  (i) the original Mortgage Note (or with respect to
         ________________ Mortgage Loans, a lost note affidavit for each)
         endorsed by manual or facsimile signature in blank in the following
         form: "Pay to the order of ____________ without recourse," with all
         intervening endorsements showing a complete chain of endorsement from
         the originator to the Seller (each such endorsement being sufficient to
         transfer all right, title and interest of the party so endorsing, as
         noteholder or assignee thereof, in and to that Mortgage Note);

                  (ii) except with respect to a Cooperative Loan and except as
         provided below, within 45 days after the Closing Date the original
         recorded Mortgage and any amendment thereto or a copy of such Mortgage
         or amendment certified by the Seller as being a true and complete copy
         of the Mortgage;

                  (iii) except with respect to a Cooperative Loan, a duly
         executed assignment of the Mortgage (which may be included in a blanket
         assignment or assignments), together with, except as provided below,
         within 45 days after the Closing Date all interim recorded assignments
         of such Mortgage (each such assignment, when duly and validly
         completed, to be in recordable form and sufficient to effect the
         assignment of and transfer to the assignee thereof, under the Mortgage
         to which the assignment relates) sufficient to show a complete chain of
         assignment from the originator to the Seller; provided that, if the
         related Mortgage has not been returned from the applicable public
         recording office, such assignment of the Mortgage may exclude the
         information to be provided by the recording office;

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

                  (v) except with respect to a Cooperative Loan and except as
         provided below, within 45 days after the Closing Date the original or
         duplicate original lender's title policy and all riders thereto; and

                                       35
<PAGE>   41

                  (vi) in the case of a Cooperative Loan, the originals of the
         following documents or instruments:

                           (a) Except for Partially Unrecognized Cooperative
                  Loans, the Coop Shares, together with a stock power in blank;

                           (b) The executed Security Agreement;

                           (c) Except for Partially Unrecognized Cooperative
                  Loans, the executed Proprietary Lease;

                           (d) Except for Partially Unrecognized Cooperative
                  Loans, the executed Recognition Agreement;

                           (e) [Reserved];

                           (f) Except for Partially Unrecognized Cooperative
                  Loans, the executed UCC-1 financing statement with evidence of
                  recording thereon which have been filed in all places required
                  to perfect the Seller's interest in the Coop Shares and the
                  Proprietary Lease; and

                           (g) Except for Partially Unrecognized Cooperative
                  Loans, executed UCC-3 financing statements or other
                  appropriate UCC financing statements required by state law,
                  evidencing a complete and unbroken line from the mortgagee to
                  the Trustee with evidence of recording thereon (or in a form
                  suitable for recordation).

         In the event that in connection with the documents and instruments
specified above with respect to any Mortgage Loan the Depositor cannot deliver
(a) the original recorded Mortgage or any amendment thereto, (b) all interim
recorded assignments or (c) the lender's title policy (together with all riders
thereto) satisfying the requirements of clause (ii), (iii) or (v) above,
respectively, because such document or documents have not been returned from the
applicable public recording office in the case of clause (ii) or (iii) above, or
because the title policy has not been delivered to either the Master Servicer or
the Depositor by the applicable title insurer in the case of clause (v) above,
the Depositor shall promptly deliver to the Trustee, in the case of clause (ii)
or (iii) above, such original Mortgage, such amendment thereto or such interim
assignment, as the case may be, with evidence of recording indicated thereon
upon receipt thereof from the public recording office, or a copy thereof,
certified, if appropriate, by the relevant recording office, but in no event
shall any such delivery of the original Mortgage, any amendment thereto, and
each such interim assignment or a copy thereof, certified, if appropriate, by
the relevant recording office, be made later than one year following the Closing
Date, or, in the case of clause (v) above, no later than 120 days following the
Closing Date; provided, however, in the event the Depositor is unable to deliver
by such date each Mortgage, any amendment thereto, and each such interim
assignment by reason of the fact that any such documents have not been returned
by the appropriate recording office, or, in the case of each such interim
assignment, because the related Mortgage or amendment thereto has not been
returned by the appropriate recording office, the Depositor shall deliver such
documents to the Trustee as promptly as possible upon receipt thereof and, in
any event, within 720 days following the Closing Date. The Depositor shall
forward or cause to be forwarded to the Trustee (a) from time to time additional
original documents evidencing an assumption

                                       36
<PAGE>   42

or modification of a Mortgage Loan and (b) any other documents required to be
delivered by the Depositor or the Master Servicer to the Trustee. In the event
that the original Mortgage is not delivered and in connection with the payment
in full of the related Mortgage Loan and the public recording office requires
the presentation of a "lost instruments affidavit and indemnity" or any
equivalent document, because only a copy of the Mortgage can be delivered with
the instrument of satisfaction or reconveyance, the Master Servicer shall
execute and deliver or cause to be executed and delivered such a document to the
public recording office. In the case where a public recording office retains the
original recorded Mortgage or in the case where a Mortgage is lost after
recordation in a public recording office, the Seller shall deliver to the
Trustee a copy of such Mortgage certified by such public recording office to be
a true and complete copy of the original recorded Mortgage.

         As promptly as practicable subsequent to such transfer and assignment,
and in any event, within thirty (30) days thereafter, the Master Servicer shall
(i) affix the Trustee's name to each assignment of Mortgage, as the assignee
thereof, (ii) cause such assignment to be in proper form for recording in the
appropriate public office for real property records and (iii) cause to be
delivered for recording in the appropriate public office for real property
records the assignments of the Mortgages to the Trustee, except that, with
respect to any assignments of Mortgage as to which the Master Servicer has not
received the information required to prepare such assignment in recordable form,
the Master Servicer's obligation to do so and to deliver the same for such
recording shall be as soon as practicable after receipt of such information and
in any event within thirty (30) days after receipt thereof and that the Master
Servicer need not cause to be recorded any assignment which relates to a
Mortgage Loan (a) the Mortgaged Property relating to which is located in
California or (b) in any other jurisdiction under the laws of which, as
evidenced by an Opinion of Counsel delivered by the Seller (at the Seller's
expense) to the Trustee, the recordation of such assignment is not necessary to
protect the Trustee's and the Certificateholders' interest in the related
Mortgage Loan.

         In the case of Mortgage Loans that have been prepaid in full as of the
Closing Date, the Depositor, in lieu of delivering the above documents to the
Trustee, will deposit in the Certificate Account the portion of such payment
that is required to be deposited in the Certificate Account pursuant to Section
3.05 hereof.

         SECTION 2.02. Acceptance by Trustee of the Mortgage Loans.

         The Trustee acknowledges receipt of the Original Capitalized Interest
Amount and the Original Pre-Funded Amount and the documents identified in the
Initial Certification in the form annexed hereto as Exhibit G with any
applicable exceptions noted and declares that it holds and will hold such
documents and the other documents delivered to it constituting the Mortgage
Files, and that it holds or will hold such other assets as are included in the
Trust Fund, in trust for the exclusive use and benefit of all present and future
Certificateholders. The Trustee acknowledges that it will maintain possession of
the Mortgage Notes in the State of Minnesota, unless otherwise permitted by the
Rating Agencies.

         The Trustee agrees to execute and deliver on the Closing Date to the
Depositor, the Master Servicer and the Seller an Initial Certification in the
form annexed hereto as Exhibit G. Based on its review and examination, and only
as to the documents identified in such Initial Certification, the Trustee
acknowledges that such documents appear regular on their face and relate to such
Initial Mortgage Loan. The Trustee shall be under no duty or obligation to
inspect, review or examine said documents, instruments, certificates or other
papers to determine that the same are genuine, enforceable

                                       37
<PAGE>   43

or appropriate for the represented purpose or that they have actually been
recorded in the real estate records or that they are other than what they
purport to be on their face.

         Not later than 90 days after the Closing Date, the Trustee shall
deliver to the Depositor, the Master Servicer and the Seller a Final
Certification in the form annexed hereto as Exhibit H, with any applicable
exceptions noted thereon.

         If, in the course of such review, the Trustee finds any document
constituting a part of a Mortgage File which does not meet the requirements of
Section 2.01, the Trustee shall list such as an exception in the Final
Certification; provided, however that the Trustee shall not make any
determination as to whether (i) any endorsement is sufficient to transfer all
right, title and interest of the party so endorsing, as noteholder or assignee
thereof, in and to that Mortgage Note or (ii) any assignment is in recordable
form or is sufficient to effect the assignment of and transfer to the assignee
thereof under the mortgage to which the assignment relates. The Seller shall
promptly correct or cure such defect within 90 days from the date it was so
notified of such defect and, if the Seller does not correct or cure such defect
within such period, the Seller shall either (a) substitute for the related
Mortgage Loan a Substitute Mortgage Loan, which substitution shall be
accomplished in the manner and subject to the conditions set forth in Section
2.03, or (b) purchase such Mortgage Loan from the Trustee within 90 days from
the date the Seller was notified of such defect in writing at the Purchase Price
of such Mortgage Loan; provided, however, that in no event shall such
substitution or purchase occur more than 540 days from the Closing Date, except
that if the substitution or purchase of a Mortgage Loan pursuant to this
provision is required by reason of a delay in delivery of any documents by the
appropriate recording office, and there is a dispute between either the Master
Servicer or the Seller and the Trustee over the location or status of the
recorded document, then such substitution or purchase shall occur within 720
days from the Closing Date. The Trustee shall deliver written notice to each
Rating Agency within 270 days from the Closing Date indicating each Mortgage
Loan (a) which has not been returned by the appropriate recording office or (b)
as to which there is a dispute as to location or status of such Mortgage Loan.
Such notice shall be delivered every 90 days thereafter until the related
Mortgage Loan is returned to the Trustee. Any such substitution pursuant to (a)
above or purchase pursuant to (b) above shall not be effected prior to the
delivery to the Trustee of the Opinion of Counsel required by Section 2.05
hereof, if any, and any substitution pursuant to (a) above shall not be effected
prior to the additional delivery to the Trustee of a Request for Release
substantially in the form of Exhibit N. No substitution is permitted to be made
in any calendar month after the Determination Date for such month. The Purchase
Price for any such Mortgage Loan shall be deposited by the Seller in the
Certificate Account on or prior to the Distribution Account Deposit Date for the
Distribution Date in the month following the month of repurchase and, upon
receipt of such deposit and certification with respect thereto in the form of
Exhibit N hereto, the Trustee shall release the related Mortgage File to the
Seller and shall execute and deliver at the Seller's request such instruments of
transfer or assignment prepared by the Seller, in each case without recourse, as
shall be necessary to vest in the Seller, or a designee, the Trustee's interest
in any Mortgage Loan released pursuant hereto.

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

                                       38
<PAGE>   44

         The Master Servicer, as custodian under the Additional Pledged
Collateral Custodial Agreement, acknowledges the deemed transfer to it as
custodian of the Additional Collateral and agrees that it shall hold the same on
behalf of the Trustee pursuant to the Additional Pledged Collateral Custodial
Agreement.

         It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan which does not meet the
requirements of Section 2.01 above shall constitute the sole remedy respecting
such defect available to the Trustee, the Depositor and any Certificateholder
against the Seller.

         SECTION 2.03. Representations, Warranties and Covenants of the Seller
                       and Master Servicer.

         (a) Boston Safe Deposit and Trust Company, in its capacities as Seller
and Master Servicer, hereby makes the representations and warranties set forth
in Schedule II hereto, and by this reference incorporated herein, to the
Depositor and the Trustee, as of the Closing Date, or if so specified therein,
as of the Cut-off Date.

         (b) The Seller, in its capacity as Seller, hereby makes the
representations and warranties set forth in Schedule III hereto, and by this
reference incorporated herein, to the Depositor and the Trustee, as of the
Closing Date, or if so specified therein, as of the Cut-off Date.

         (c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty made pursuant to Section 2.03(b) that materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
the party discovering such breach shall give prompt notice thereof to the other
parties. The Seller hereby covenants that within 90 days of the earlier of its
discovery or its receipt of written notice from any party of a breach of any
representation or warranty made pursuant to Section 2.03(b) which materially and
adversely affects the interests of the Certificateholders in any Mortgage Loan,
it shall cure such breach in all material respects, and if such breach is not so
cured, shall, (i) if such 90-day period expires prior to the second anniversary
of the Closing Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from
the Trust Fund and substitute in its place a Substitute Mortgage Loan, in the
manner and subject to the conditions set forth in this Section; or (ii)
repurchase the affected Mortgage Loan or Mortgage Loans from the Trustee at the
Purchase Price in the manner set forth below; provided, however, that any such
substitution pursuant to (i) above shall not be effected prior to the delivery
to the Trustee of the Opinion of Counsel required by Section 2.05 hereof, if
any, and any such substitution pursuant to (i) above shall not be effected prior
to the additional delivery to the Trustee of a Request for Release substantially
in the form of Exhibit N and the Mortgage File for any such Substitute Mortgage
Loan. The Seller shall promptly reimburse the Master Servicer and the Trustee
for any expenses reasonably incurred by the Master Servicer or the Trustee in
respect of enforcing the remedies for such breach. With respect to the
representations and warranties described in this Section which are made to the
best of the Seller's knowledge, if it is discovered by either the Depositor, the
Seller 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 or the interests of the Certificateholders therein,
notwithstanding the Seller's lack of knowledge with respect to the substance of
such representation or warranty, such inaccuracy shall be deemed a breach of the
applicable representation or warranty.

                                       39
<PAGE>   45

         With respect to any Substitute Mortgage Loan or Loans, the Seller shall
deliver to the Trustee for the benefit of the Certificateholders the Mortgage
Note, the Mortgage, the related assignment of the Mortgage, and such other
documents and agreements as are required by Section 2.01, with the Mortgage Note
endorsed and the Mortgage assigned as required by Section 2.01. No substitution
is permitted to be made in any calendar month after the Determination Date for
such month. Scheduled Payments due with respect to Substitute Mortgage Loans in
the month of substitution shall not be part of the Trust Fund and will be
retained by the Seller on the next succeeding Distribution Date. For the month
of substitution, distributions to Certificateholders will include the monthly
payment due on any Deleted Mortgage Loan for such month and thereafter the
Seller shall be entitled to retain all amounts received in respect of such
Deleted Mortgage Loan. The Master Servicer shall amend the Mortgage Loan
Schedule for the benefit of the Certificateholders to reflect the removal of
such Deleted Mortgage Loan and the substitution of the Substitute Mortgage Loan
or Loans and the Master Servicer shall deliver the amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, the Substitute Mortgage Loan or
Loans shall be subject to the terms of this Agreement in all respects, and the
Seller shall be deemed to have made with respect to such Substitute Mortgage
Loan or Loans, as of the date of substitution, the representations and
warranties made pursuant to Section 2.03(b) with respect to such Mortgage Loan.
Upon any such substitution and the deposit to the Certificate Account of the
amount required to be deposited therein in connection with such substitution as
described in the following paragraph, the Trustee shall release the Mortgage
File held for the benefit of the Certificateholders relating to such Deleted
Mortgage Loan to the Seller and shall execute and deliver at the Seller's
direction such instruments of transfer or assignment prepared by the Seller, in
each case without recourse, as shall be necessary to vest title in the Seller,
or its designee, the Trustee's interest in any Deleted Mortgage Loan substituted
for pursuant to this Section 2.03.

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

         In the event that the Seller shall have repurchased a Mortgage Loan,
the Purchase Price therefor shall be deposited in the Certificate Account
pursuant to Section 3.05 before the Distribution Account Deposit Date for the
Distribution Date in the month following the month during which the Seller
became obligated hereunder to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of the Opinion of Counsel
required by Section 2.05 in connection with a substitution and receipt of a
Request for Release in the form of Exhibit N hereto, the Trustee shall release
the related Mortgage File held for the benefit of the Certificateholders to such
Person, and the Trustee shall execute and deliver at such Person's direction
such instruments of transfer or assignment prepared by such Person, in each case
without recourse, as shall be necessary to transfer title from the Trustee. It
is understood and agreed that the obligation under this Agreement of any Person
to cure, repurchase or replace any Mortgage Loan as to which a breach has
occurred and is continuing shall constitute the sole remedy against such Persons
respecting such breach available to Certificateholders, the Depositor or the
Trustee on their behalf.

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<PAGE>   46

         The representations and warranties made pursuant to this Section 2.03
shall survive delivery of the respective Mortgage Files to the Trustee for the
benefit of the Certificateholders.

         SECTION 2.04. Representations and Warranties of the Depositor as to the
                       Mortgage Loans.

         The Depositor hereby represents and warrants to the Trustee with
respect to each Mortgage Loan as of the date hereof or such other date set forth
herein that as of the Closing Date, and following the transfer of the Mortgage
Loans to it by the Seller, the Depositor had good title to the Mortgage Loans
and the Mortgage Notes were subject to no offsets, defenses or counterclaims
arising from the action or inaction of the Depositor.

         It is understood and agreed that the representations and warranties set
forth in this Section 2.04 shall survive delivery of the Mortgage Files to the
Trustee. Upon discovery by the Depositor or the Trustee of a breach of any of
the foregoing representations and warranties set forth in this Section 2.04
(referred to herein as a "breach"), which breach materially and adversely
affects the interest of the Certificateholders, the party discovering such
breach shall give prompt written notice to the others and to each Rating Agency.

         SECTION 2.05. Delivery of Opinion of Counsel in Connection with
                       Substitutions.

         (a) Notwithstanding any contrary provision of this Agreement, no
substitution pursuant to Section 2.02 or Section 2.03 shall be made more than 90
days after the Closing Date unless the Seller delivers to the Trustee an Opinion
of Counsel, which Opinion of Counsel shall not be at the expense of either the
Trustee or the Trust Fund, addressed to the Trustee, to the effect that such
substitution will not (i) result in the imposition of the tax on "prohibited
transactions" on the Trust Fund or contributions after the Startup Date, as
defined in Sections 860F(a)(2) and 860G(d) of the Code, respectively, or (ii)
cause any REMIC hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding.

         (b) Upon discovery by the Depositor, the Seller, the Master Servicer,
or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party discovering such
fact shall promptly (and in any event within five (5) Business Days of
discovery) give written notice thereof to the other parties. In connection
therewith, the Trustee shall require the Seller, at the Seller's option, to
either (i) substitute, if the conditions in Section 2.03(c) with respect to
substitutions are satisfied, a Substitute Mortgage Loan for the affected
Mortgage Loan, or (ii) repurchase the affected Mortgage Loan within 90 days of
such discovery in the same manner as it would a Mortgage Loan for a breach of
representation or warranty made pursuant to Section 2.03. The Trustee shall
reconvey to the 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 contained in Section
2.03.

         SECTION 2.06. Execution and Delivery of Certificates.

         The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed and
delivered to or upon the order of the Depositor, the Certificates in authorized
denominations evidencing directly or indirectly the entire ownership of the
Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the rights
referred

                                       41
<PAGE>   47

to above for the benefit of all present and future Holders of the Certificates
and to perform the duties set forth in this Agreement to the best of its
ability, to the end that the interests of the Holders of the Certificates may be
adequately and effectively protected.

         SECTION 2.07. REMIC Matters.

         The Preliminary Statement sets forth the designations and "latest
possible maturity date" for federal income tax purposes of all interests created
hereby. The "Startup Day" for purposes of the REMIC Provisions shall be the
Closing Date. The "tax matters person" with respect to each REMIC designated
hereunder shall be the holder of the Tax Matters Person Certificate, which
initially is the Master Servicer. The fiscal year of each REMIC designated
hereunder shall be the calendar year.

         SECTION 2.08. Converted Mortgage Loans.

         (a) The Trustee, as note holder, hereby appoints the Master Servicer to
determine the fixed rate for each Converted Mortgage Loan in accordance with the
terms of the applicable Mortgage Note and to otherwise determine whether the
related Mortgagor has complied with the requirements thereof in order to
exercise the conversion option.

         (b) On or before the Master Servicer Advance Date in the month
following the month in which a Mortgage Loan becomes a Converted Mortgage Loan,
the Seller shall repurchase such Converted Mortgage Loan for an amount equal to
the Purchase Price therefor. The Seller shall cause such Purchase Price to be
delivered to the Master Servicer for deposit in the Certificate Account.

         (c) Upon payment of the Purchase Price, the Trustee shall reconvey the
applicable Converted Mortgage Loan, without recourse, to the Seller or its
designee and release the related Mortgage File to the order of the Seller.

         (d) Notwithstanding that a Mortgage Loan becomes a Converted Mortgage
Loan in any month, such Converted Mortgage Loan shall remain in the Trust Fund
and all payments of principal and interest in respect thereof shall remain in
the Trust Fund unless and until such Converted Mortgage Loan is repurchased by
the Seller.

         (e) The obligation of the Seller provided in Section 2.08(b) shall
terminate without further action upon the bankruptcy or insolvency of the
Seller.

         SECTION 2.09. Subsequent Transfers. (a) Subject to the satisfaction of
the conditions set forth in paragraph (b) below and pursuant to the terms of
each Subsequent Transfer Agreement, in consideration of the Trustee's delivery,
on behalf of the Trust Fund, on the related Subsequent Transfer Date to or upon
the order of the Depositor of the purchase price therefor, the Seller and the
Depositor shall on any Subsequent Transfer Date sell, transfer, assign, set over
and otherwise convey without recourse to the Trustee on behalf of the Trust
Fund, all of their respective right, title and interest in and to each
Subsequent Mortgage Loan listed on the schedule attached to the Subsequent
Transfer Agreement on such Subsequent Transfer Date including all interest and
principal received or receivable by the Seller on or with respect to the
Subsequent Mortgage Loans after the related Cut-off Date and all interest and
principal payments on the Subsequent Mortgage Loans received prior to the
related Cut-off Date in respect of installments of interest and principal due
thereafter, but not including payments of principal and interest due and payable
on the Subsequent Mortgage Loans on or before the related Cut-off Date and the
Seller's security interest in any

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<PAGE>   48

Additional Collateral. The transfer by the Seller and the Depositor of the
Subsequent Mortgage Loans to the Trustee shall be absolute and shall be intended
by all parties hereto to be treated as a sale by the Seller to the Trust Fund.
If the assignment and transfer of the Subsequent Mortgage Loans and the other
property specified in this Section 2.09 pursuant to this Agreement is held or
deemed not to be a sale or is held or deemed to be a pledge of security for a
loan, the Seller and the Depositor each intends that the rights and obligations
of the parties shall be established pursuant to the terms of this Agreement and
that, in such event, (i) the Seller and the Depositor each shall be deemed to
have granted and does hereby grant to the Trustee as of such Subsequent Transfer
Date a first priority security interest in its respective entire right, title
and interest in and to the Subsequent Mortgage Loans and all other property
conveyed to the Trustee pursuant to this Section 2.09 and all proceeds thereof
and (ii) this Agreement shall constitute a security agreement under applicable
law. The purchase price shall be one hundred percent (100%) of the Stated
Principal Balances of the Subsequent Mortgage Loans as of the related Cut-off
Date.

         (b) The Seller shall transfer and deliver to the Trustee or the
Custodian on behalf of the Trustee the Subsequent Mortgage Loans and the other
property and rights related thereto described in paragraph (a) above only upon
the satisfaction of each of the following conditions on or prior to the
applicable Subsequent Transfer Date:

                  (i)   The Seller shall have provided the Trustee and the
         Rating Agencies with an Addition Notice, which notice shall be given
         not less than two Business Days prior to the applicable Subsequent
         Transfer Date and shall designate the Subsequent Mortgage Loans to be
         sold to the Trust Fund and the aggregate Stated Principal Balance of
         such Mortgage Loans and the Rating Agencies shall not have informed the
         Seller or the Trustee prior to the applicable Subsequent Transfer that
         the inclusion of such Subsequent Mortgage Loans would result in the
         downgrade or withdrawal of the ratings assigned to the Certificates;

                  (ii)  The Seller and the Depositor shall have delivered to the
         Trustee a duly executed Subsequent Transfer Agreement in substantially
         the form of Exhibit P;

                  (iii) The Seller shall have delivered to the Master Servicer
         for deposit in the Certificate Account all principal collected and
         interest collected to the extent accrued after the related Cut-off
         Date;

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

                  (v)   Such addition will not result in a material adverse tax
         consequence to any REMIC or the Holders of the Certificates;

                  (vi)  The Pre-Funding Period shall not have terminated;

                  (vii) The Seller shall have provided the Trustee and the
         Rating Agencies with an Opinion of Counsel relating to the sale (i.e.,
         "True Sale Opinion") of the Subsequent Mortgage Loans to the Trustee,
         the enforceability of the Subsequent Transfer Agreement and to the
         effect that the transfer of such Subsequent Mortgage Loans will not
         adversely affect the status of any REMIC as a REMIC which matters may
         be covered in the opinions delivered on the Closing Date;

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<PAGE>   49

                  (viii) The Subsequent Mortgage Loans satisfy the parameters
         set forth in Exhibit Q hereto; and

                  (ix)   On the last Subsequent Transfer Date, the Trustee shall
         have received an accountant's letter confirming that the
         characteristics of the Mortgage Loans (including the Subsequent
         Mortgage Loans) satisfy the conditions set forth in Exhibit Q hereto.

         (c) The Seller, the Depositor and the Trustee shall comply with their
respective obligations set forth in Section 2.01, 2.02, 2.03 and 2.04 with
respect to the Subsequent Mortgage Loans delivered on each Subsequent Transfer
Date. References in such Sections to the Mortgage Loans shall be deemed to refer
to the Subsequent Mortgage Loans and references to the Closing Date shall be
deemed to refer to the applicable Subsequent Transfer Date except that
references to 720 days after the Closing Date shall remain unchanged as shall
representations made with specific reference to the Initial Mortgage Loans.

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

         SECTION 3.01. Master Servicer to Service Mortgage Loans.

         For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with the terms of this
Agreement and Accepted Servicing Practices. In connection with such servicing
and administration, the Master Servicer shall have full power and authority,
acting alone and/or through Subservicers as provided in Section 3.02 hereof, to
do or cause to be done any and all things that it may deem necessary or
desirable in connection with such servicing and administration, including but
not limited to, the power and authority, subject to the terms hereof (i) to
execute and deliver, on behalf of the Certificateholders and the Trustee,
customary consents or waivers and other instruments and documents, (ii) to
consent to transfers of any Mortgaged Property and assumptions of the Mortgage
Notes and related Mortgages (but only in the manner provided in this Agreement),
(iii) to collect any Insurance Proceeds and other Liquidation Proceeds, and (iv)
to effectuate foreclosure or other conversion of the ownership of the Mortgaged
Property securing any Mortgage Loan; provided that the Master Servicer shall not
take any action that is inconsistent with or prejudices the interests of the
Trust Fund or the Certificateholders in any Mortgage Loan or the rights and
interests of the Depositor, the Trustee or the Certificateholders under this
Agreement. The Master Servicer shall represent and protect the interests of the
Trust Fund in the same manner as it protects its own interests in mortgage loans
in its own portfolio in any claim, proceeding or litigation regarding a Mortgage
Loan, and shall not make or permit any modification, waiver or amendment of any
Mortgage Loan which would cause any REMIC hereunder to fail to qualify as a
REMIC or result in the imposition of any tax under Section 860F(a) or Section
860G(d) of the Code. Without limiting the generality of the foregoing, the
Master Servicer, in its own name or in the name of the Depositor and the
Trustee, is hereby authorized and empowered by the Depositor and the Trustee,
when the Master Servicer believes it appropriate in its reasonable judgment, to
execute and deliver and record (if appropriate), on behalf of the Trustee, the
Depositor, the Certificateholders or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans, and with
respect to the Mortgaged Properties held for the benefit of the
Certificateholders. The Master Servicer shall prepare and deliver to the
Depositor and/or the Trustee

                                       44
<PAGE>   50

such documents requiring execution and delivery by either or both of them as are
necessary or appropriate to enable the Master Servicer to service and administer
the Mortgage Loans to the extent that the Master Servicer is not permitted to
execute and deliver such documents pursuant to the preceding sentence. Upon
receipt of such documents, the Depositor and/or the Trustee shall execute such
documents and deliver them to the Master Servicer.

         In accordance with the terms of this Agreement and Accepted Servicing
Practices, the Master Servicer shall advance or cause to be advanced funds as
necessary for the purpose of effecting the payment of taxes and assessments on
the Mortgaged Properties, which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section 3.06,
and further as provided in Section 3.08. The costs incurred by the Master
Servicer, if any, in effecting the payments of taxes and assessments on the
Mortgaged Properties and related insurance premiums shall not, for the purpose
of calculating monthly distributions to the Certificateholders, be added to the
Stated Principal Balances of the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.

         SECTION 3.02. Subservicing; Enforcement of the Obligations of
                       Servicers.

         (a) The Master Servicer shall arrange for the subservicing of any
Mortgage Loan by a Subservicer pursuant to a subservicing agreement; provided,
however, that such subservicing arrangement and the terms of the related
subservicing agreement must provide for the servicing of such Mortgage Loans in
a manner consistent with the servicing arrangements contemplated hereunder.
Unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Master Servicer in servicing the Mortgage Loans
include actions taken or to be taken by a Subservicer on behalf of the Master
Servicer. Notwithstanding the provisions of any subservicing agreement, any of
the provisions of this Agreement relating to agreements or arrangements between
the Master Servicer and a Subservicer or reference to actions taken through a
Subservicer or otherwise, the Master Servicer shall remain obligated and liable
to the Depositor, the Trustee and the Certificateholders for the servicing and
administration of the Mortgage Loans in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
Subservicer and to the same extent and under the same terms and conditions as if
the Master Servicer alone were servicing and administering the Mortgage Loans.
The Master Servicer shall be entitled to enter into an agreement with the
Subservicer for indemnification of the Master Servicer by the Subservicer and
nothing contained in this Agreement shall be deemed to limit or modify such
indemnification. All actions of each Subservicer performed pursuant to the
related subservicing agreement shall be performed as an agent of the Master
Servicer with the same force and effect as if performed directly by the Master
Servicer.

         (b) For purposes of this Agreement, the Master Servicer shall be deemed
to have received any collections, recoveries or payments with respect to the
Mortgage Loans that are received by a Subservicer regardless of whether such
payments are remitted by the Subservicer to the Master Servicer.

         (c) The Master Servicer shall pay all fees and expenses of the
Subservicer from its own funds, and the Subservicer's fee shall not exceed the
Master Servicing Fee.

         (d) At the cost and expense of the Master Servicer, without any right
of reimbursement from the Certificate Account, the Master Servicer shall be
entitled to terminate the rights

                                       45
<PAGE>   51

and responsibilities of the Subservicer and arrange for any servicing
responsibilities to be performed by a successor subservicer. In the event that
the Master Servicer's responsibilities and duties under this Agreement are
terminated pursuant to Section 6.04, 7.01 or 9.01, the Master Servicer shall at
its own cost and expense terminate the rights and responsibilities of the
Subservicer as soon as is reasonably possible. The Master Servicer shall pay all
fees, expenses or penalties necessary in order to terminate the rights and
responsibilities of the Subservicer from the Master Servicer's own funds without
reimbursement from the Depositor or the Trust Fund.

         (e) Any subservicing agreement and any other transactions or services
relating to the Mortgage Loans involving the Subservicer shall be deemed to be
between the Subservicer and Master Servicer alone, and the Depositor and the
Trustee shall have no obligations, duties or liabilities with respect to the
Subservicer including no obligation, duty or liability to pay the Subservicer's
fees and expenses.

         SECTION 3.03. Rights of the Depositor and the Trustee in Respect of the
                       Master Servicer.

         The Depositor may, but is not obligated to, enforce the obligations of
the Master Servicer hereunder and may, but is not obligated to, perform, or
cause a designee to perform, any defaulted obligation of the Master Servicer
hereunder and in connection with any such defaulted obligation to exercise the
related rights of the Master Servicer hereunder; provided that the Master
Servicer shall not be relieved of any of its obligations hereunder by virtue of
such performance by the Depositor or its designee. Neither the Trustee nor the
Depositor shall have any responsibility or liability for any action or failure
to act by the Master Servicer nor shall the Trustee or the Depositor be
obligated to supervise the performance of the Master Servicer hereunder or
otherwise.

         SECTION 3.04. Trustee to Act as Master Servicer.

         In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its successor shall thereupon assume all of the rights and
obligations of the Master Servicer hereunder arising thereafter (except that the
Trustee shall not be (i) liable for losses of the Master Servicer pursuant to
Section 3.09 hereof or any acts or omissions of the predecessor Master Servicer
hereunder, (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder including, but not limited to, repurchases or
substitutions of Mortgage Loans pursuant to Section 2.02 or 2.03 hereof, (iv)
responsible for expenses of the Master Servicer pursuant to Section 2.03 or (v)
deemed to have made any representations and warranties of the Master Servicer
hereunder). Any such assumption shall be subject to Section 7.02 hereof. Each
subservicing agreement shall provide that if the Master Servicer shall for any
reason no longer be the Master Servicer (including by reason of any Event of
Default), the Trustee or its successor may, at its option, succeed to any rights
and obligations of the Master Servicer under each subservicing agreement.

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

                                       46
<PAGE>   52

         The Trustee shall be entitled to be reimbursed from the Master Servicer
for all costs associated with the transfer of servicing from the Master
Servicer, including without limitation, any costs or expenses associated with
the complete transfer of all servicing data and the completion, correction or
manipulation of such servicing data as may be required by the Trustee to correct
any errors or insufficiencies in the servicing data or otherwise to enable the
Trustee to service the Mortgage Loans properly and effectively.

         SECTION 3.05. Collection of Mortgage Loan Payments; Certificate
                       Account; Distribution Account.

         (a) The Master Servicer shall make reasonable efforts in accordance
with Accepted Servicing Practices to collect all payments called for under the
terms and provisions of the Mortgage Loans to the extent such procedures shall
be consistent with this Agreement and the terms and provisions of any related
Required Insurance Policy. Consistent with the foregoing, the Master Servicer
may in its discretion (i) waive any late payment charge or any prepayment
charge, assumption fee or penalty interest in connection with the prepayment of
a Mortgage Loan or any other fee that may be collected in the ordinary course of
servicing the Mortgage Loans and (ii) extend the due dates for payments due on a
Mortgage Note for a period not greater than 180 days or such longer period as
may be consistent with a loan modification program previously approved by the
Depositor; provided, however, that the Master Servicer cannot extend the
maturity of any such Mortgage Loan past the date on which the final payment is
due on the latest maturing Subsequent Mortgage Loan as of the related Cut-off
Date. In the event of any such arrangement, the Master Servicer shall make
Advances on the related Mortgage Loan in accordance with the provisions of
Section 4.01 during the scheduled period in accordance with the amortization
schedule of such Mortgage Loan without modification thereof by reason of such
arrangements. The Master Servicer shall not permit any modification of any
material term of any Mortgage Loan, including any modification that would change
the Mortgage Rate, defer or forgive the payment of principal or interest, reduce
or increase the outstanding principal balance (except for actual payments of
principal) on such Mortgage Loan. The Master Servicer shall not be required to
institute or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against any public or
governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.

         (b) The Master Servicer shall establish and maintain a Certificate
Account into which the Master Servicer shall deposit or cause to be deposited on
a daily basis, within two Business Days of receipt, except as otherwise
specifically provided herein, the following payments and collections remitted by
Subservicers or received by it in respect of Mortgage Loans subsequent to the
Cut-off Date (other than in respect of principal and interest due on the
Mortgage Loans on or before the Cut-off Date) and the following amounts required
to be deposited hereunder:

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

                  (ii) all payments on account of interest on the Mortgage
         Loans, net of the related Master Servicing Fee;

                                       47
<PAGE>   53

                  (iii)  all Insurance Proceeds and Liquidation Proceeds, other
         than proceeds to be applied to the restoration or repair of the
         Mortgaged Property or released to the Mortgagor in accordance with the
         Master Servicer's normal servicing procedures;

                  (iv)   any amount required to be deposited by the Master
         Servicer pursuant to Section 3.05(d) in connection with any losses on
         Permitted Investments;

                  (v)    any amounts required to be deposited by the Master
         Servicer pursuant to Section 3.09(a), 3.09(b), and in respect of net
         monthly rental income from REO Property pursuant to Section 3.11
         hereof;

                  (vi)   all Substitution Adjustment Amounts;

                  (vii)  all Advances made by the Master Servicer pursuant to
         Section 4.01; and

                  (viii) any other amounts required to be deposited hereunder.

         The foregoing requirements for remittance by the Master Servicer shall
be exclusive, it being understood and agreed that, without limiting the
generality of the foregoing, payments in the nature of prepayment penalties,
late payment charges or assumption fees, if collected, need not be remitted by
the Master Servicer. In the event that the Master Servicer shall remit any
amount not required to be remitted, it may at any time withdraw or direct the
institution maintaining the Certificate Account to withdraw such amount from the
Certificate Account, any provision herein to the contrary notwithstanding. Such
withdrawal or direction may be accomplished by delivering written notice thereof
to the Trustee or such other institution maintaining the Certificate Account
which describes the amounts deposited in error in the Certificate Account. The
Master Servicer shall maintain adequate records with respect to all withdrawals
made pursuant to this Section. All funds deposited in the Certificate Account
shall be held in trust for the Certificateholders until withdrawn in accordance
with Section 3.08.

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

                  (i)   the aggregate amount remitted by the Master Servicer to
         the Trustee pursuant to Section 3.08(a)(ix);

                  (ii)  any amount deposited by the Master Servicer pursuant to
         Section 3.05(d) in connection with any losses on Permitted Investments;

                  (iii) the Capitalized Interest Requirement, if any, and Excess
         Funding Amount, if any; and

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

         In the event that the Master Servicer shall remit any amount not
required to be remitted, it may at any time direct the Trustee to withdraw such
amount from the Distribution Account, any provision herein to the contrary
notwithstanding. Such direction may be accomplished by delivering an Officer's
Certificate to the Trustee which describes the amounts deposited in error in the
Distribution

                                       48
<PAGE>   54

Account. All funds deposited in the Distribution Account shall be held by the
Trustee in trust for the Certificateholders until disbursed in accordance with
this Agreement or withdrawn in accordance with Section 3.08. In no event shall
the Trustee incur liability for withdrawals from the Distribution Account at the
direction of the Master Servicer.

         (d) Each institution at which the Certificate Account is maintained
shall invest the funds therein as directed in writing by the Master Servicer in
Permitted Investments, which shall mature not later than the second Business Day
next preceding the related Distribution Account Deposit Date (except that if
such Permitted Investment is an obligation of the institution that maintains
such account, then such Permitted Investment shall mature not later than the
Business Day next preceding such Distribution Account Deposit Date) and, shall
not be sold or disposed of prior to its maturity. All such Permitted Investments
shall be made in the name of the Trustee, for the benefit of the
Certificateholders. All income and gain net of any losses realized from any such
investment of funds on deposit in the Certificate Account shall be for the
benefit of the Master Servicer as servicing compensation and shall be remitted
to it monthly as provided herein. The amount of any realized losses in the
Certificate Account incurred in any such account in respect of any such
investments shall promptly be deposited by the Master Servicer in the
Certificate Account.

         (e) The Master Servicer shall give notice to the Trustee, the Seller,
each Rating Agency and the Depositor of any proposed change of the location of
the Certificate Account prior to any change thereof. The Trustee shall give
notice to the Master Servicer, the Seller, each Rating Agency and the Depositor
of any proposed change of the location of the Distribution Account prior to any
change thereof.

         SECTION 3.06. Collection of Taxes, Assessments and Similar Items;
                       Escrow Accounts; Maintenance of Records.

         (a) To the extent required by the related Mortgage Note and not
violative of current law, the Master Servicer shall establish and maintain one
or more accounts (each, an "Escrow Account") and deposit, on a daily basis, and
retain therein all collections from the Mortgagors (or advances by the Master
Servicer) constituting Escrow Payments separate and apart from any of its own
funds and general assets for the account of the Mortgagors. Nothing herein shall
require the Master Servicer to compel a Mortgagor to establish an Escrow Account
in violation of applicable law or unless required by the applicable Mortgage
Loan.

         (b) Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of ground rents, taxes, assessments, water
rates, mortgage insurance premiums, fire, flood and hazard insurance premiums,
condominium or PUD association dues, or comparable items constituting Escrow
Payments for the related Mortgage, to reimburse the Master Servicer out of
related collections for any payments made pursuant to Sections 3.01 hereof (with
respect to taxes and assessments and insurance premiums) and 3.09 hereof (with
respect to hazard insurance), to refund to any Mortgagors any sums determined to
be in excess of the amounts required under the terms of the related Mortgage
Note, to pay interest, if required by law or the terms of the related Mortgage
or Mortgage Note, to Mortgagors on balances in the Escrow Account or to clear
and terminate the Escrow Account at the termination of this Agreement in
accordance with Section 9.01 hereof. The Escrow Accounts shall not be a part of
the Trust Fund.

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<PAGE>   55

         (c) With respect to each Mortgage Loan, the Master Servicer shall
maintain accurate records reflecting the status of ground rents, taxes,
assessments, water rates, sewer rents, and the charges which are or may become a
lien upon the Mortgaged Property and the status of fire, flood and hazard
insurance coverage and with respect to each Mortgage Loan which provides for
Escrow Payments, the Master Servicer shall obtain, from time to time, all bills
for the payment of such charges (including renewal premiums) and shall effect
payment thereof prior to the applicable penalty or termination date, employing
for such purpose deposits of the Mortgagor in the Escrow Account which shall
have been estimated and accumulated by the Master Servicer in amounts sufficient
for such purposes, as allowed under the terms of the Mortgage. The Master
Servicer shall advance any payments referred to in Section 3.06(a) that are not
timely paid by the Mortgagors in accordance with Accepted Servicing Practices,
but the Master Servicer shall be required so to advance only to the extent that
such advances, in the good faith judgment of the Master Servicer, will be
recoverable by the Master Servicer out of Insurance Proceeds, Liquidation
Proceeds or otherwise.

         (d) The Master Servicer shall be entitled to retain any interest 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. To the
extent required by law, the Master Servicer shall pay interest on escrowed funds
to the Mortgagor notwithstanding that the Escrow Account may be non-interest
bearing or that interest paid thereon is insufficient for such purposes.

         SECTION 3.07. Access to Certain Documentation and Information Regarding
                       the Mortgage Loans.

         The Master Servicer shall afford the Depositor and the Trustee
reasonable access to all records and documentation regarding the Mortgage Loans
and all accounts, insurance information and other matters relating to this
Agreement, such access being afforded without charge, but only upon reasonable
request and during normal business hours at the office designated by the Master
Servicer.

         Upon reasonable advance notice in writing, the Master Servicer will
provide to each Certificateholder which is a savings and loan association, bank
or insurance company certain reports and reasonable access to information and
documentation regarding the Mortgage Loans sufficient to permit such
Certificateholder to comply with applicable regulations of the OTS or other
regulatory authorities with respect to investment in the Certificates; provided
that the Master Servicer shall be entitled to be reimbursed by each such
Certificateholder for actual expenses incurred by the Master Servicer in
providing such reports and access.

         SECTION 3.08. Permitted Withdrawals from the Certificate Account and
                       Distribution Account.

         (a) The Master Servicer may from time to time make withdrawals from the
Certificate Account for the following purposes:

                  (i) to pay to the Master Servicer (to the extent not
         previously retained by the Master Servicer) the servicing compensation
         to which it is entitled pursuant to Section 3.14, and to pay to the
         Master Servicer, as additional servicing compensation, earnings on or
         investment income with respect to funds in or credited to the
         Certificate Account;

                                       50
<PAGE>   56

                  (ii)   to reimburse the Master Servicer for unreimbursed
         Advances made by it, such right of reimbursement pursuant to this
         subclause (ii) being limited to amounts received on the Mortgage
         Loan(s) in respect of which any such Advance was made;

                  (iii)  to reimburse the Master Servicer for any Nonrecoverable
         Advance previously made;

                  (iv)   to reimburse the Master Servicer for Insured Expenses
         from the related Insurance Proceeds;

                  (v)    to reimburse the Master Servicer for (a) unreimbursed
         Servicing Advances, the Master Servicer's right to reimbursement
         pursuant to this clause (a) with respect to any Mortgage Loan being
         limited to amounts received on such Mortgage Loan(s) which represent
         late recoveries of the payments for which such advances were made
         pursuant to Section 3.01 or Section 3.06 and (b) for unpaid Master
         Servicing Fees as provided in Section 3.11 hereof;

                  (vi)   to pay to the purchaser, with respect to each Mortgage
         Loan or property acquired in respect thereof that has been purchased
         pursuant to Section 2.02, 2.03 or 3.11, all amounts received thereon
         after the date of such purchase;

                  (vii)  to reimburse the Seller, the Master Servicer or the
         Depositor for expenses incurred by any of them and reimbursable
         pursuant to Section 6.03 hereof;

                  (viii) to withdraw any amount deposited in the Certificate
         Account and not required to be deposited therein;

                  (ix)   on or prior to the Distribution Account Deposit Date,
         to withdraw an amount equal to the portion of Available Funds for such
         Distribution Date on deposit therein and remit such amount to the
         Trustee for deposit in the Distribution Account; and

                  (x)    to clear and terminate the Certificate Account upon
         termination of this Agreement pursuant to Section 9.01 hereof.

         The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the Certificate Account pursuant to such subclauses (i), (ii),
(iv), (v) and (vi). Prior to making any withdrawal from the Certificate Account
pursuant to subclause (iii), the Master Servicer shall deliver to the Trustee an
Officer's Certificate of a Servicing Officer indicating the amount of any
previous Advance determined by the Master Servicer to be a Nonrecoverable
Advance and identifying the related Mortgage Loans(s), and their respective
portions of such Nonrecoverable Advance.

         (b) The Trustee shall withdraw funds from the Distribution Account for
distributions to Certificateholders in the manner specified in this Agreement
(and to withhold and pay from the amounts so withdrawn, the amount of any taxes
that it is authorized to withhold pursuant to the last paragraph of Section
8.11). In addition, the Trustee may from time to time make withdrawals from the
Distribution Account for the following purposes:

                  (i) to pay to itself the related Trustee Fee on each
         Distribution Date;

                                       51
<PAGE>   57

                  (ii)  [reserved];

                  (iii) to withdraw and return to the Master Servicer any amount
         deposited in the Distribution Account and not required to be deposited
         therein; and

                  (iv)  to clear and terminate the Distribution Account upon
         termination of the Agreement pursuant to Section 9.01 hereof.

         SECTION 3.09. Maintenance of Hazard Insurance.

         (a) Except in the case of Cooperative Loans, the Master Servicer shall
cause to be maintained, for each Mortgage Loan, hazard insurance such that all
buildings upon the Mortgaged Property are insured by a FNMA or FHLMC acceptable
insurer against loss by fire, hazards of extended coverage and such other
hazards as are customary in the area where the Mortgaged Property is located, in
an amount that is at least equal to the lesser of (i) the replacement value of
the improvements securing such Mortgage Loan or (ii) the greater of (y) the
outstanding principal balance of the Mortgage Loan and (z) an amount such that
the proceeds of such policy shall be sufficient to prevent the Mortgagor or the
loss payee from becoming a co-insurer. If upon origination of the Mortgage Loan,
the related Mortgaged Property was located in an area identified in the Federal
Register by the Flood Emergency Management Agency as having special flood
hazards (and such flood insurance has been made available), a flood insurance
policy meeting the requirements of the current guidelines of the Federal Flood
Insurance Administration is in effect with a generally acceptable insurance
carrier in an amount representing coverage equal to the lesser of (i) the
minimum amount required, under the terms of coverage, to compensate for any
damage or loss on a replacement-cost basis or the unpaid balance of the Mortgage
Loan (if replacement coverage is not available for the type of building insured)
and (ii) the maximum amount of insurance which is available under the Flood
Disaster Protection Act of 1973, as amended. If a Mortgage is secured by a unit
in a condominium, the Master Servicer shall have received a certificate of
insurance evidencing a master policy held by the owner's association and naming
the Master Servicer as loss payee. All policies required hereunder shall name
the Master Servicer as loss payee and shall be endorsed with standard mortgage
clauses, which shall provide for at least 30 days' prior written notice of any
cancellation, reduction in amount or material change in coverage. The Master
Servicer shall not interfere with the Mortgagor's freedom of choice in selecting
either his insurance carrier or agent; provided, however, that the Master
Servicer shall not accept any such insurance policies from insurance companies
unless such companies satisfy the requirements of FNMA or FHLMC and are licensed
to do business in the jurisdiction in which the Mortgaged Property is located.
Any amounts collected by the Master Servicer under any such policies (other than
the amounts to be deposited in the Escrow Account and to be applied to the
restoration or repair of the related Mortgaged Property) (or, in the case of a
Cooperative Loan, the related Cooperative Unit) or property acquired in
liquidation of the Mortgage Loan, or amounts released to the Mortgagor in
accordance with the Master Servicer's normal servicing procedures) shall be
deposited in the Certificate Account. Any cost incurred by the Master Servicer
in maintaining any such insurance shall not, for the purpose of calculating
monthly distributions to the Certificateholders or remittances to the Trustee
for their benefit, be added to the principal balance of the Mortgage Loan,
notwithstanding that the terms of the Mortgage Loan so permit. Such costs shall
be recoverable by the Master Servicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section 3.08
hereof. It is understood and agreed that no earthquake or other additional
insurance is to be required of any Mortgagor or maintained on property acquired
in respect of a Mortgage other than pursuant to such applicable laws and
regulations as shall at any time be in force and as shall require such
additional insurance.

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<PAGE>   58

         (b) In the event that the Master Servicer shall maintain a blanket
policy insuring against losses arising from fire and hazards covered under
extended coverage on any or all of the Mortgage Loans and, to the extent such
policy provides coverage in an amount equal to the amount required pursuant to
Section 3.09(a) and otherwise complies with all other requirements of Section
3.09(a), it shall conclusively be deemed to have satisfied its obligations as
set forth in Section 3.09(a). Any amounts collected by the Master Servicer under
any such policy relating to a Mortgage Loan shall be deposited in the
Certificate Account. Such policy may contain a deductible clause, in which case,
in the event that there shall not have been maintained on the related Mortgaged
Property a policy complying with Section 3.09(a), and there shall have been a
loss which would have been covered by such policy, the Master Servicer shall
deposit in the Certificate Account at the time of such loss the amount not
otherwise deposited from the Master Servicer's funds, without reimbursement
therefor. Upon request of the Depositor or the Trustee, the Master Servicer
shall cause to be delivered to the Depositor or the Trustee, as applicable, 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 (30) days' prior written notice to the Depositor and the Trustee. In
connection with its activities as Master Servicer of the Mortgage Loans, the
Master Servicer agrees to present, on behalf of itself, the Depositor, and the
Trustee for the benefit of the Certificateholders, claims under any such blanket
policy.

         SECTION 3.10. Enforcement of Due-on-Sale Clauses; Assumption
                       Agreements.

         (a) Except as otherwise provided in this Section, when any property
subject to a Mortgage has been conveyed by the Mortgagor, the Master Servicer
shall to the extent that it has knowledge of such conveyance, enforce any
due-on-sale clause contained in any Mortgage Note or Mortgage, to the extent
permitted under applicable law and governmental regulations, but only to the
extent that such enforcement will not adversely affect or jeopardize coverage
under any Required Insurance Policy. Notwithstanding the foregoing, the Master
Servicer is not required to exercise such rights with respect to a Mortgage Loan
if the Person to whom the related Mortgaged Property has been conveyed or is
proposed to be conveyed satisfies the terms and conditions contained in the
Mortgage Note and Mortgage related thereto and the consent of the mortgagee
under such Mortgage Note or Mortgage is not otherwise so required under such
Mortgage Note or Mortgage as a condition to such transfer. In the event that the
Master Servicer is prohibited by law from enforcing any such due-on-sale clause,
or if coverage under any Required Insurance Policy would be adversely affected,
or if nonenforcement is otherwise permitted hereunder, the Master Servicer is
authorized, subject to Section 3.10(b), to take or enter into an assumption and
modification agreement from or 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 state law, the Mortgagor
remains liable thereon, provided that the Mortgage Loan shall continue to be
covered (if so covered before the Master Servicer enters into such agreement) by
the applicable Required Insurance Policies. The Master Servicer, subject to
Section 3.10(b), is also authorized with the prior approval of the insurers
under any Required Insurance Policies to enter into a substitution of liability
agreement with such Person, pursuant to which the original Mortgagor is released
from liability and such Person is substituted as Mortgagor and becomes liable
under the Mortgage Note. Notwithstanding the foregoing, the Master Servicer
shall not be deemed to be in default under this Section by reason of any
transfer or assumption which the Master Servicer reasonably believes it is
restricted by law from preventing, for any reason whatsoever.

         (b) Subject to the Master Servicer's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.10(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification

                                       53
<PAGE>   59

agreement or supplement to the Mortgage Note or Mortgage that requires the
signature of the Trustee, or if an instrument of release signed by the Trustee
is required releasing the Mortgagor from liability on the Mortgage Loan, the
Master Servicer shall prepare and deliver or cause to be prepared and delivered
to the Trustee for signature and shall direct, in writing, the Trustee to
execute the assumption agreement with the Person to whom the Mortgaged Property
is to be conveyed and such modification agreement or supplement to the Mortgage
Note or Mortgage or other instruments as are reasonable or necessary to carry
out the terms of the Mortgage Note or Mortgage or otherwise to comply with any
applicable laws regarding assumptions or the transfer of the Mortgaged Property
to such Person. In connection with any such assumption, no material term of the
Mortgage Note may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Master Servicer in accordance with
its underwriting standards as then in effect and if the credit of the proposed
transferee does not meet such underwriting criteria, the Master Servicer
diligently shall, to the extent permitted by the Mortgage or the Mortgage Note
and by applicable law, accelerate the maturity of the Mortgage Loan. Together
with each such substitution, assumption or other agreement or instrument
delivered to the Trustee for execution by it, the Master Servicer shall deliver
an Officer's Certificate signed by a Servicing Officer stating that the
requirements of this subsection have been met in connection therewith. The
Master Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.

         SECTION 3.11. Realization Upon Defaulted Mortgage Loans; Repurchase of
                       Certain Mortgage Loans.

         In the event that any payment due under any Mortgage Loan and not
postponed pursuant to Section 3.01 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 Master Servicer shall take such actions, including
foreclosure or other conversion, as (1) the Master Servicer would take under
similar circumstances with respect to a similar mortgage loan held for its own
account for investment, (2) shall be consistent with Accepted Servicing
Practices, and (3) and shall meet the requirements of the insurer under any
Required Insurance Policy. In accordance with the preceding sentence in the
event that any payment due under any Mortgage Loan is not postponed and remains
delinquent for a period of ninety (90) days or any other default continues for a
period of ninety (90) days beyond the expiration of any grace or cure period,
the Master Servicer shall commence foreclosure proceedings, provided, however,
that the Master Servicer may enter into, and shall give the Rating Agencies
notice of, a special servicing agreement with an unaffiliated holder of 100%
Percentage Interest of one or more Classes of Subordinated Certificates or a
holder of a class of securities representing interests in one or more Classes of
Subordinated Certificates and provided, further, that entering into such special
servicing agreement shall not result in the downgrading or withdrawal of the
respective ratings when assigned to the Certificates. Any such agreement may
contain provisions whereby such holder may instruct the Master Servicer to
commence or delay foreclosure proceedings with respect to delinquent Mortgage
Loans and will contain provisions for the deposit of cash by the holder that
would be available for distribution to Certificateholders if Liquidation
Proceeds are less than they otherwise may have been had the Master Servicer
acted in accordance with its normal procedures. Notwithstanding the foregoing,
the Master Servicer shall not be required to expend its own funds in connection
with any foreclosure or towards the restoration of any property unless it shall

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<PAGE>   60

determine (i) that such restoration and/or foreclosure will increase the
proceeds of liquidation of the Mortgage Loan after reimbursement to itself of
such expenses and (ii) that such expenses will be recoverable to it through
Liquidation Proceeds (respecting which it shall have priority for purposes of
withdrawals from the Certificate Account). The Master Servicer shall be
responsible for all other costs and expenses incurred by it in any such
proceedings; provided, however, that it shall be entitled to reimbursement
thereof from the liquidation proceeds with respect to the related Mortgaged
Property, as provided in the definition of Liquidation Proceeds. If the Master
Servicer has knowledge that a Mortgaged Property which the Master Servicer is
contemplating acquiring in foreclosure or by deed in lieu of foreclosure is
located within a 1 mile radius of any site listed in the Expenditure Plan for
the Hazardous Substance Clean Up Bond Act of 1984 or other site with
environmental or hazardous waste risks known to the Master Servicer, the Master
Servicer will, prior to acquiring the Mortgaged Property, consider such risks
and only take action in accordance with its established environmental review
procedures.

         With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Certificateholders,
or its nominee, on behalf of the Certificateholders. The Trustee's name shall be
placed on the title to such REO Property solely as the Trustee hereunder and not
in its individual capacity. The Master Servicer shall ensure that the title to
such REO Property references the Pooling and Servicing Agreement and the
Trustee's capacity thereunder. Pursuant to its efforts to sell such REO
Property, the Master Servicer shall either itself or through an agent selected
by the Master Servicer manage, operate, protect and conserve such REO Property
in the same manner and to such extent as it manages, operates, protects and
conserves other foreclosed property for its own account, and to such extent as
is customary in the locality where such REO Property is located and may,
incident to its conservation and protection of the interests of the
Certificateholders, rent the same, or any part thereof, as the Master Servicer
deems to be in the best interest of the Certificateholders for the period prior
to the sale of such REO Property. The Master Servicer shall prepare for and
deliver to the Trustee a statement with respect to each REO Property that has
been rented showing the aggregate rental income received and all expenses
incurred in connection with the management and maintenance of such REO Property
at such times as is necessary to enable the Trustee to comply with the reporting
requirements of the REMIC Provisions. The net monthly rental income, if any,
from such REO Property shall be deposited in the Certificate Account no later
than the close of business on each Determination Date. The Master Servicer shall
perform the tax reporting and withholding required by Sections 1445 and 6050J of
the Code with respect to foreclosures and abandonments, the tax reporting
required by Section 6050H of the Code with respect to the receipt of mortgage
interest from individuals and any tax reporting required by Section 6050P of the
Code with respect to the cancellation of indebtedness by certain financial
entities, by preparing such tax and information returns as may be required, in
the form required, and delivering the same to the Trustee for execution, if
required, and by filing the same.

         In the event that the Trust Fund acquires any Mortgaged Property as
aforesaid or otherwise in connection with a default or imminent default on a
Mortgage Loan, the Master Servicer shall dispose of such Mortgaged Property
prior to three years from the close of the taxable year of its acquisition by
the Trust Fund unless the Trustee shall have been supplied with an Opinion of
Counsel to the effect that the holding by the Trust Fund of such Mortgaged
Property subsequent to such three-year period will not result in the imposition
of taxes on "prohibited transactions" of any REMIC hereunder as defined in
Section 860F of the Code or cause any REMIC hereunder 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 Mortgaged Property (subject to any conditions
contained in such Opinion of Counsel). Notwithstanding

                                       55
<PAGE>   61

any other provision of this Agreement, no Mortgaged Property acquired by the
Trust Fund shall be rented (or allowed to continue to be rented) or otherwise
used for the production of income by or on behalf of the Trust Fund in such a
manner or pursuant to any terms that would (i) cause such Mortgaged Property to
fail to qualify as "foreclosure property" within the meaning of Section
860G(a)(8) of the Code or (ii) subject either REMIC hereunder to the imposition
of any federal, state or local income taxes on the income earned from such
Mortgaged Property under Section 860G(c) of the Code or otherwise, unless the
Master Servicer has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.

         The Master Servicer shall also maintain on each REO Property fire and
hazard insurance with extended coverage in an amount which is at least equal to
the lesser of the replacement value or the maximum insurable value of the
improvements which are part of such property, liability insurance and, to the
extent required and available under the Flood Disaster Protection Act of 1973,
as amended, flood insurance in the amount required above. The Master Servicer
shall withdraw from the Certificate Account funds necessary for the proper
operation, management and maintenance of each REO Property, including the cost
of maintaining any hazard insurance pursuant to Section 3.09 and the fees of any
managing agent of the Master Servicer, a Subservicer, or the Master Servicer
itself.

         The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding and if such determination cannot be made, the Master Servicer
shall deal with such Mortgage Loan in a manner consistent with the servicing
standard in Section 3.01 hereof. The income earned from the management of any
REO Properties, net of reimbursement to the Master Servicer for expenses
incurred (including any property or other taxes) in connection with such
management and net of unreimbursed Master Servicing Fees, Advances and Servicing
Advances, shall be applied to the payment of principal of and interest on the
related defaulted Mortgage Loans (with interest accruing as though such Mortgage
Loans were still current) and all such income shall be deemed, for all purposes
in this Agreement, to be payments on account of principal and interest on the
related Mortgage Notes and shall be deposited into the Certificate Account. To
the extent the net income received during any calendar month is in excess of the
amount attributable to amortizing principal and accrued interest at the related
Mortgage Rate on the related Mortgage Loan for such calendar month, such excess
shall be considered to be a partial prepayment of principal of the related
Mortgage Loan.

         The proceeds from any liquidation of a Mortgage Loan, as well as any
income from an REO Property, will be applied in the following order of priority:
first, to reimburse the Master Servicer for any related unreimbursed Servicing
Advances and Master Servicing Fees; second, to reimburse the Master Servicer for
any unreimbursed Advances; third, to reimburse the Certificate Account for any
Nonrecoverable Advances (or portions thereof) that were previously withdrawn by
the Master Servicer pursuant to Section 3.08(a)(iii) that related to such
Mortgage Loan; fourth, to accrued and unpaid interest (to the extent no Advance
has been made for such amount or any such Advance has been reimbursed) on the
Mortgage Loan or related REO Property, at the Adjusted Net Mortgage Rate to the
Due Date occurring in the month in which such amounts are required to be
distributed; and fifth, as a recovery of principal of the Mortgage Loan. Excess
Proceeds, if any, from the liquidation of a Liquidated Mortgage Loan will be
retained by the Master Servicer as additional servicing compensation pursuant to
Section 3.14.

                                       56
<PAGE>   62

         In the event that foreclosure proceedings are commenced in respect of
any Mortgage Loan as to which Additional Collateral has been pledged as
security, the Master Servicer shall, if such Additional Collateral is readily
marketable, immediately commence the liquidation of such collateral. The
proceeds of such sale shall be promptly deposited in the Certificate Account. If
such Additional Collateral is not readily marketable, the Master Servicer shall
not exercise any right it may have to seize, convert or otherwise assume
ownership of such Additional Collateral.

         The Master Servicer, in its sole discretion, shall have the right to
purchase for its own account from the Trust Fund any Mortgage Loan which is 91
days or more delinquent at a price equal to the Purchase Price. The Purchase
Price for any Mortgage Loan purchased hereunder shall be deposited in the
Certificate Account and the Trustee, upon receipt of a certificate from the
Master Servicer in the form of Exhibit N hereto, shall release or cause to be
released to the purchaser of such Mortgage Loan the related Mortgage File and
shall execute and deliver such instruments of transfer or assignment prepared by
the purchaser of such Mortgage Loan, in each case without recourse, as shall be
necessary to vest in the purchaser of such Mortgage Loan any Mortgage Loan
released pursuant hereto and the purchaser of such Mortgage Loan shall succeed
to all the Trustee's right, title and interest in and to such Mortgage Loan and
all security and documents related thereto. Such assignment shall be an
assignment outright and not for security. The purchaser of such Mortgage Loan
shall thereupon own such Mortgage Loan, and all security and documents, free of
any further obligation to the Trustee or the Certificateholders with respect
thereto.

         SECTION 3.12. Trustee to Cooperate; Release of Mortgage Files.

         Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will immediately notify
the Trustee by delivering, or causing to be delivered two copies of a "Request
for Release" substantially in the form of Exhibit N, which shall be signed by a
Servicing Officer, or in a mutually agreeable electronic format which will, in
lieu of a signature on its face, originate from a Servicing Officer. Upon
receipt of such request, the Trustee shall deliver the related Mortgage File to
the Master Servicer within five (5) Business Days after the receipt of the
request, and the Trustee shall, upon request from the Master Servicer, execute
and deliver to the Master Servicer the request for reconveyance, deed of
reconveyance or release or satisfaction of mortgage or such instrument releasing
the lien of the Mortgage in each case provided by the Master Servicer, together
with the Mortgage Note with written evidence of cancellation thereon. Expenses
incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the related Mortgagor. From time to time and
as shall be appropriate for the servicing or foreclosure of any Mortgage Loan,
including for such purpose, collection under any policy of flood insurance, any
fidelity bond or errors or omissions policy, or for the purposes of effecting a
partial release of any Mortgaged Property from the lien of the Mortgage or the
making of any corrections to the Mortgage Note or the Mortgage or any of the
other documents included in the Mortgage File, the Trustee shall, upon delivery
to the Trustee of a Request for Release in the form of Exhibit M signed by a
Servicing Officer, or in a mutually agreeable electronic format which will, in
lieu of a signature on its face, originate from a Servicing Officer, release the
Mortgage File to the Master Servicer. Subject to the further limitations set
forth below, the Master Servicer shall cause the Mortgage File so released to be
returned to the Trustee when the need therefor by the Master Servicer no longer
exists, unless the Mortgage Loan is liquidated and the proceeds thereof are
deposited in the Certificate Account, in which case the Master Servicer shall
deliver to the Trustee a Request for Release in the form of Exhibit N, signed by
a Servicing Officer.

                                       57
<PAGE>   63

         If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity.

         SECTION 3.13. Documents, Records and Funds in Possession of Master
                       Servicer to be Held for the Trustee.

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

         SECTION 3.14. Servicing Compensation.

         As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Certificate Account an amount equal
to the Master Servicing Fee for each Mortgage Loan, provided that the aggregate
Master Servicing Fee with respect to any Distribution Date shall be reduced (i)
by an amount equal to the aggregate of the Prepayment Interest Shortfalls, if
any, with respect to such Distribution Date, but not below an amount equal to
the aggregate Master Servicing Fee for such Distribution Date before reduction
thereof in respect of such Prepayment Interest Shortfalls, and (ii) with respect
to the first Distribution Date, an amount equal to any amount to be deposited
into the Distribution Account by the Depositor pursuant to Section 2.01(a) and
not so deposited.

         Additional servicing compensation in the form of Excess Proceeds,
prepayment penalties, assumption fees, late payment charges and all income and
gain net of any losses realized from Permitted Investments or amounts on deposit
in the Certificate Account shall be retained by the Master Servicer to the
extent not required to be deposited in the Certificate Account pursuant to
Section 3.05 hereof. The Master Servicer shall be required to pay all expenses
incurred by it in connection with its master servicing activities hereunder
(including payment of any premiums for hazard insurance and

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<PAGE>   64

maintenance of the other forms of insurance coverage required by this Agreement)
and shall not be entitled to reimbursement therefor except as specifically
provided in this Agreement.

         SECTION 3.15. Access to Certain Documentation.

         The Master Servicer shall provide to the OTS and the FDIC and to
comparable regulatory authorities supervising Holders of Subordinated
Certificates and the examiners and supervisory agents of the OTS, the FDIC and
such other authorities, access to the documentation regarding the Mortgage Loans
required by applicable regulations of the OTS and the FDIC. Such access shall be
afforded without charge, but only upon reasonable and prior written request and
during normal business hours at the offices designated by the Master Servicer.
Nothing in this Section shall limit the obligation of the Master Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Mortgagors and the failure of the Master Servicer to provide access as provided
in this Section as a result of such obligation shall not constitute a breach of
this Section.

         SECTION 3.16. Annual Statement as to Compliance.

         The Master Servicer shall deliver to the Depositor and the Trustee on
or before March 31st each year beginning March 31, 2001, an Officer's
Certificate stating, as to the signer thereof, that (i) a review of the
activities of the Master Servicer during the preceding Fiscal Year and of the
performance of the Master Servicer under this Agreement has been made under such
officer's supervision and (ii) to the best of such officer's knowledge, based on
such review, the Master Servicer has fulfilled all its obligations under this
Agreement throughout such year, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and the action being taken by the
Master Servicer to cure such default. The Trustee shall forward a copy of each
such statement to each Rating Agency.

         SECTION 3.17. Annual Independent Public Accountants' Servicing
                       Statement.

         On or before March 31st of each year beginning March 31, 2001, the
Master Servicer at its expense shall cause a nationally or regionally recognized
firm of independent public accountants (who may also render other services to
the Master Servicer, the Seller or any affiliate thereof) which is a member of
the American Institute of Certified Public Accountants to furnish a statement to
the Trustee and the Depositor to the effect that such firm has examined the
Master Servicer's assertion of its compliance with the minimum standards of the
Uniform Single Attestation Program for Mortgage Bankers ("USAP"), to the extent
applicable and that, on the basis of such examination, conducted substantially
in compliance with USAP to the extent applicable, such assertion is fairly
stated in all material respects except for such significant exceptions or errors
in records that, in the opinion of such firm, USAP requires it to report. In
rendering such statement, such firm may rely, as to matters relating to direct
servicing of mortgage loans by Subservicers, upon comparable statements for
examinations conducted substantially in compliance with the Uniform Single
Attestation Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FNMA and FHLMC (rendered within one year of such statement) of
independent public accountants with respect to the related Subservicer. Delivery
of such statement to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Master Servicer's compliance with any of its covenants
hereunder (as to which the Trustee is entitled to rely exclusively on an
Officer's Certificate). Copies of such statement

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<PAGE>   65

shall be provided by the Trustee to any Certificateholder upon request at the
Master Servicer's expense, provided such statement is delivered by the Master
Servicer to the Trustee.

         SECTION 3.18. Errors and Omissions Insurance; Fidelity Bonds.

         The Master Servicer shall for so long as it acts as master servicer
under this Agreement, obtain and maintain in force (a) a policy or policies of
insurance covering errors and omissions in the performance of its obligations as
Master Servicer hereunder and (b) a fidelity bond in respect of its officers,
employees and agents. Each such policy or policies and bond shall, together,
comply with the requirements from time to time of FNMA or FHLMC for persons
performing servicing for mortgage loans purchased by FNMA or FHLMC. In the event
that any such policy or bond ceases to be in effect, the Master Servicer shall
obtain a comparable replacement policy or bond from an insurer or issuer,
meeting the requirements set forth above as of the date of such replacement.

         SECTION 3.19. Inspections.

         The Master Servicer shall inspect the Mortgaged Property as often as
deemed necessary by the Master Servicer to assure itself that the value of the
Mortgaged Property is being preserved. In addition, if any Mortgage Loan is more
than ninety (90) days delinquent, the Master Servicer immediately shall inspect
the Mortgaged Property and shall conduct subsequent inspections in accordance
with Accepted Servicing Practices. The Master Servicer shall keep a written
report of each such inspection.

         SECTION 3.20. Restoration of Mortgaged Property.

         The Master Servicer need not obtain the approval of the Depositor or
the Trustee prior to releasing any Insurance Proceeds to the Mortgagor to be
applied to the restoration or repair of the Mortgaged Property if such release
is in accordance with Accepted Servicing Practices.

         If the Depositor or the Trustee is named as an additional loss payee,
the Master Servicer is hereby empowered to endorse any loss draft issued in
respect of such a claim in the name of the Depositor or the Trustee.

         SECTION 3.21. Put Option and Optional Call.

         During the Put Period, each Certificateholder eligible to do so, or in
the event that such Certificates are still held in book-entry form, each
Certificate Owner eligible to do so, may exercise the Put Option by written
notice to the Master Servicer or, to the extent that the Certificates are still
held in book-entry form, DTC. Notice by a Certificateholder or Certificate
Owner, as applicable, of the exercise of a Put Option will be irrevocable. At
the end of the Put Period, based on information obtained by the Master Servicer
from DTC with respect to Book-Entry Certificates, if applicable, the Master
Servicer shall notify the Standby Purchaser, and the Trustee in writing of the
number of Certificateholders, or Certificate Owners, as applicable, who have
exercised the Put Option and the percentage of the Class Certificate Balance of
Certificates held by such Certificateholders or Certificate Owners, as
applicable. In the event that the Put Option has been exercised with respect to
more than 90% of the aggregate outstanding Class Certificate Balance of the
Certificates, the Master Servicer shall so notify the Standby Purchaser in
writing, and the Standby Purchaser will be entitled to exercise the Optional
Call. Not later than the fourth Business Day prior to the Put Date, the Standby
Purchaser shall pay to the Trustee, and

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<PAGE>   66

the Trustee shall deposit, into the Distribution Account, (i) if the Standby
Purchaser has exercised the Optional Call, the Optional Call Purchase Price, or
(ii) otherwise, the Put Purchase Price for each Certificate for which the
Certificateholder has exercised the Put Option.

         On the Put Date, with respect to each Certificate for which the Put
Option was exercised, or as to all Certificates (other than the Class X and
Class A-R Certificates) if the Standby Purchaser has exercised the Optional
Call, the Trustee shall withdraw from the Distribution Account the applicable
Put Purchase Price and distribute it to the related Certificateholder by wire
transfer in immediately available funds for the account of such
Certificateholder, or by any other means of payment as specified by such
Certificateholder and at the address of such Holder appearing in the Certificate
Register, provided that such payment shall only be made after presentation and
surrender of the Certificate if the Certificates are no longer held in
book-entry form. With respect to any Subordinated Certificate that is not a
Book-Entry Certificate for which the Holder has exercised the Put Option or the
Standby Purchaser has exercised the Optional Call, such Holder shall submit the
applicable Subordinated Certificate(s) to the Trustee at the Corporate Trust
Office for transfer and re-registration to the Standby Purchaser. In connection
with such submission, neither such Holder nor the Standby Purchaser shall be
required to submit any of the transfer documentation otherwise required by
Section 5.02(b). The Trustee shall promptly execute and deliver new
Certificates, registered in the name of the Standby Purchaser, as provided in
Section 5.02(a).

         In the event that the Certificates are no longer held in book-entry
form, and any Certificateholders of the Certificates, in the case of the
exercise of the Optional Call or all Certificateholders who exercised the Put
Option, in the case of the Put Option, shall not surrender their Certificates
for cancellation within six months after the applicable Put Date, the Master
Servicer shall give or cause the Trustee to give second written notice to the
remaining Certificateholders to surrender their Certificates for cancellation
and receive the Put Purchase Price with respect thereto. If within one year
after the second notice all the related Certificates shall not have been
surrendered for cancellation, the Master Servicer may take appropriate steps to
contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the applicable Put
Purchase Price, in the case of the Put Option or out of funds and other assets
which remain in the Trust Fund in the case of the Optional Call.

         The Standby Purchaser's obligation to make payments hereunder is
irrevocable, unconditional, and not subject to any defense, rights of setoff,
counterclaim or rescission.

         SECTION 3.22. Modifications.

         If a Mortgagor exercises its right to the extent set forth in the
related Mortgage Note to request a modification to the index, margin, adjustment
period or amortization, the Master Servicer shall purchase such Mortgage Loan
prior to the effective terms of such modification at a price equal to the
Purchase Price. The Purchase Price for any Mortgage Loan purchased hereunder
shall be deposited in the Certificate Account and the Trustee, upon receipt of a
certificate from the Master Servicer in the form of Exhibit N hereto, shall
release or cause to be released to the purchaser of such Mortgage Loan the
related Mortgage File and shall execute and deliver such instruments of transfer
or assignment prepared by the purchaser of such Mortgage Loan, in each case
without recourse, as shall be necessary to vest in the purchaser of such
Mortgage Loan any Mortgage Loan released pursuant hereto and the purchaser of
such Mortgage Loan shall succeed to all the Trustee's right, title and interest
in and to such Mortgage Loan and all security and documents related thereto.
Such assignment shall be an assignment outright and not for security. The
purchaser of such Mortgage Loan shall thereupon own such Mortgage

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<PAGE>   67

Loan, and all security and documents, free of any further obligation to the
Trustee or the Certificateholders with respect thereto.

                                   ARTICLE IV

                                DISTRIBUTIONS AND
                         ADVANCES BY THE MASTER SERVICER

         SECTION 4.01. Advances.

         The Master Servicer shall determine on or before each Master Servicer
Advance Date whether it is required to make an Advance pursuant to the
definition thereof. If the Master Servicer determines it is required to make an
Advance, it shall, on or before the Master Servicer Advance Date, either (i)
deposit into the Certificate Account an amount equal to the Advance or (ii) make
an appropriate entry in its records relating to the Certificate Account that any
Amount Held for Future Distribution has been used by the Master Servicer in
discharge of its obligation to make any such Advance. Any funds so applied shall
be replaced by the Master Servicer by deposit in the Certificate Account no
later than the close of business on the next Master Servicer Advance Date. The
Master Servicer shall be entitled to be reimbursed from the Certificate Account
for all Advances of its own funds made pursuant to this Section as provided in
Section 3.08. The obligation to make Advances with respect to any Mortgage Loan
shall continue if such Mortgage Loan has been foreclosed or otherwise terminated
and the related Mortgaged Property has not been liquidated.

         The Master Servicer shall deliver to the Trustee on the related Master
Servicer Advance Date an Officer's Certificate of a Servicing Officer indicating
the amount of any proposed Advance determined by the Master Servicer to be a
Nonrecoverable Advance.

         SECTION 4.02. Priorities of Distribution.

                  (a) On each Distribution Date, the Trustee shall, to the
         extent on deposit therein, withdraw the Available Funds and apply such
         funds to distributions on the specified Classes of Certificates, in the
         following order and priority and, in each case, to the extent of such
         funds remaining:

                           (i) concurrently,

                                    (x) to each interest-bearing Class of Senior
                           Certificates, an amount allocable to interest equal
                           to the related Class Optimal Interest Distribution
                           Amount, any shortfall being allocated among such
                           Classes in proportion to the amount of the Class
                           Optimal Interest Distribution Amount that would have
                           been distributed in the absence of such shortfall,
                           and

                                    (y) [reserved];

                           (ii) [Reserved for distribution of Accrual Amount, if
                  any.]

                           (iii) to each Class of Senior Certificates as
                  follows:

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<PAGE>   68

                                    (x) [reserved];

                                    (y) on each Distribution Date prior to the
                           Senior Credit Support Depletion Date, the Formula
                           Principal Amount, up to the amount of the Senior
                           Principal Distribution Amount for such Distribution
                           Date will be distributed as principal to the
                           following Classes of Senior Certificates, in the
                           following order of priority:

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

                                    (B)      to the Class A-1 Certificates,
                                             until the Class Certificate Balance
                                             thereof is reduced to zero.

                           (iv) On each Distribution Date, Available Funds
                  remaining after making the distributions described in 4.02 (a)
                  (i) through (iii) above, will be distributed to the
                  Subordinated Certificates in the following order and priority
                  and, in each case, to the extent of such funds remaining:

                                    (A)      to the Class B-1 Certificates, an
                                             amount allocable to interest equal
                                             to the Class Optimal Interest
                                             Distribution Amount for such
                                             Distribution Date;

                                    (B)      to the Class B-1 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof is
                                             reduced to zero;

                                    (C)      to the Class B-2 Certificates, an
                                             amount allocable to interest equal
                                             to the Class Optimal Interest
                                             Distribution Amount for such Class
                                             for such Distribution Date;

                                    (D)      to the Class B-2 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof is
                                             reduced to zero;

                                    (E)      to the Class B-3 Certificates, an
                                             amount allocable to interest equal
                                             to the Class Optimal Interest
                                             Distribution Amount for such Class
                                             for such Distribution Date;

                                    (F)      to the Class B-3 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof is
                                             reduced to zero;

                                    (G)      to the Class B-4 Certificates, an
                                             amount allocable to interest equal
                                             to the amount of the Class Optimal

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<PAGE>   69

                                             Interest Distribution Amount for
                                             such Class for such Distribution
                                             Date;

                                    (H)      to the Class B-4 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof has
                                             been reduced to zero;

                                    (I)      to the Class B-5 Certificates, an
                                             amount allocable to interest equal
                                             to the amount of the Class Optimal
                                             Interest Distribution Amount for
                                             such Class for such Distribution
                                             Date;

                                    (J)      to the Class B-5 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof has
                                             been reduced to zero;

                                    (K)      to the Class B-6 Certificates, an
                                             amount allocable to interest equal
                                             to the Class Optimal Interest
                                             Distribution Amount for such Class
                                             for such Distribution Date; and

                                    (L)      to the Class B-6 Certificates, an
                                             amount allocable to principal equal
                                             to its Pro Rata Share for such
                                             Distribution Date until the Class
                                             Certificate Balance thereof is
                                             reduced to zero.

                           (v) [Reserved]

                           (vi) to the Class A-R Certificates, in respect of any
                  MR Interest, any remaining funds in the Master REMIC and in
                  respect of the SR Interest, any remaining funds in the
                  Subsidiary REMIC.

                  (b) [Reserved for allocation of Accrual Amount, if any.]

                  (c) On each Distribution Date on or after the Senior Credit
Support Depletion Date, notwithstanding the allocation and priority set forth in
Section 4.02(a)(iii)(y), the portion of Available Funds available to be
distributed as principal of the Senior Certificates shall be distributed
concurrently, as principal, on such Classes, pro rata, on the basis of their
respective Class Certificate Balances, until the Class Certificate Balances
thereof are reduced to zero.

                  (d) On each Distribution Date, the amount referred to in
clause (i) of the definition of Class Optimal Interest Distribution Amount for
each Class of Certificates for such Distribution Date shall be reduced by the
related Class' pro rata share of (i) Net Prepayment Interest Shortfalls based on
such Class' Optimal Interest Distribution Amount without taking into account
such Net Prepayment Interest Shortfalls, (ii) after the Special Hazard Coverage
Termination Date, with respect to each Mortgage Loan that became a Special
Hazard Mortgage Loan during the calendar month preceding the month of such
Distribution Date, the excess of one month's interest at the related Adjusted
Net Mortgage Rate on the Stated Principal Balance of such Mortgage Loan as of
the Due Date in such month over the

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<PAGE>   70

amount of Liquidation Proceeds applied as interest on such Mortgage Loan with
respect to such month, (iii) after the Bankruptcy Coverage Termination Date,
with respect to each Mortgage Loan that became subject to a Bankruptcy Loss
during the calendar month preceding the month of such Distribution Date, the
interest portion of the related Debt Service Reduction or Deficient Valuation,
(iv) each Relief Act Reduction incurred during the calendar month preceding the
month of such Distribution Date and (v) after the Fraud Coverage Termination
Date, with respect to each Mortgage Loan that became a Fraud Loan during the
calendar month preceding the month of such Distribution Date, the excess of one
month's interest at the related Adjusted Net Mortgage Rate on the Stated
Principal Balance of such Mortgage Loan as of the Due Date in such month over
the amount of Liquidation Proceeds applied as interest on such Mortgage Loan
with respect to such month.

                  (e) Notwithstanding the priority and allocation contained in
Section 4.02(a)(iv), if with respect to any Class of Subordinated Certificates
on any Distribution Date the sum of the related Class Subordination Percentages
of such Class and of all Classes of Subordinated Certificates which have a
higher numerical Class designation than such Class (the "Applicable Credit
Support Percentage") is less than the Original Applicable Credit Support
Percentage for such Class, no distribution of Principal Prepayments will be made
to any such Classes (the "Restricted Classes") and the amount of such Principal
Prepayments otherwise distributable to the Restricted Classes shall be
distributed to any Classes of Subordinated Certificates having lower numerical
Class designations than such Class, pro rata, based on their respective Class
Certificate Balances immediately prior to such Distribution Date and shall be
distributed in the sequential order provided in Section 4.02(a)(iv).

                  (f) On each Distribution Date, Available Funds shall be
distributed on the Subsidiary REMIC Regular Interests, in each case in an amount
sufficient to make the distributions to the Corresponding Classes of
Certificates on such Distribution Date in accordance with the provisions of
Section 4.02(a).

         SECTION 4.03. Allocation of Realized Losses.

                  (a) On or prior to each Determination Date, the Master
Servicer shall determine the total amount of Realized Losses, including Excess
Losses, with respect to the related Distribution Date.

                  Realized Losses with respect to any Distribution Date shall be
allocated as follows:

                  (i) any Realized Loss (other than an Excess Loss) shall be
         allocated first to the Subordinated Certificates in reverse order of
         their respective numerical Class designations (beginning with the Class
         of Subordinated Certificates then outstanding with the highest
         numerical Class designation) until the respective Class Certificate
         Balance of each such Class is reduced to zero, and second to the Senior
         Certificates (other than the Notional Amount Certificates), pro rata on
         the basis of their respective Class Certificate Balances immediately
         prior to the related Distribution Date until the Class Certificate
         Balances thereof have been reduced to zero;

                  (ii) any Excess Losses on the Mortgage Loans shall be
         allocated to the Senior Certificates (other than the Notional Amount
         Certificates) and the Subordinated Certificates then outstanding, pro
         rata, on the basis of, their respective Class Certificate Balances.

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<PAGE>   71

                  (b) The Class Certificate Balance of the Class of Subordinated
Certificates then outstanding with the highest numerical Class designation shall
be reduced on each Distribution Date by the amount, if any, by which the
aggregate of the Class Certificate Balances of all outstanding Classes of
Certificates (after giving effect to the distribution of principal and the
allocation of Realized Losses on such Distribution Date) exceeds the sum of (i)
the Pool Stated Principal Balance for the following Distribution Date and (ii)
the Pre-Funded Amount, if any.

                  (c) Any Realized Loss allocated to a Class of Certificates or
any reduction in the Class Certificate Balance of a Class of Certificates
pursuant to Section 4.03(a) or (b) above shall be allocated among the
Certificates of such Class in proportion to their respective Certificate
Balances.

                  (d) Any allocation of Realized Losses to a Certificate or any
reduction in the Certificate Balance of a Certificate, pursuant to Section
4.03(a) or (b) above shall be accomplished by reducing the Certificate Balance
thereof immediately following the distributions made on the related Distribution
Date in accordance with the definition of "Certificate Balance".

         SECTION 4.04. Monthly Statements to Certificateholders.

                  (a) Not later than each Distribution Date, the Trustee shall
make available to each Certificateholder, the Master Servicer and the Depositor
a statement, based solely on information provided by the Master Servicer and/or
Subservicer, setting forth with respect to the related distribution:

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

                           (ii)   the amount thereof allocable to interest, any
                  Class Unpaid Interest Shortfall included in such distribution
                  and any remaining Class Unpaid Interest Shortfall after giving
                  effect to such distribution;

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

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

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

                           (vi)   the Senior Percentage and Subordinated
                  Percentage for the following Distribution Date;

                           (vii)  the amount of the Master Servicing Fees paid
                  to or retained by the Master Servicer with respect to such
                  Distribution Date;

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

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<PAGE>   72

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

                           (x)    the number and aggregate principal amounts of
                  Mortgage Loans (A) delinquent (exclusive of Mortgage Loans in
                  foreclosure) (1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90
                  days and (4) 91 or more days and (B) in foreclosure and
                  delinquent (1) 1 to 30 days (2) 31 to 60 days (3) 61 to 90
                  days and (4) 91 or more days, as of the close of business on
                  the last day of the calendar month preceding such Distribution
                  Date;

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

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

                           (xiii) the Senior Prepayment Percentage for the
                  following Distribution Date;

                           (xiv)  the aggregate amount of Realized Losses
                  incurred during the preceding calendar month;

                           (xv)   the Special Hazard Loss Coverage Amount, the
                  Fraud Loss Coverage Amount and the Bankruptcy Loss Coverage
                  Amount, in each case as of the related Determination Date; and

                           (xvi)  for each Pre-Funding Distribution Date, the
                  amount on deposit in the Pre-Funding Account.

                  (b) The Trustee's responsibility for disbursing the above
information to the Certificateholders is limited to the availability, timeliness
and accuracy of the information provided by the Master Servicer. The Trustee
will provide a copy of each statement provided pursuant to this Section 4.04 to
each Rating Agency. The Trustee will make a copy of each statement provided
pursuant to this Section 4.04 (and, at its option, any additional files
containing the same information in an alternative format) available each month
to Certificateholders, and other parties to this Agreement via the Trustee's
internet website and its fax-on-demand service. The Trustee's fax-on-demand
service may be accessed by calling (301) 815-6610. The Trustee's internet
website shall initially be located at "www.ctslink.com". Assistance in using the
website or the fax-on-demand service can be obtained by calling the Trustee's
customer service desk at (301) 815-6600. Parties that are unable to use the
above distribution options are entitled to have a paper copy mailed to them via
first class mail by calling the customer service desk and indicating such. The
Trustee shall have the right to change the way such statements are distributed
in order to make such distribution more convenient and/or more accessible to the
above parties and the Trustee shall provide timely and adequate notification to
all above parties and Certificateholders regarding any such changes.

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<PAGE>   73

                  (c) Within one Business Day of each Determination Date, the
Master Servicer shall deliver to the Trustee (which delivery may be by
electronic data transmission) a report in substantially the form set forth as
Schedule V hereto.

                  (d) Within a reasonable period of time after the end of each
calendar year, the Trustee shall cause to be furnished, electronically or
otherwise, to each Person who at any time during the calendar year was a
Certificateholder, a statement containing the information set forth in clauses
(a)(i), (a)(ii) and (a)(vii) of this Section 4.04 aggregated for such calendar
year or applicable portion thereof during which such Person was a
Certificateholder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of the Code as from time to
time in effect.

                  (e) On or before the Distribution Date preceding the
commencement of the Put Period, the Master Servicer shall prepare and forward to
the Trustee and the Depositor, and the Trustee shall forward to each
Certificateholder (other than Holders of the Residual or Notional Amount
Certificates), notice to the effect that:

                           (i)   (A) such Certificateholder, or Certificate
                  Owner in the event that the applicable Certificates are still
                  held in book-entry form, has the right to exercise the Put
                  Option during the Put Period, (B) if the Certificateholder or
                  Certificate Owner, as the case may, choose to exercise the Put
                  Option, no interest shall accrue on such Certificate after the
                  Put Date;

                           (ii)  such Put Option may be exercised by (a) in the
                  event that the applicable Certificates are not held in
                  book-entry form, providing irrevocable, written notice of such
                  Certificateholder's exercise of the Put Option to the Master
                  Servicer and presenting and surrendering such Certificate at
                  the office or agency of the Certificate Registrar maintained
                  for such purpose (the address of which shall be set forth in
                  such notice) or (b) in the event that the applicable
                  Certificates are still held in book-entry form, providing
                  irrevocable, written notice of such Certificate Owner's
                  exercise of the Put Option to DTC;

                           (iii) if the Certificateholder, or the Certificate
                  Owner, as the case may be, complies with the preceding clause,
                  the Put Purchase Price shall be payable on the Put Date; and

                           (iv)  if Certificateholders, or if the Certificates
                  are still held in book-entry form, Certificate Owners, holding
                  more than 90% of the Class Certificate Balance of the
                  Certificates notify the Master Servicer of their intent to
                  exercise the Put Option, the Standby Purchaser will be
                  entitled to exercise the Optional Call.

                  At least ten (10) days preceding the Put Date, if the Standby
Purchaser intends to exercise the Optional Call, the Standby Purchaser will
cause the Master Servicer to prepare and forward to the Trustee and the
Depositor, and the Trustee shall forward to each Certificateholder notice to the
effect that:

                           (i) the Standby Purchaser has exercised the Optional
                  Call; and

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<PAGE>   74

                           (ii) if the Holder did not exercise the Put Option,
                  (A) in the event that the applicable Certificates are no
                  longer held in book-entry form, the Put Purchase Price will be
                  payable upon presentation and surrender of such Certificate at
                  the office or agency of the Certificate Registrar maintained
                  for such purpose (the address of which shall be set forth in
                  such notice), and (B) no interest shall accrue on such
                  Certificate after the Put Date.

                  The Standby Purchaser shall give the Trustee written notice
not less than 30 days prior to the Put Date stating its intention, or lack of
intention, to repurchase the Certificates upon exercise of the Put Option or to
pay the Optional Call Purchase Price upon exercise of the Optional Call.

         SECTION 4.05. Determination of Pass-Through Rates for COFI
                       Certificates.

         The Pass-Through Rate for each Class of COFI Certificates for each
Interest Accrual Period after the initial Interest Accrual Period shall be
determined by the Trustee as provided below on the basis of the Index and the
applicable formulae appearing in footnotes corresponding to the COFI
Certificates in the table relating to the Certificates in the Preliminary
Statement.

         Except as provided below, with respect to each Interest Accrual Period
following the initial Interest Accrual Period, the Trustee shall not later than
two Business Days following the publication of the applicable Index determine
the Pass-Through Rate at which interest shall accrue in respect of the COFI
Certificates during the related Interest Accrual Period.

         Except as provided below, the Index to be used in determining the
respective Pass-Through Rates for the COFI Certificates for a particular
Interest Accrual Period shall be COFI for the second calendar month preceding
such Interest Accrual Period. If at the Outside Reference Date for any Interest
Accrual Period, COFI for the second calendar month preceding such Interest
Accrual Period has not been published, the Trustee shall use COFI for the third
calendar month preceding such Interest Accrual Period. If COFI for neither the
second nor third calendar months preceding any Interest Accrual Period has been
published on or before the related Outside Reference Date, the Index for such
Interest Accrual Period and for all subsequent Interest Accrual Periods shall be
the National Cost of Funds Index for the third calendar month preceding such
Interest Accrual Period (or the fourth preceding calendar month if such National
Cost of Funds Index for the third preceding calendar month has not been
published by such Outside Reference Date). In the event that the National Cost
of Funds Index for neither the third nor fourth calendar months preceding an
Interest Accrual Period has been published on or before the related Outside
Reference Date, then for such Interest Accrual Period and for each succeeding
Interest Accrual Period, the Index shall be LIBOR, determined in the manner set
forth below.

         On each Interest Determination Date so long as the COFI Certificates
are outstanding and the applicable Index therefor is LIBOR, the Trustee shall
either (i) request each Reference Bank to inform the Trustee of the quotation
offered by its principal London office for making one-month United States dollar
deposits in leading banks in the London interbank market, as of 11:00 a.m.
(London time) on such Interest Determination Date or (ii) in lieu of making any
such request, rely on such Reference Bank quotations that appear at such time on
the Reuters Screen LIBO Page (as defined in the International Swap Dealers
Association Inc. Code of Standard Wording, Assumptions and Provisions for Swaps,
1986 Edition), to the extent available.

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<PAGE>   75

         With respect to any Interest Accrual Period for which the applicable
Index is LIBOR, LIBOR for such Interest Accrual Period will be established by
the Trustee on the related Interest Determination Date as follows:

                  (a) If on any Interest Determination Date two or more
         Reference Banks provide such offered quotations, LIBOR for the next
         Interest Accrual Period shall be the arithmetic mean of such offered
         quotations (rounding such arithmetic mean upwards if necessary to the
         nearest whole multiple of 1/32%).

                  (b) If on any Interest Determination Date only one or none of
         the Reference Banks provides such offered quotations, LIBOR for the
         next Interest Accrual Period shall be whichever is the higher of (i)
         LIBOR as determined on the previous Interest Determination Date or (ii)
         the Reserve Interest Rate. The "Reserve Interest Rate" shall be the
         rate per annum which the Trustee determines to be either (i) the
         arithmetic mean (rounded upwards if necessary to the nearest whole
         multiple of 1/32%) of the one-month United States dollar lending rates
         that New York City banks selected by the Trustee are quoting, on the
         relevant Interest Determination Date, to the principal London offices
         of at least two of the Reference Banks to which such quotations are, in
         the opinion of the Trustee, being so made, or (ii) in the event that
         the Trustee can determine no such arithmetic mean, the lowest one-month
         United States dollar lending rate which New York City banks selected by
         the Trustee are quoting on such Interest Determination Date to leading
         European banks.

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

         In determining LIBOR and any Pass-Through Rate for the COFI
Certificates or any Reserve Interest Rate, the Trustee may conclusively rely and
shall be protected in relying upon the offered quotations (whether written, oral
or on the Reuters Screen) from the Reference Banks or the New York City banks as
to LIBOR or the Reserve Interest Rate, as appropriate, in effect from time to
time. The Trustee shall not have any liability or responsibility to any Person
for (i) the Trustee's selection of New York City banks for purposes of
determining any Reserve Interest Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from the Reference Banks
or the New York City banks or to determine such arithmetic mean, all as provided
for in this Section 4.05.

         The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.

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<PAGE>   76

         SECTION 4.06. Determination of Pass-Through Rates for LIBOR
                       Certificates.

         (a) On each Interest Determination Date so long as the LIBOR
Certificates are outstanding, the Trustee will determine LIBOR on the basis of
the British Bankers' Association ("BBA") "Interest Settlement Rate" for
one-month deposits in U.S. dollars as found on Telerate page 3750 as of 11:00
a.m. London time on each Interest Determination Date.

         (b) If on any Interest Determination Date, the Trustee is required by
unable to determine LIBOR in the manner provided in paragraph (a) above, LIBOR
for the next Interest Accrual Period will be the Reference Bank Rate.

         (c) The Pass-Through Rate for each Class of LIBOR Certificates for each
Interest Accrual Period after the initial Interest Accrual Period shall be
determined by the Trustee on each Interest Determination Date so long as the
LIBOR Certificates are outstanding on the basis of LIBOR and the respective
formulae appearing in footnotes corresponding to the LIBOR Certificates in the
table relating to the Certificates in the Preliminary Statement.

         (d) In determining LIBOR, any Pass-Through Rate for the LIBOR
Certificates or any Reference Bank Rate, the Trustee may conclusively rely and
shall be protected in relying upon the offered quotations (whether written, oral
or on Telerate page 3750) from the Reference Banks or the New York City banks as
to LIBOR or the Reference Bank Rate, as appropriate, in effect from time to
time. The Trustee shall not have any liability or responsibility to any Person
for (i) the Trustee's selection of New York City banks for purposes of
determining any Reference Bank Rate or (ii) its inability, following a
good-faith reasonable effort, to obtain such quotations from the Reference Banks
or the New York City banks or to determine such arithmetic mean, all as provided
for in this Section 4.06.

         (e) The establishment of LIBOR and each Pass-Through Rate for the LIBOR
Certificates by the Trustee shall (in the absence of manifest error) be final,
conclusive and binding upon each Holder of a Certificate and the Trustee.

         SECTION 4.07. Determination of Pass-Through Rates for Variable Rate
                       Certificates.

         On each Determination Date, and so long as any Class of Variable Rate
Certificates is outstanding, the Trustee will ascertain the Pass-Through Rate
for the Variable Rate Certificates based on information provided to the Trustee
by the Master Servicer.

         The Trustee's determination of each Pass-Through Rate for the Variable
Rate Certificates for the related Interest Accrual Period will (in the absence
of manifest error) be final and binding upon each Holder of a Certificate and
the Trustee.

         SECTION 4.08. Capitalized Interest Account and Pre-Funding Account. (a)
The Trustee has heretofore established or caused to be established and shall
hereafter maintain or cause to be maintained the Capitalized Interest Account.
The Capitalized Interest Account shall be treated as an "outside reserve fund"
under applicable Treasury regulations and will not be part of any REMIC. Any
investment earnings on the Capitalized Interest Account will be treated as owned
by the Seller and will be taxable to the Seller. The amount on deposit in the
Capitalized Interest Account shall be invested in Permitted Investments in
accordance with the provisions of (i) below.

                                       71
<PAGE>   77

         The Trustee has heretofore established or caused to be established and
shall hereafter maintain or cause to be maintained the Pre-Funding Account. The
Pre-Funding Account shall be treated as an "outside reserve fund" under
applicable Treasury regulations and will not be part of any REMIC. The amount on
deposit in the Pre-Funding Account shall be invested in permitted Investments in
accordance with the provisions of (i) below. All Pre-Funding Earnings will be
treated as owned by, and will be taxable to, the Seller.

         (b) On the Closing Date, the Depositor will cause to be deposited the
Original Capitalized Interest Amount into the Capitalized Interest Account from
the sale of the Offered Certificates. On the Closing Date, the Depositor will
cause to be deposited the Original Pre-Funded Amount in the Pre-Funding Account
from the sale of the Offered Certificates.

         (c) On each Subsequent Transfer Date, (i) the Trustee shall withdraw
from the Pre-Funding Account an amount equal to 100% of the aggregate Stated
Principal Balance of the Subsequent Mortgage Loans sold to the Trust Fund on
such Subsequent Transfer Date, (ii) the Trustee shall withdraw the Overfunded
Amount, if any, from the Capitalized Interest Account and (iii) the Trustee
shall pay such amounts to or upon the order of the Seller with respect to such
transfer.

         (d) On each Pre-Funding Distribution Date (i) the Trustee shall
transfer any Pre-Funding Earnings into the Capitalized Interest Account and (ii)
the Trustee shall withdraw the Overfunded Amount, if any, from the Capitalized
Interest Account and shall pay such amounts to the Seller; provided, however,
that on the final Subsequent Transfer Date, the Trustee shall (i) transfer the
Excess Funding Amount from the Pre-Funding Account to the Distribution Account,
(ii) close the Pre-Funding Account.

         (e) On each Pre-Funding Distribution Date, the Trustee shall transfer
from the Capitalized Interest Account to the Distribution Account the
Capitalized Interest Requirement, if any, for such Distribution Date; provided,
however, that on the final Pre-Funding Distribution Date the Trustee shall (i)
transfer the Capitalized Interest Requirement, if any, for such Distribution
Date from the Capitalized Interest Account to the Distribution Account, (ii)
remit the balance of the funds on deposit in the Capitalized Interest Account to
the Seller and (iii) close the Capitalized Interest Account.

         (g) If at the end of the Pre-Funding Period amounts still remain in the
Pre-Funding Account, the Trustee shall withdraw the Excess Funding Amount from
the Pre-Funding Account on the immediately following Distribution Date and
deposit such amounts in the Distribution Account.

         (h) Unless sooner closed as provided above, the Capitalized Interest
Account shall be closed on the final Pre-Funding Distribution Date and the
Pre-Funding Account shall be closed on the Distribution Date immediately
following the end of the Pre-Funding Period. All amounts, if any, remaining in
the Capitalized Interest Account on the final Pre-Funding Distribution Date
shall be paid to the Seller.

         (i) Consistent with any requirements of the Code, all or a portion of
either of the Capitalized Interest Account or, the Pre-Funding Account (each an
"Account") held by the Trustee shall be invested and reinvested by the Trustee,
as directed in writing by the Seller (the "Directing Party"), in one or more
investments bearing interest or sold at a discount. If the Directing Party does
not provide investment directions, and an Event of Default shall have occurred
and be continuing the Trustee shall invest the Accounts in Permitted Investments
described in paragraph (ix) of the definition of Permitted

                                       72
<PAGE>   78

Investments. No such investment in either Account shall mature later than the
Business Day immediately preceding the next Distribution Date (except that for
either Account (i) if such Permitted Investment is an obligation of the Trustee
or a money market fund or any other Permitted Investment for which the Trustee
or any affiliate is the manager or the advisor, then such Permitted Investment
shall mature not later than such Distribution Date and (ii) any other date as
may be approved by the Rating Agencies).

         (j) If any amounts are needed for disbursement from either Account held
by the Trustee and sufficient uninvested funds are not available to make such
disbursement, the Trustee shall cause to be sold or otherwise converted to cash
a sufficient amount of the investments in such Account. The Trustee shall not be
liable for any investment loss or other charge resulting therefrom unless the
Trustee's failure to perform in accordance with this Section 4.08 is the cause
of such loss or charge.

         (k) Subject to Section 8.03, the Trustee shall not in any way be held
liable by reason of any insufficiency in either Account held by the Trustee
resulting from any investment loss on any Permitted Investment included therein
(except to the extent that the Trustee is the obligor and has defaulted thereon
or as provided in subsection (i) of this Section 4.08).

         (l) The Trustee shall invest and reinvest funds in the Accounts held by
the Trustee, to the fullest extent practicable, in such manner as the Directing
Party shall from time to time direct as set forth in Section 4.08(i), but only
in one or more Permitted Investments.

                                    ARTICLE V

                                THE CERTIFICATES

         SECTION 5.01. The Certificates.

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

         Subject to Section 9.02 hereof respecting the final distribution on the
Certificates, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either (x) by wire
transfer in immediately available funds to the account of such holder at a bank
or other entity having appropriate facilities therefor, if (i) such Holder has
so notified the Trustee at least five Business Days prior to the related Record
Date and (ii) such Holder shall hold (A) a Notional Amount Certificate, (B) 100%
of the Class Certificate Balance of any Class of Certificates or (C)
Certificates of any Class with aggregate principal Denominations of not less
than $1,000,000 or (y) by check mailed by first class mail to such
Certificateholder at the address of such holder appearing in the Certificate
Register.

         The Certificates shall be executed by manual or facsimile signature on
behalf of the Trustee by an authorized officer. Certificates bearing the manual
or facsimile signatures of individuals who were, at the time when such
signatures were affixed, authorized to sign on behalf of the Trustee shall bind
the Trustee, notwithstanding that such individuals or any of them have ceased to
be so

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<PAGE>   79

authorized prior to the execution 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 countersigned by the Trustee by manual signature, and such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence, that such Certificate has been duly executed and delivered hereunder.
All Certificates shall be dated the date of their countersignature. On the
Closing Date, the Trustee shall countersign the Certificates to be issued at the
direction of the Depositor, or any affiliate thereof.

         The Depositor shall provide, or cause to be provided, to the Trustee on
a continuous basis, an adequate inventory of Certificates to facilitate
transfers.

         SECTION 5.02. Certificate Register; Registration of Transfer and
                       Exchange of Certificates.

         (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.06 hereof, a Certificate Register for the Trust
Fund in which, subject to the provisions of subsections (b) and (c) below and to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided. Upon surrender for registration of transfer of any
Certificate, the Trustee shall execute and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the same
Class and aggregate Percentage Interest.

         At the option of a Certificateholder, Certificates may be exchanged for
other Certificates of the same Class in authorized denominations and evidencing
the same aggregate Percentage Interest upon surrender of the Certificates to be
exchanged at the office or agency of the Trustee. Whenever any Certificates are
so surrendered for exchange, the Trustee shall execute, countersign, and deliver
the Certificates which the Certificateholder making the exchange is entitled to
receive. Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the holder thereof or his attorney
duly authorized in writing.

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

         All Certificates surrendered for registration of transfer or exchange
shall be cancelled and subsequently destroyed by the Trustee in accordance with
the Trustee's customary procedures.

         (b) Except as otherwise provided in Section 3.21 in connection with the
exercise of the Put Option or the Optional Call, no transfer of a Private
Certificate shall be made unless such transfer is made pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws or is exempt from the registration requirements under said Act
and such state securities laws. In the event that a transfer is to be made in
reliance upon an exemption from the Securities Act and such laws, in order to
assure compliance with the Securities Act and such laws, the Certificateholder
desiring to effect such transfer and such Certificateholder's prospective
transferee shall each certify to the Trustee in writing the facts surrounding
the transfer in substantially the forms set forth in Exhibit J-1 or J-2 as
applicable (the "Transferor Certificate") and (i) deliver a letter in
substantially the form of either Exhibit K (the "Investment Letter") or Exhibit
L (the "Rule 144A Letter") or (ii) there shall be delivered

                                       74
<PAGE>   80

to the Trustee at the expense of the transferor an Opinion of Counsel that such
transfer may be made pursuant to an exemption from the Securities Act. The
Depositor shall provide to any Holder of a Private Certificate and any
prospective transferee designated by any such Holder, information regarding the
related Certificates and the Mortgage Loans and such other information as shall
be necessary to satisfy the condition to eligibility set forth in Rule
144A(d)(4) for transfer of any such Certificate without registration thereof
under the Securities Act pursuant to the registration exemption provided by Rule
144A. The Trustee and the Master Servicer shall cooperate with the Depositor in
providing the Rule 144A information referenced in the preceding sentence,
including providing to the Depositor such information regarding the
Certificates, the Mortgage Loans and other matters regarding the Trust Fund as
the Depositor shall reasonably request to meet its obligation under the
preceding sentence. Each Holder of a Private Certificate desiring to effect such
transfer shall, and does hereby agree to, indemnify the Trustee and the
Depositor, the Seller and the Master Servicer against any liability that may
result if the transfer is not so exempt or is not made in accordance with such
federal and state laws.

         Except as otherwise provided in Section 3.21 in connection with the
exercise of the Put Option and the Optional Call, no transfer of an
ERISA-Restricted Certificate shall be made unless the Trustee shall have
received either (i) a representation from the transferee of such Certificate
acceptable to and in form and substance satisfactory to the Trustee (in the
event such Certificate is a Private Certificate, such requirement is satisfied
only by the Trustee's receipt of a representation letter from the transferee
substantially in the form of Exhibit K or Exhibit L), to the effect that such
transferee is not an employee benefit plan or arrangement subject to Section 406
of ERISA or a plan or arrangement 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, (ii) 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")) or (iii) 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 such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an Opinion of Counsel satisfactory to the Trustee, which Opinion of Counsel
shall not be an expense of either the Trustee or the Trust Fund, addressed to
the Trustee to the effect that the purchase or holding of such ERISA-Restricted
Certificate will not result in a prohibited transaction and will not subject the
Trustee to any obligation in addition to those expressly undertaken in this
Agreement or to any liability. For purposes of the preceding sentence, with
respect to an ERISA-Restricted Certificate that is a Book-Entry Certificate, in
the event the representation letter referred to in the preceding sentence is not
so furnished, such representation shall be deemed to have been made to the
Trustee by the transferee's (including an initial acquiror's) acceptance of the
ERISA-Restricted Certificates. 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 Trustee of an Opinion of Counsel satisfactory to the Trustee as
described above shall be void and of no effect.

         To the extent permitted under applicable law (including, but not
limited to, ERISA), the Trustee shall be under no liability to any Person for
any registration of transfer of any ERISA-Restricted Certificate that is in fact
not permitted by this Section 5.02(b) or for making any payments due on such
Certificate to the Holder thereof or taking any other action with respect to
such Holder under the provisions of this Agreement so long as the transfer was
registered by the Trustee in accordance with the foregoing requirements.

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<PAGE>   81

         (c) Each Person who has or who acquires any Ownership Interest in a
Residual Certificate shall be deemed by the acceptance or acquisition of such
Ownership Interest to have agreed to be bound by the following provisions, and
the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions:

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

                  (ii)  No Ownership Interest in a Residual Certificate may be
         registered on the Closing Date or thereafter transferred, and the
         Trustee shall not register the Transfer of any Residual Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee under subparagraph (b) above, the Trustee shall have been
         furnished with an affidavit (a "Transfer Affidavit") (in the event such
         Residual Certificate is a Private Certificate) of the initial owner or
         the proposed transferee in the form attached hereto as Exhibit I.

                  (iii) Each Person holding or acquiring any Ownership Interest
         in a Residual Certificate shall agree (A) to obtain a Transfer
         Affidavit from any other Person to whom such Person attempts to
         Transfer its Ownership Interest in a Residual Certificate, (B) to
         obtain a Transfer Affidavit from any Person for whom such Person is
         acting as nominee, trustee or agent in connection with any Transfer of
         a Residual Certificate and (C) not to Transfer its Ownership Interest
         in a Residual Certificate or to cause the Transfer of an Ownership
         Interest in a Residual Certificate to any other Person if it has actual
         knowledge that such Person is not a Permitted Transferee.

                  (iv)  Any attempted or purported Transfer of any Ownership
         Interest in a Residual Certificate in violation of the provisions of
         this Section 5.02(c) shall be absolutely null and void and shall vest
         no rights in the purported Transferee. If any purported transferee
         shall become a Holder of a Residual Certificate in violation of the
         provisions of this Section 5.02(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Residual
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Residual Certificate that is in fact
         not permitted by Section 5.02(b) (in the event such Residual
         Certificate is a Private Certificate) and this Section 5.02(c) or for
         making any payments due on such Certificate to the Holder thereof or
         taking any other action with respect to such Holder under the
         provisions of this Agreement so long as the Transfer was registered
         after receipt of the related Transfer Affidavit, Transferor Certificate
         and either the Rule 144A Letter or the Investment Letter (in the event
         such Residual Certificate is a Private Certificate). The Trustee shall
         be entitled but not obligated to recover from any Holder of a Residual
         Certificate that was in fact not a Permitted Transferee at the time it
         became a Holder or, at such subsequent time as it became other than a
         Permitted Transferee, all payments made on such Residual Certificate at
         and after either such time. Any such payments so recovered by the
         Trustee shall be paid and delivered by the Trustee to the last
         preceding Permitted Transferee of such Certificate.

                  (v)   The Depositor shall compute any tax or use its best
         efforts to make available, upon receipt of written request from the
         Trustee, all information necessary to compute any tax imposed under
         Section 860E(e) of the Code as a result of a Transfer of an Ownership
         Interest in

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<PAGE>   82

         a Residual Certificate to any Holder who is not a Permitted Transferee.
         The Trustee will compute such tax upon receipt of an additional
         reasonable fee.

         The restrictions on Transfers of a Residual Certificate set forth in
this Section 5.02(c) shall cease to apply (and the applicable portions of the
legend on a Residual Certificate may be deleted) with respect to Transfers
occurring after delivery to the Trustee of an Opinion of Counsel, which Opinion
of Counsel shall not be an expense of the Trust Fund, the Trustee, the Seller or
the Master Servicer, to the effect that the elimination of such restrictions
will not cause any REMIC hereunder to fail to qualify as a REMIC at any time
that the Certificates are outstanding or result in the imposition of any tax on
the Trust Fund, a Certificateholder or another Person. Each Person holding or
acquiring any Ownership Interest in a Residual Certificate hereby consents to
any amendment of this Agreement which, based on an Opinion of Counsel furnished
to the Trustee, is reasonably necessary (a) to ensure that the record ownership
of, or any beneficial interest in, a Residual Certificate is not transferred,
directly or indirectly, to a Person that is not a Permitted Transferee and (b)
to provide for a means to compel the Transfer of a Residual Certificate which is
held by a Person that is not a Permitted Transferee to a Holder that is a
Permitted Transferee.

         (d) The preparation and delivery of all certificates and opinions
referred to above in this Section 5.02 in connection with transfer shall be at
the expense of the parties to such transfers.

         (e) Except as provided below, the Book-Entry Certificates shall at all
times remain registered in the name of the Depository or its nominee and at all
times: (i) registration of the Certificates may not be transferred by the
Trustee except to another Depository; (ii) the Depository shall maintain
book-entry records with respect to the Certificate Owners and with respect to
ownership and transfers of such Book-Entry Certificates; (iii) ownership and
transfers of registration of the Book-Entry Certificates on the books of the
Depository shall be governed by applicable rules established by the Depository;
(iv) the Depository may collect its usual and customary fees, charges and
expenses from its Depository Participants; (v) the Trustee shall deal with the
Depository, Depository Participants and indirect participating firms as
representatives of the Certificate Owners of the Book-Entry Certificates for
purposes of exercising the rights of holders under this Agreement, and requests
and directions for and votes of such representatives shall not be deemed to be
inconsistent if they are made with respect to different Certificate Owners; and
(vi) the Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its Depository
Participants and furnished by the Depository Participants with respect to
indirect participating firms and persons shown on the books of such indirect
participating firms as direct or indirect Certificate Owners.

         All transfers by Certificate Owners of Book-Entry Certificates shall be
made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owner. Each Depository
Participant shall only transfer Book-Entry Certificates of Certificate Owners it
represents or of brokerage firms for which it acts as agent in accordance with
the Depository's normal procedures.

         If (x) (i) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to properly discharge
its responsibilities as Depository, and (ii) the Depositor is unable to locate a
qualified successor, (y) the Depositor at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Depository
or (z) after the occurrence of an Event of Default, Certificate Owners
representing at least 51% of the Certificate Balance of the Book-Entry
Certificates together advise the Trustee and the Depository through the

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Depository Participants in writing that the continuation of a book-entry system
through the Depository is no longer in the best interests of the Certificate
Owners, the Trustee shall notify all Certificate Owners, through the Depository,
of the occurrence of any such event and of the availability of definitive,
fully-registered Certificates (the "Definitive Certificates") to Certificate
Owners requesting the same. Upon surrender to the Trustee of the related Class
of Certificates by the Depository, accompanied by the instructions from the
Depository for registration, the Trustee shall issue the Definitive
Certificates. Neither the Master Servicer, the Depositor nor the Trustee shall
be liable for any delay in delivery of such instruction and each may
conclusively rely on, and shall be protected in relying on, such instructions.
The Master Servicer shall provide the Trustee with an adequate inventory of
certificates to facilitate the issuance and transfer of Definitive Certificates.
Upon the issuance of Definitive Certificates the Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.

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

         If (a) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Certificate and (b) there is delivered to the Master Servicer and the
Trustee 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 that such
Certificate has been acquired by a bona fide purchaser, the Trustee shall
execute, countersign and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
Class, tenor and Percentage Interest. In connection with the issuance of any new
Certificate under this Section 5.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 5.03 shall constitute complete and indefeasible evidence of
ownership, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

         SECTION 5.04. Persons Deemed Owners.

         The Master Servicer, the Trustee and any agent of the Master Servicer
or the Trustee may treat the Person in whose name any Certificate is registered
as the owner of such Certificate for the purpose of receiving distributions as
provided in this Agreement and for all other purposes whatsoever, and neither
the Master Servicer, the Trustee nor any agent of the Master Servicer or the
Trustee shall be affected by any notice to the contrary.

         SECTION 5.05. Access to List of Certificateholders' Names and
                       Addresses.

         If three or more Certificateholders (a) request such information in
writing from the Trustee, (b) state that such Certificateholders desire to
communicate with other Certificateholders with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication which such Certificateholders propose to transmit, or if the
Depositor or Master Servicer shall request such information in writing from the
Trustee, then the Trustee shall, within ten Business Days after the receipt of
such request, provide the Depositor, the Master Servicer or such
Certificateholders at such recipients' expense the most recent list of the
Certificateholders of such Trust Fund held by the Trustee, if any. The Depositor
and every Certificateholder, by receiving and holding a Certificate, agree that
the Trustee shall not be held accountable by reason of the disclosure of any
such information as to the list of the Certificateholders hereunder, regardless
of the source from which such information was derived.

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         SECTION 5.06. Maintenance of Office or Agency.

         The Trustee will maintain or cause to be maintained at its expense an
office or offices or agency or agencies in Minneapolis, Minnesota where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.

                                   ARTICLE VI

                      THE DEPOSITOR AND THE MASTER SERVICER

         SECTION 6.01. Respective Liabilities of the Depositor and the Master
                       Servicer.

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

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

         The Depositor and the Master Servicer will each keep in full effect its
existence, rights and franchises as a corporation or association under the laws
of the United States or under the laws of one of the states thereof and will
each obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Agreement, or any
of the Mortgage Loans and to perform its respective duties under this Agreement.

         Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any Person resulting from any merger or consolidation
to which the Depositor or the Master Servicer shall be a party, or any Person
succeeding to the business of the Depositor or the Master Servicer, shall be the
successor of the Depositor or the Master Servicer, as the case may be,
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding; provided, however, that the successor or surviving Person to
the Master Servicer shall be qualified, or affiliated with an entity qualified,
to sell mortgage loans to, and to service mortgage loans on behalf of, FNMA or
FHLMC.

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

         None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Certificateholders for any
action taken or for refraining from the taking of any action in good faith
pursuant to this Agreement, or for errors in judgment; provided, however, that
this provision shall not protect the Depositor, the Seller, the Master Servicer
or any such Person against any breach of representations or warranties made by
it herein or protect the Depositor, the Seller, the Master Servicer or any such
Person from any liability which would otherwise be imposed by reasons of willful
misfeasance, bad faith or gross negligence in the performance of duties or by
reason of reckless disregard

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of obligations and duties hereunder. The Depositor, the Seller, the Master
Servicer and any director, officer, employee or agent of the Depositor, the
Seller or the Master Servicer may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Depositor, the Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the Master
Servicer shall be indemnified by the Trust Fund and held harmless against any
loss, liability or expense incurred in connection with any audit, controversy or
judicial proceeding relating to a governmental taxing authority or any legal
action relating to this Agreement or the Certificates, other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement) and any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or gross negligence in the performance
of duties hereunder or by reason of reckless disregard of obligations and duties
hereunder. None of the Depositor, the Seller or the Master Servicer shall be
under any obligation to appear in, prosecute or defend any legal action that is
not incidental to its respective duties hereunder and which in its opinion may
involve it in any expense or liability; provided, however, that any of the
Depositor, the Seller or the Master Servicer may in its discretion undertake any
such action that it may deem necessary or desirable in respect of this Agreement
and the rights and duties of the parties hereto and interests of the Trustee and
the Certificateholders hereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom shall be expenses, costs and
liabilities of the Trust Fund, and the Depositor, the Seller and the Master
Servicer shall be entitled to be reimbursed therefor out of the Certificate
Account.

         SECTION 6.04. Limitation on Resignation of Master Servicer.

         Except as provided in Section 6.02, the Master Servicer shall not
resign from the obligations and duties hereby imposed on it except (a) upon
appointment by the Depositor of a successor servicer reasonably satisfactory to
the Trustee and receipt by the Trustee of a letter from each Rating Agency that
such a resignation and appointment will not result in a downgrading of the
rating of any of the Certificates or (b) upon determination that its duties
hereunder are no longer permissible under applicable law. Any such determination
under clause (b) permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect delivered to the Trustee. No
such resignation shall become effective until the Trustee or a successor master
servicer shall have assumed the Master Servicer's responsibilities, duties,
liabilities and obligations hereunder.

                                   ARTICLE VII

                                     DEFAULT

         SECTION 7.01. Events of Default.

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

                  (i) any failure by the Master Servicer to deposit in the
         Certificate Account or remit to the Trustee any payment (other than a
         payment required to be made under Section 4.01 hereof) required to be
         made under the terms of this Agreement, which failure shall continue
         unremedied for five days after the date upon which written notice of
         such failure shall have been given to the Master Servicer by the
         Trustee or the Depositor or to the Master Servicer and the Trustee by
         the Holders of Certificates having not less than 25% of the Voting
         Rights evidenced by the Certificates; or

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<PAGE>   86

                  (ii)  any failure by the Master Servicer to observe or perform
         in any material respect any other of the covenants or agreements on the
         part of the Master Servicer contained in this Agreement, which failure
         shall continue unremedied for a period of 60 days after the date on
         which written notice of such failure shall have been given to the
         Master Servicer by the Trustee or the Depositor, or to the Master
         Servicer and the Trustee by the Holders of Certificates evidencing not
         less than 25% of the Voting Rights evidenced by the Certificates; or

                  (iii) a decree or order of a court or agency or supervisory
         authority having jurisdiction in the premises for the appointment of a
         receiver or liquidator in any insolvency, readjustment of debt,
         marshaling of assets and liabilities or similar proceedings, or for the
         winding-up or liquidation of its affairs, shall have been entered
         against the Master Servicer and such decree or order shall have
         remained in force undischarged or unstayed for a period of 60
         consecutive days; or

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

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

                  (vi)  so long as the Master Servicer is the Seller, any
         failure by the Seller to observe or perform in any material respect any
         other of the covenants or agreements on the part of the Seller
         contained in this Agreement, which failure shall continue unremedied
         for a period of 60 days after the date on which written notice of such
         failure shall have been given to the Seller by the Trustee or the
         Depositor, or to the Seller and the Trustee by the Holders of
         Certificates evidencing not less than 25% of the Voting Rights
         evidenced by the Certificates; or

                  (vii) any failure of the Master Servicer to make any Advance
         in the manner and at the time required to be made pursuant to Section
         4.01 which continues unremedied for a period of one Business Day after
         the date of such failure.

         If an Event of Default described in clauses (i) to (vi) of this Section
shall occur, then, and in each and every such case, so long as such Event of
Default shall not have been remedied, the Trustee may, or at the direction of
the Holders of Certificates evidencing not less than 25% of the Voting Rights
evidenced by the Certificates, the Trustee shall by notice in writing to the
Master Servicer (with a copy to each Rating Agency), terminate all of the rights
and obligations of the Master Servicer under this Agreement and in and to the
Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. If an Event of Default described in clause (vii)
hereof shall occur, the Trustee shall, by notice in writing to the Master
Servicer and the Depositor, terminate all of the rights and obligations of the
Master Servicer under this Agreement and in and to the Mortgage Loans and the
proceeds thereof, other than its rights as a Certificateholder hereunder. On and
after the receipt by the

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Master Servicer of such written notice, all authority and power of the Master
Servicer hereunder, whether with respect to the Mortgage Loans or otherwise,
shall pass to and be vested in the Trustee pursuant to Section 7.02 hereof. The
Trustee shall thereupon make any Advance described in clause (vii) hereof
subject to Section 3.04 hereof. The Trustee is hereby authorized and empowered
to execute and deliver, on behalf of the Master Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement or
assignment of the Mortgage Loans and related documents, or otherwise. Unless
expressly provided in such written notice, no such termination shall affect any
obligation of the Master Servicer to pay amounts owed pursuant to Article VIII.
The Master Servicer agrees to cooperate with the Trustee in effecting the
termination of the Master Servicer's responsibilities and rights hereunder,
including, without limitation, the transfer to the Trustee of all cash amounts
which shall at the time be credited to the Certificate Account, or thereafter be
received with respect to the Mortgage Loans.

         Notwithstanding any termination of the activities of the Master
Servicer hereunder, the Master Servicer shall be entitled to receive, out of any
late collection of a Scheduled Payment on a Mortgage Loan which was due prior to
the notice terminating such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, Liquidation Proceeds,
purchase or repurchase proceeds or otherwise that portion thereof to which such
Master Servicer would have been entitled pursuant to Sections 3.08(a)(i) through
(viii), and any other amounts payable to such Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder
on a first in, first out basis.

         SECTION 7.02. Trustee to Act; Appointment of Successor.

         On and after the time the Master Servicer receives a notice of
termination pursuant to Section 7.01 hereof, the Trustee shall, subject to and
to the extent provided in Section 3.04, be the successor to the Master Servicer
in its capacity as master servicer under this Agreement and the transactions set
forth or provided for herein and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Master Servicer by the
terms and provisions hereof and applicable law including the obligation to make
Advances pursuant to Section 4.01. As compensation therefor, the Trustee shall
be entitled to all funds relating to the Mortgage Loans that the Master Servicer
would have been entitled to charge to the Certificate Account or Distribution
Account if the Master Servicer had continued to act hereunder. Notwithstanding
the foregoing, if the Trustee has become the successor to the Master Servicer in
accordance with Section 7.01 hereof, the Trustee may, if it shall be unwilling
to so act, or shall, if it is prohibited by applicable law from making Advances
pursuant to Section 4.01 hereof or if it is otherwise unable to so act, appoint,
or petition a court of competent jurisdiction to appoint, any established
mortgage loan servicing institution the appointment of which does not adversely
affect the then current rating of the Certificates by each Rating Agency as the
successor to the Master Servicer hereunder in the assumption of all or any part
of the responsibilities, duties or liabilities of the Master Servicer hereunder.
Any successor to the Master Servicer shall be an institution which is a FNMA and
FHLMC approved seller/servicer in good standing, which has a net worth of at
least $15,000,000, and which is willing to service the Mortgage Loans and
executes and delivers to the Depositor and the Trustee an agreement accepting
such delegation and assignment, which contains an assumption by such Person of
the rights, powers, duties, responsibilities, obligations and liabilities of the
Master Servicer (other than liabilities of the Master Servicer under Section
6.03 hereof incurred prior to termination of the Master Servicer under Section
7.01), with like effect as if originally named as a party to this Agreement; and
provided further that each Rating Agency acknowledges that its

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rating of the Certificates in effect immediately prior to such assignment and
delegation will not be qualified or reduced as a result of such assignment and
delegation. Pending appointment of a successor to the Master Servicer hereunder,
the Trustee, unless the Trustee is prohibited by law from so acting, shall,
subject to Section 3.04 hereof, act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of the servicing compensation permitted the
Master Servicer hereunder. The Trustee and such successor shall take such
action, consistent with this Agreement, as shall be necessary to effectuate any
such succession. Neither the Trustee nor any other successor master servicer
shall be deemed to be in default hereunder by reason of any failure to make, or
any delay in making, any distribution hereunder or any portion thereof or any
failure to perform, or any delay in performing, any duties or responsibilities
hereunder, in either case caused by the failure of the Master Servicer to
deliver or provide, or any delay in delivering or providing, any cash,
information, documents or records to it.

         Notwithstanding the foregoing, the parties hereto agree that the
Trustee, in its capacity as successor Master Servicer, immediately will assume
all of the obligations of the Master Servicer to make Advances and the Trustee
will assume the other duties of the Master Servicer as soon as practicable, but
in no event later than 90 days after the Trustee becomes successor Master
Servicer pursuant to this Section. Notwithstanding the foregoing, the Trustee,
in its capacity as successor Master Servicer, shall not be responsible for the
lack of information and/or documents that it cannot obtain through reasonable
efforts.

         Any successor to the Master Servicer as master servicer shall give
notice to the Mortgagors of such change of servicer and shall, during the term
of its service as master servicer maintain in force the policy or policies that
the Master Servicer is required to maintain pursuant to Section 6.05.

         SECTION 7.03. Notification to Certificateholders.

         (a) Upon any termination of or appointment of a successor to the Master
Servicer, the Trustee shall give prompt written notice thereof to
Certificateholders and to each Rating Agency.

         (b) Within 60 days after the occurrence of any Event of Default, the
Trustee shall transmit by mail to all Certificateholders notice of each such
Event of Default hereunder known to the Trustee, unless such Event of Default
shall have been cured or waived.

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

         SECTION 8.01. Duties of Trustee.

         The Trustee, prior to the occurrence of an Event of Default and after
the curing of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use

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the same degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.

         The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that are specifically required to be furnished pursuant to any provision
of this Agreement shall examine them to determine whether they are in the form
required by this Agreement; provided, however, that the Trustee shall not be
responsible for the accuracy or content of any such resolution, certificate,
statement, opinion, report, document, order or other 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 willful misconduct; provided, however, that:

                  (i)   unless an Event of Default known to the Trustee shall
         have occurred and be continuing, 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 the Trustee may conclusively rely, as
         to the truth of the statements and the correctness of the opinions
         expressed therein, upon any certificates or opinions furnished to the
         Trustee and conforming to the requirements of this Agreement which it
         believed in good faith to be genuine and to have been duly executed by
         the proper authorities respecting any matters arising hereunder;

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

                  (iii) the Trustee shall not be liable with respect to any
         action taken, suffered or omitted to be taken by it in good faith in
         accordance with the direction of Holders of Certificates evidencing not
         less than 25% of the Voting Rights of Certificates affected thereby
         relating to the time, method and place of conducting any proceeding for
         any remedy available to the Trustee, or exercising any trust or power
         conferred upon the Trustee under this Agreement.

         SECTION 8.02. Certain Matters Affecting the Trustee.

         Except as otherwise provided in Section 8.01:

                  (i) the Trustee may request and rely upon and shall be
         protected in acting or refraining from acting upon any resolution,
         Officers' Certificate, certificate of auditors or any other
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, appraisal, bond or other paper or document believed by
         it to be genuine and to have been signed or presented by the proper
         party or parties and the Trustee shall have no responsibility to
         ascertain or confirm the genuineness of any signature of any such party
         or parties;

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<PAGE>   90

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

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

                  (iv)   the Trustee shall not be bound to make any
         investigation into the facts or matters stated in any resolution,
         certificate, statement, instrument, opinion, report, notice, request,
         consent, order, approval, bond or other paper or document, unless
         requested in writing so to do by Holders of Certificates evidencing not
         less than 25% of the Voting Rights allocated to each Class of
         Certificates affected thereby;

                  (v)    the Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, accountants or attorneys;

                  (vi)   the Trustee shall not be required to risk or expend its
         own funds or otherwise incur any financial liability in the performance
         of any of its duties or in the exercise of any of its rights or powers
         hereunder if it shall have reasonable grounds for believing that
         repayment of such funds or adequate indemnity against such risk or
         liability is not assured to it;

                  (vii)  the Trustee shall not be liable for any loss on any
         investment of funds pursuant to this Agreement;

                  (viii) the Trustee shall not be deemed to have knowledge of an
         Event of Default until a Responsible Officer of the Trustee shall have
         received written notice thereof;

                  (ix)   the Trustee shall be under no obligation to exercise
         any of the trusts, rights or powers vested in it by this Agreement or
         to institute, conduct or defend any litigation hereunder or in relation
         hereto at the request, order or direction of any of the
         Certificateholders, pursuant to the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         reasonable security or indemnity satisfactory to the Trustee against
         the costs, expenses and liabilities which may be incurred therein or
         thereby; and

                  (x)    upon any failure of Mellon Bank, N.A. to satisfy its
         obligations under the Put Option the Optional Call, if exercised, the
         Trustee shall proceed in accordance with the protections offered it by
         this Agreement, including, but not limited to, Section 8.01(iii) and
         Section 8.02(iv), (vi) and (ix).

         SECTION 8.03. Trustee Not Liable for Certificates, Mortgage Loans or
                       Additional Collateral.

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         The recitals contained herein and in the Certificates shall be taken as
the statements of the Depositor or the Seller, as the case may be, and the
Trustee assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates or of any Mortgage Loan or of any Additional Collateral which may
be held by a custodian on behalf of the Trustee or of any related document other
than with respect to the Trustee's execution and counter-signature of the
Certificates. The Trustee shall not be accountable for the use or application by
the Depositor or the Master Servicer of any funds paid to the Depositor or the
Master Servicer in respect of the Mortgage Loans or deposited in or withdrawn
from the Certificate Account by the Depositor or the Master Servicer.

         SECTION 8.04. Trustee May Own Certificates.

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

         SECTION 8.05. Trustee's Fees and Expenses.

         The Trustee shall be entitled to the Trustee Fee on each Distribution
Date, as compensation for its activities hereunder. The Trustee and any
director, officer, employee or agent of the Trustee shall be indemnified by the
Master Servicer and held harmless against any loss, liability or expense
(including reasonable attorney's fees) (i) incurred in connection with any claim
or legal action relating to (a) this Agreement or any Subsequent Transfer
Agreement, (b) the Certificates or (c) in connection with the performance of any
of the Trustee's duties hereunder, other than any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence in the
performance of any of the Trustee's duties hereunder and (ii) resulting from any
error in any tax or information return prepared by the Master Servicer. Such
indemnity shall survive the termination of this Agreement or the resignation or
removal of the Trustee hereunder. Without limiting the foregoing, the Master
Servicer covenants and agrees, except as otherwise agreed upon in writing by the
Depositor and the Trustee, and except for any such expense, disbursement or
advance as may arise from the Trustee's negligence, bad faith or willful
misconduct, to pay or reimburse the Trustee, for all reasonable and
unanticipated expenses, disbursements and advances incurred or made by the
Trustee in accordance with any of the provisions of this Agreement including,
but not limited to: (A) the reasonable compensation and the expenses and
disbursements of its counsel not associated with the closing of the issuance of
the Certificates, (B) the reasonable compensation, expenses and disbursements of
any accountant, engineer or appraiser that is not regularly employed by the
Trustee, to the extent that the Trustee must engage such persons to perform acts
or services hereunder, (C) printing and engraving expenses in connection with
preparing any Definitive Certificates and (D) expenses incurred pursuant to
Section 3.04. Except as otherwise provided herein, the Trustee shall not be
entitled to payment or reimbursement for any routine ongoing expenses incurred
by the Trustee in the ordinary course of its duties as Trustee or as agent for
the Tax Matters Person or for any other expenses.

         SECTION 8.06. Eligibility Requirements for Trustee.

         The Trustee hereunder shall at all times be a corporation or
association organized and doing business under the laws of a state or the United
States of America, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000, subject
to supervision or examination by federal or state authority and with a credit
rating which would not cause either of the Rating Agencies to reduce their
respective then current ratings of the Certificates (or having

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provided such security from time to time as is sufficient to avoid such
reduction). If such corporation or association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.06
the combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 8.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.07 hereof. The entity serving as Trustee may have normal banking and trust
relationships with the Depositor and its affiliates or the Master Servicer and
its affiliates; provided, however, that such entity cannot be an affiliate of
the Master Servicer other than the Trustee in its role as successor to the
Master Servicer.

         SECTION 8.07. Resignation and Removal of Trustee.

         The Trustee may at any time resign and be discharged from the trusts
hereby created by giving written notice of resignation to the Depositor and the
Master Servicer and each Rating Agency not less than 60 days before the date
specified in such notice when, subject to Section 8.08, such resignation is to
take effect, and acceptance by a successor trustee in accordance with Section
8.08 meeting the qualifications set forth in Section 8.06. If no successor
trustee meeting such qualifications shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice or
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

         If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request thereto by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or a tax
is imposed with respect to the Trust Fund by any state in which the Trustee or
the Trust Fund is located and the imposition of such tax would be avoided by the
appointment of a different trustee, then the Depositor or the Master Servicer
may remove the Trustee and appoint a successor trustee by written instrument, in
triplicate, one copy of which instrument shall be delivered to the Trustee, one
copy of which shall be delivered to the Master Servicer and one copy to the
successor trustee.

         The Holders of Certificates entitled to at least 51% of the Voting
Rights may at any time remove the Trustee and appoint a successor trustee by
written instrument or instruments, in triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer, one complete
set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.

         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
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.08 hereof.

         SECTION 8.08. Successor Trustee.

         Any successor trustee appointed as provided in Section 8.07 hereof
shall execute, acknowledge and deliver to the Depositor and to its predecessor
trustee and the Master Servicer an

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instrument accepting such appointment hereunder and thereupon the resignation or
removal of the predecessor trustee shall become effective and such successor
trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with the like effect as if originally named as trustee herein. The
Depositor, the Master Servicer and the predecessor trustee shall execute and
deliver such instruments and do such other things as may reasonably be required
for more fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties, and obligations.

         No successor trustee shall accept appointment as provided in this
Section 8.08 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 hereof and its appointment
shall not adversely affect the then current rating of the Certificates.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 8.08, the Depositor shall mail notice of the succession of such
trustee hereunder to all Holders of Certificates. If the Depositor fails to mail
such notice within 10 days after acceptance of appointment by the successor
trustee, the successor trustee shall cause such notice to be mailed at the
expense of the Depositor.

         SECTION 8.09. Merger or Consolidation of Trustee.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to the business of the Trustee, shall be the successor of
the Trustee hereunder, provided that such corporation shall be eligible under
the provisions of Section 8.06 hereof without the execution or filing of any
paper or further act on the part of any of the parties hereto, anything herein
to the contrary notwithstanding.

         SECTION 8.10. Appointment of Co-Trustee or Separate Trustee.

         Notwithstanding any other provisions of this Agreement, at any time,
for the purpose of meeting any legal requirements of any jurisdiction in which
any part of the Trust Fund or property securing any Mortgage Note may at the
time be located, the Master Servicer and the Trustee acting jointly shall have
the power and shall execute and deliver all instruments to appoint one or more
Persons approved by the Trustee to act as co-trustee or co-trustees jointly with
the Trustee, or separate trustee or separate trustees, of all or any part of the
Trust Fund, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust Fund or any part
thereof, whichever is applicable, and, subject to the other provisions of this
Section 8.10, such powers, duties, obligations, rights and trusts as the Master
Servicer and the Trustee may consider necessary or desirable. If the Master
Servicer shall not have joined in such appointment within 15 days after the
receipt by it of a request to do so, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee hereunder shall be required
to meet the terms of eligibility as a successor trustee under Section 8.06 and
no notice to Certificateholders of the appointment of any co-trustee or separate
trustee shall be required under Section 8.08.

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

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                  (i)   To the extent necessary to effectuate the purposes of
         this Section 8.10, all rights, powers, duties and obligations conferred
         or imposed upon the Trustee, except for the obligation of the Trustee
         under this Agreement to advance funds on behalf of the Master Servicer,
         shall be conferred or imposed upon and exercised or performed by the
         Trustee and such separate trustee or co-trustee jointly (it being
         understood that such separate trustee or co-trustee is not authorized
         to act separately without the Trustee joining in such act), except to
         the extent that under any law of any jurisdiction in which any
         particular act or acts are to be performed (whether as Trustee
         hereunder or as successor to the Master Servicer hereunder), the
         Trustee shall be incompetent or unqualified to perform such act or
         acts, in which event such rights, powers, duties and obligations
         (including the holding of title to the applicable Trust Fund or any
         portion thereof in any such jurisdiction) shall be exercised and
         performed singly by such separate trustee or co-trustee, but solely at
         the direction of the Trustee;

                  (ii)  No trustee hereunder shall be held personally liable by
         reason of any act or omission of any other trustee hereunder and such
         appointment shall not, and shall not be deemed to, constitute any such
         separate trustee or co-trustee as agent of the Trustee;

                  (iii) The Trustee may at any time accept the resignation of or
         remove any separate trustee or co-trustee; and

                  (iv)  The Master Servicer, and not the Trustee, shall be
         liable for the payment of reasonable compensation, reimbursement and
         indemnification to any such separate trustee or co-trustee.

         Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the separate trustees and co-trustees, when
and as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

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

         SECTION 8.11. Tax Matters.

         (a) It is intended that the assets with respect to which any REMIC
election is to be made, as set forth in the Preliminary Statement, shall
constitute, and that the conduct of matters relating to such assets shall be
such as to qualify such assets as, a "real estate mortgage investment conduit"
as defined in and in accordance with the REMIC Provisions. In furtherance of
such intention, the Trustee covenants

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and agrees that it shall act as agent (and the Trustee is hereby appointed to
act as agent) on behalf of any such REMIC and that in such capacity it shall:
(a) prepare and file, or cause to be prepared and filed, in a timely manner, a
U.S. Real Estate Mortgage Investment Conduit Income Tax Return (Form 1066 or any
successor form adopted by the Internal Revenue Service) and prepare and file or
cause to be prepared and filed with the Internal Revenue Service and applicable
state or local tax authorities income tax or information returns for each
taxable year with respect to any such REMIC, containing such information and at
the times and in the manner as may be required by the Code or state or local tax
laws, regulations, or rules, and furnish or cause to be furnished to
Certificateholders the schedules, statements or information at such times and in
such manner as may be required thereby; (b) within thirty days of the Closing
Date, furnish or cause to be furnished to the Internal Revenue Service, on Forms
8811 or as otherwise may be required by the Code, the name, title, address, and
telephone number of the person that the holders of the Certificates may contact
for tax information relating thereto, together with such additional information
as may be required by such Form, and update such information at the time or
times in the manner required by the Code; (c) make or cause to be made elections
that such assets be treated as a REMIC on the federal tax return for its first
taxable year (and, if necessary, under applicable state law); (d) prepare and
forward, or cause to be prepared and forwarded, to the Certificateholders and to
the Internal Revenue Service and, if necessary, state tax authorities, all
information returns and reports as and when required to be provided to them in
accordance with the REMIC Provisions, including without limitation, the
calculation of any original issue discount using the Prepayment Assumption (as
defined in the Prospectus Supplement); (e) provide information necessary for the
computation of tax imposed on the transfer of a Residual Certificate to a Person
that is not a Permitted Transferee, or an agent (including a broker, nominee or
other middleman) of a Non-Permitted Transferee, or a pass-through entity in
which a Non-Permitted Transferee is the record holder of an interest (the
reasonable cost of computing and furnishing such information may be charged to
the Person liable for such tax); (f) to the extent that they are under its
control conduct matters relating to such assets at all times that any
Certificates are outstanding so as to maintain the status as a REMIC under the
REMIC Provisions; (g) not knowingly or intentionally take any action or omit to
take any action that would cause the termination of the REMICs' status; (h) pay,
from the sources specified in the last paragraph of this Section 8.11, the
amount of any federal or state tax, including prohibited transaction taxes as
described below, imposed on any REMIC hereunder prior to its termination when
and as the same shall be due and payable (but such obligation shall not prevent
the Trustee or any other appropriate Person from contesting any such tax in
appropriate proceedings and shall not prevent the Trustee from withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings); (i) ensure that federal, state or local income tax or information
returns shall be signed by the Trustee or such other person as may be required
to sign such returns by the Code or state or local laws, regulations or rules;
(j) maintain records relating to any REMIC hereunder, including but not limited
to the income, expenses, assets and liabilities thereof and the fair market
value and adjusted basis of the assets determined at such intervals as may be
required by the Code, as may be necessary to prepare the foregoing returns,
schedules, statements or information; (k) as and when necessary and appropriate,
represent any such REMIC in any administrative or judicial proceedings relating
to an examination or audit by any governmental taxing authority, request an
administrative adjustment as to any taxable year of any such REMIC, enter into
settlement agreements with any governmental taxing agency, extend any statute of
limitations relating to any tax item of the REMICs, and otherwise act on behalf
of REMICs in relation to any tax matter or controversy involving it; and (l)
apply for an Employee Identification Number from the Internal Revenue Service on
Form SS-4, or any other acceptable method, for each REMIC formed hereunder.

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         In order to enable the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within ten (10) days after the Closing Date all information or data that the
Trustee requests and determines to be relevant for tax purposes to the
valuations and offering prices of the Certificates, including, without
limitation, the price, yield, prepayment assumption and projected cash flows of
the Certificates and the Mortgage Loans. Thereafter, the Depositor shall provide
to the Trustee promptly upon request therefor, any such additional information
or data that the Trustee may, from time to time, reasonably request in order to
enable the Trustee to perform its duties as set forth herein. The Depositor
hereby indemnifies the Trustee for any losses, liabilities, damages, claims or
expenses of the Trustee arising from any errors or miscalculations of the
Trustee that result from any failure of the Depositor to provide, or to cause to
be provided, accurate information or data to the Trustee on a timely basis.

         In the event that any tax is imposed on "prohibited transactions" of
any REMIC hereunder as defined in Section 860F(a)(2) of the Code, on the "net
income from foreclosure property" of the REMIC as defined in Section 860G(c) of
the Code, on any contribution to any REMIC hereunder after the Startup Day
pursuant to Section 860G(d) of the Code, or any other tax is imposed, if not
paid as otherwise provided for herein, such tax shall be paid by (i) the
Trustee, if any such other tax arises out of or results from a breach by the
Trustee of any of its obligations under this Agreement, (ii) the Master
Servicer, in the case of any such minimum tax, or if such tax arises out of or
results from a breach by the Master Servicer or Seller of any of their
obligations under this Agreement, (iii) the Seller, if any such tax arises out
of or results from the Seller's obligation to repurchase a Mortgage Loan
pursuant to Section 2.02 or 2.03 or (iv) in all other cases, or in the event
that the Trustee, the Master Servicer or the Seller fails to honor its
obligations under the preceding clauses (i),(ii) or (iii), any such tax will be
paid with amounts otherwise to be distributed to the Certificateholders, as
provided in Section 3.08(b).

         (b) The Master Servicer is hereby designated as the Tax Matters Person
for each REMIC hereunder. The Master Servicer irrevocably appoints the Trustee
as its agent to perform all of the duties of the Tax Matters Person for each
REMIC hereunder.

         The Trustee shall afford the Tax Matters Person, 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. Upon request, the Trustee shall furnish
the Tax Matters Person with its most recent report of condition published
pursuant to law or to the requirements of its supervisory or examining authority
publicly available. The Trustee shall make available to the Tax Matters Person
such books, documents or records relating to the Trustee's services hereunder as
the Tax Matters Person shall reasonably request. The Tax Matters Person shall
not have any responsibility or liability for any action or failure to act by the
Trustee and is not obligated to supervise the performance of the Trustee under
this Agreement or otherwise.

         (c) The Put Option will not constitute

                  (i)  a "real estate asset" within the meaning of section
         856(c)(4)(A) of the Code for a real estate investment trust;

                  (ii) a "qualified mortgage" or a "permitted investment" within
         the meaning of section 860G(a)(3) and section 860G(a)(5), respectively,
         of the Code if held by a REMIC; or

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                  (iii) an asset described in section 7701(a)(19)(C) (xi) of the
         Code if held by a domestic building and loan association.

         SECTION 8.12. Periodic Filings.

         Pursuant to written instructions from the Depositor, the Trustee shall
prepare, execute and file all Form 8-Ks with exhibits (other than the Form 8-K
with which this Agreement is filed) and Form 10-Ks with exhibits required under
the Securities Exchange Act of 1934 in connection with this Agreement (other
than any such reports due as a result of the original issuance of the
Certificates). In addition, the Trustee shall prepare, execute and file no later
than January 30, 2001 a Form 15 to terminate the Trust Fund's reporting
obligations. In connection with the preparation and filing of such periodic
reports, the Depositor and the Master Servicer shall timely provide to the
Trustee all material information available to them which is required to be
included in such reports and not known to them to be in the possession of the
Trustee and such other information as the Trustee reasonably may request from
either of them and otherwise reasonably shall cooperate with the Trustee. The
Trustee shall have no liability with respect to any failure to properly prepare
or file such periodic reports resulting from or relating to the Trustee's
inability or failure to obtain any information not resulting from its own
negligence or willful misconduct.

                                   ARTICLE IX

                                   TERMINATION

         SECTION 9.01. Termination upon Liquidation or Purchase of all Mortgage
                       Loans.

         Subject to Section 9.03, the obligations and responsibilities of the
Depositor, the Master Servicer and the Trustee created hereby with respect to
the Trust Fund shall terminate upon the earlier of (a) the purchase by the
Master Servicer of all Mortgage Loans (and REO Properties) remaining in the
Trust Fund at the price equal to the sum of (i) 100% of the Stated Principal
Balance of each Mortgage Loan plus one month's accrued interest thereon at the
applicable Adjusted Mortgage Rate and (ii) the lesser of (x) the appraised value
of any REO Property as determined by the higher of two appraisals completed by
two independent appraisers selected by the Master Servicer at the expense of the
Master Servicer and (y) the Stated Principal Balance of each Mortgage Loan
related to any REO Property, in each case plus accrued and unpaid interest
thereon at the applicable Adjusted Mortgage Rate, (b) the later of (i) the
maturity or other liquidation (or any Advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund and the disposition of all REO
Property and (ii) the distribution to Certificateholders of all amounts required
to be distributed to them pursuant to this Agreement and (c) the exchange of all
Outstanding Regular Certificates by a single Holder for the Mortgage Loans and
REO Properties remaining in the Trust Fund. In no event shall the trusts created
hereby continue beyond the earlier of (i) the expiration of 21 years from the
death of the survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James's, living on the date
hereof and (ii) the Latest Possible Maturity Date. The right to purchase all
Mortgage Loans and REO Properties pursuant to clause (a) above shall be
conditioned upon the Pool Stated Principal Balance, at the time of any such
repurchase, aggregating ten percent (10%) or less of the sum of the aggregate
Cut-off Date Principal Balance of the Initial Mortgage Loans and the Original
Pre-Funded Amount.

         SECTION 9.02. Final Distribution on the Certificates.

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         If on any Determination Date, the Master Servicer determines that there
are no Outstanding Mortgage Loans and no other funds or assets in the Trust Fund
other than the funds in the Certificate Account, the Master Servicer shall
direct the Trustee promptly to send a final distribution notice to each
Certificateholder. If the Master Servicer elects to terminate the Trust Fund
pursuant to clause (a) of Section 9.01, at least 20 days prior to the date
notice is to be mailed to the affected Certificateholders, the Master Servicer
shall notify the Depositor and the Trustee of the date the Master Servicer
intends to terminate the Trust Fund and of the applicable repurchase price of
the Mortgage Loans and REO Properties.

         Notice of any termination of the Trust Fund, specifying the
Distribution Date on which Certificateholders may surrender their Certificates
for payment of the final distribution and cancellation, shall be given to the
extent reasonably practicable by the Trustee by letter to Certificateholders
mailed not earlier than the 15th day and no later than the 10th day of the month
next preceding the month of such final distribution. Any such notice shall
specify (a) the Distribution Date upon which final distribution on the
Certificates will be made upon presentation and surrender of Certificates at the
office therein designated, (b) the amount of such final distribution, (c) the
location of the office or agency at which such presentation and surrender must
be made, and (d) that the Record Date otherwise applicable to such Distribution
Date is not applicable, distributions being made only upon presentation and
surrender of the Certificates at the office therein specified. The Master
Servicer will give such notice to each Rating Agency at the time such notice is
given to Certificateholders.

         In the event such notice is given, the Master Servicer shall cause all
funds in the Certificate Account to be remitted to the Trustee for deposit in
the Distribution Account on the Business Day prior to the applicable
Distribution Date. Upon such final deposit with respect to the Trust Fund and
the receipt by the Trustee of a Request for Release therefor, the Trustee shall
promptly release to the Master Servicer the Mortgage Files for the Mortgage
Loans.

         Upon presentation and surrender of the Certificates, the Trustee shall
cause to be distributed to the Certificateholders of each Class, in the order
set forth in Section 4.02 hereof, on the final Distribution Date, in proportion
to their respective Percentage Interests, with respect to Certificateholders of
the same Class, an amount equal to (i) as to each Class of Regular Certificates,
the Certificate Balance thereof plus accrued interest thereon (or on their
Notional Amount, if applicable) in the case of an interest bearing Certificate,
and (ii) as to the Residual Certificates, the amount, if any, which remains on
deposit in the Distribution Account (other than the amounts retained to meet
claims) after application pursuant to clause (i) above.

         In the event that any affected Certificateholders shall not surrender
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets which remain a part of
the Trust Fund. If within one year after the second notice all Certificates
shall not have been surrendered for cancellation, the Class A-R
Certificateholders shall be entitled to all unclaimed funds and other assets of
the Trust Fund which remain subject hereto.

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         SECTION 9.03. Additional Termination Requirements.

         (a) In the event the Master Servicer exercises its purchase option as
provided in Section 9.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee has been supplied with
an Opinion of Counsel, at the expense of the Master Servicer, to the effect that
the failure to comply with the requirements of this Section 9.03 will not (i)
result in the imposition of taxes on "prohibited transactions" on any REMIC as
defined in section 860F of the Code, or (ii) cause any REMIC hereunder to fail
to qualify as a REMIC at any time that any Certificates are outstanding:

                  (1) Within 90 days prior to the final Distribution Date set
         forth in the notice given by the Master Servicer under Section 9.02,
         the Master Servicer shall prepare and the Trustee, at the expense of
         the "tax matters person," shall adopt a plan of complete liquidation
         within the meaning of section 860F(a)(4) of the Code which, as
         evidenced by an Opinion of Counsel (which opinion shall not be an
         expense of the Trustee or the Tax Matters Person), meets the
         requirements of a qualified liquidation; and

                  (2) Within 90 days after the time of adoption of such a plan
         of complete liquidation, the Trustee shall sell all of the assets of
         the Trust Fund to the Master Servicer for cash in accordance with
         Section 9.01.

         (b) The Trustee as agent for any REMIC hereunder hereby agrees to adopt
and sign such a plan of complete liquidation upon the written request of the
Master Servicer, and the receipt of the Opinion of Counsel referred to in
Section 9.03(a)(1) and to take such other action in connection therewith as may
be reasonably requested by the Master Servicer.

         (c) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Master Servicer to prepare and the Trustee to adopt and sign a
plan of complete liquidation.

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

         SECTION 10.01. Amendment.

         (a) This Agreement may be amended from time to time by the Depositor,
the Master Servicer and the Trustee without the consent of any of the
Certificateholders to cure any ambiguity or defect, or to correct or supplement
any provisions herein, (including to give effect to the expectations of
investors), or to make such other provisions with respect to matters or
questions arising under this Agreement as shall not be inconsistent with any
other provisions herein; provided that such action shall not, as evidenced by an
Opinion of Counsel (which Opinion of Counsel shall not be an expense of the
Trustee or the Trust Fund), adversely affect in any material respect the
interests of any Certificateholder; provided, however, that the amendment shall
not be deemed to adversely affect in any material respect the interests of the
Certificateholders if the Person requesting the amendment obtains a letter from
each Rating Agency stating that the amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates; it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. The Trustee, the Depositor and the Master Servicer
also may at any time and from time to time amend this Agreement without the
consent of the Certificateholders to modify, eliminate or add to any of its
provisions to such

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<PAGE>   100

extent as shall be necessary or helpful to maintain the qualification of any
REMIC hereunder as a REMIC under the Code or to avoid or minimize the risk of
the imposition of any tax on any REMIC hereunder pursuant to the Code that would
be a claim at any time prior to the final redemption of the Certificates,
provided that the Trustee has been provided an Opinion of Counsel, which opinion
shall be an expense of the party requesting such opinion but in any case shall
not be an expense of the Trustee or the Trust Fund, to the effect that such
action is necessary or helpful to maintain such qualification or to avoid or
minimize the risk of the imposition of such a tax.

         (b) This Agreement may also be amended from time to time by the
Depositor, the Master Servicer and the Trustee with the consent of the Holders
of a Majority in Interest of each Class of Certificates affected thereby for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates other than as provided in the preceding paragraph;
provided, however, that no such amendment shall (i) reduce in any manner the
amount of, or delay the timing of, payments required to be distributed on any
Certificate without the consent of the Holder of such Certificate, (ii)
adversely affect in any material respect the interests of the Holders of any
Class of Certificates in a manner other than as described in (i), without the
consent of the Holders of Certificates of such Class evidencing, as to such
Class, Percentage Interests aggregating 66% or (iii) reduce the aforesaid
percentages of Certificates the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all such Certificates then
outstanding.

         (c) Notwithstanding any contrary provision of this Agreement, the
Trustee shall not enter into any amendment to this Agreement unless it shall
have first received an Opinion of Counsel, which opinion shall not be an expense
of the Trustee or the Trust Fund, to the effect that such amendment will not
cause the imposition of any tax on any REMIC hereunder or the Certificateholders
or cause any REMIC hereunder to fail to qualify as a REMIC at any time that any
Certificates are outstanding.

         (d) Promptly after the execution of any amendment to this Agreement
requiring the consent of Certificateholders, the Trustee shall furnish written
notification of the substance or a copy of such amendment to each
Certificateholder and each Rating Agency.

         (e) It shall not be necessary for the consent of Certificateholders
under this Section to approve the particular form of any proposed amendment, but
it shall be sufficient if such consent shall approve the substance thereof. The
manner of obtaining such consents and of evidencing the authorization of the
execution thereof by Certificateholders shall be subject to such reasonable
regulations as the Trustee may prescribe.

         (f) Nothing in this Agreement shall require the Trustee to enter into
an amendment without receiving an Opinion of Counsel (which Opinion shall not be
an expense of the Trustee or the Trust Fund), reasonably satisfactory to the
Trustee that (i) such amendment is permitted and is not prohibited by this
Agreement and that all requirements for amending this Agreement have been
complied with; and (ii) either (A) the amendment does not adversely affect in
any material respect the interests of any Certificateholder or (B) the
conclusion set forth in the immediately preceding clause (A) is not required to
be reached pursuant to this Section 10.01.

         (g) Notwithstanding the permissive language in Sections 10.01(a) and
10.01(b), upon satisfaction of the conditions in Section 10.01(a) or 10.01(b) as
applicable, Section 10.01(c) and

                                       95
<PAGE>   101

clauses (i) and (ii) of Section 10.01(f), the Trustee shall execute and deliver
the applicable amendment; provided, however, that the Trustee shall not be
required to execute any amendment which, based on an Opinion of Counsel,
materially and adversely affects the rights, duties or immunities of the Trustee
hereunder.

         (h) Notwithstanding the foregoing, no amendment shall adversely affect
the rights or obligations of Mellon Bank, N.A. without its prior written
consent.

         SECTION 10.02. Recordation of Agreement; Counterparts.

         This Agreement is subject to recordation in all appropriate public
offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Master Servicer at its expense, but only
upon direction by the Trustee accompanied by an Opinion of Counsel to the effect
that such recordation materially and beneficially affects the interests of the
Certificateholders.

         For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

         SECTION 10.03. Governing Law.

         THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.

         SECTION 10.04. Intention of Parties.

         It is the express intent of the parties hereto that the conveyance of
the Trust Fund by the Depositor to the Trustee be, and be construed as, an
absolute sale thereof to the Trustee. It is, further, not the intention of the
parties that such conveyance be deemed a pledge thereof by the Depositor to the
Trustee. However, in the event that, notwithstanding the intent of the parties,
such assets are held to be the property of the Depositor, or if for any other
reason this Agreement is held or deemed to create a security interest in such
assets, then (i) this Agreement shall be deemed to be a security agreement
within the meaning of the Uniform Commercial Code of the State of New York and
(ii) the conveyance provided for in this Agreement shall be deemed to be an
assignment and a grant by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

         The Depositor for the benefit of the Certificateholders shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
Trust Fund, such security interest would be deemed to be a perfected

                                       96
<PAGE>   102

security interest of first priority under applicable law and will be maintained
as such throughout the term of the Agreement.

         SECTION 10.05. Notices.

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency with respect to each of the following of which it has
actual knowledge:

                  1. Any material change or amendment to this Agreement;

                  2. The occurrence of any Event of Default that has not been
         cured;

                  3. The resignation or termination of the Master Servicer or
         the Trustee and the appointment of any successor;

                  4. The repurchase or substitution of Mortgage Loans pursuant
         to Section 2.03;

                  5. The final payment to Certificateholders; and

                  6. The exercise of the Optional Call.

         In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

                  1. Each report to Certificateholders described in Section
         4.04;

                  2. Each annual statement as to compliance described in Section
         3.16;

                  3. Each annual independent public accountants' servicing
         report described in Section 3.17; and

                  4. Any notice of a purchase of a Mortgage Loan pursuant to
         Section 2.02, 2.03 or 3.11.

         (b) All directions, demands and notices hereunder shall be in writing
and shall be deemed to have been duly given when delivered by facsimile or
otherwise to (a) in the case of the Depositor, Mellon Residential Funding
Corporation, One Mellon Bank Center, 500 Grant Street, Pittsburgh, Pennsylvania
15258, Attention: Stephen Cobain , (b) in the case of the Master Servicer,
Boston Safe Deposit and Trust Company, One Boston Place, Boston, Massachusetts
02108, Attention: __________ or such other address as may be hereafter furnished
to the Depositor and the Trustee by the Master Servicer in writing, (c) in the
case of the Trustee, at the Corporate Trust Office, or such other address as the
Trustee may hereafter furnish to the Depositor or Master Servicer, and (d) in
the case of the Rating Agencies, the address specified therefor in the
definition corresponding to the name of such Rating Agency. Notices to
Certificateholders shall be deemed given when mailed, first class postage
prepaid, to their respective addresses appearing in the Certificate Register.

         SECTION 10.06. Severability of Provisions.

                                       97
<PAGE>   103

         If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

         SECTION 10.07. Assignment.

         Notwithstanding anything to the contrary contained herein, except as
provided in Section 6.02, this Agreement may not be assigned by the Master
Servicer without the prior written consent of the Trustee and Depositor.

         SECTION 10.08. Limitation on Rights of Certificateholders.

         The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the trust created hereby, nor entitle such
Certificateholder's legal representative or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a petition or
winding up of the trust created hereby, or otherwise affect the rights,
obligations and liabilities of the parties hereto or any of them.

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

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as herein provided, and
unless the Holders of Certificates evidencing not less than 25% of the Voting
Rights evidenced by the Certificates shall also have made written request to the
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and enforcement of
the provisions of this Section 10.08, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

         SECTION 10.09. Inspection and Audit.

                                       98
<PAGE>   104

         The Master Servicer agrees that, on reasonable prior notice, it will
permit and will cause each Subservicer to permit any representative of the
Depositor or the Trustee during the Master Servicer's normal business hours, to
examine all the books of account, records, reports and other papers of the
Master Servicer relating to the Mortgage Loans, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by the Depositor or the Trustee and to discuss its affairs,
finances and accounts relating to the Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the Master
Servicer hereby authorizes said accountants to discuss with such representative
such affairs, finances and accounts), all at such reasonable times and as often
as may be reasonably requested. Any out-of-pocket expense incident to the
exercise by the Depositor or the Trustee of any right under this Section 10.09
shall be borne by the party requesting such inspection; all other such expenses
shall be borne by the Master Servicer or the related Subservicer.

         SECTION 10.10. Certificates Nonassessable and Fully Paid.

         It is the intention of the Depositor that Certificateholders shall not
be personally liable for obligations of the Trust Fund, that the interests in
the Trust Fund represented by the Certificates shall be nonassessable for any
reason whatsoever, and that the Certificates, upon due authentication thereof by
the Trustee pursuant to this Agreement, are and shall be deemed fully paid.

                                   * * * * * *

                                       99
<PAGE>   105

         IN WITNESS WHEREOF, the Depositor, the Trustee, the Standby Purchaser,
the Seller and the Master Servicer have caused their names to be signed hereto
by their respective officers thereunto duly authorized as of the day and year
first above written.

                               MELLON RESIDENTIAL FUNDING CORPORATION,
                                 as Depositor

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

                               WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                                 as Trustee

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

                               MELLON BANK, N.A.,
                                 as Standby Purchaser

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

                               BOSTON SAFE DEPOSIT AND TRUST COMPANY,
                                 as Seller and Master Servicer

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

                                      100
<PAGE>   106

                                                                      SCHEDULE I

                          (Not included in 8-K filing)

                                     S-I-1

<PAGE>   107

                                                                     SCHEDULE II

                     Mellon Residential Funding Corporation
                       Mortgage Pass-Through Certificates
                                Series 2000-TBC3

          Representations and Warranties of the Seller/Master Servicer

         Boston Safe Deposit and Trust Company ("Boston Safe") hereby makes the
representations and warranties set forth in this Schedule II to the Depositor
and the Trustee, as of the Closing Date, or if so specified herein, as of the
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
II shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among Boston Safe, as seller and master servicer,
Mellon Residential Funding Corporation, as depositor, Wells Fargo Bank
Minnesota, National Association, as trustee, and Mellon Bank, N.A., as standby
purchaser.

                  (1) Boston Safe is a trust company duly organized, validly
         existing and in good standing under the laws of the Commonwealth of
         Massachusetts and is duly authorized and qualified to transact any and
         all business contemplated by the Pooling and Servicing Agreement to be
         conducted by Boston Safe in any state in which a Mortgaged Property is
         located or is otherwise not required under applicable law to effect
         such qualification and, in any event, is in compliance with the doing
         business laws of any such state, to the extent necessary to ensure its
         ability to enforce each Mortgage Loan, to service the Mortgage Loans in
         accordance with the terms of the Pooling and Servicing Agreement and to
         perform any of its other obligations under the Pooling and Servicing
         Agreement in accordance with the terms thereof.

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

                  (3) The execution and delivery of the Pooling and Servicing
         Agreement and each Subsequent Transfer Agreement by Boston Safe, the
         sale and servicing of the Mortgage Loans by Boston Safe under the
         Pooling and Servicing Agreement and each Subsequent Transfer Agreement,
         the consummation of any other of the transactions contemplated by the
         Pooling and Servicing Agreement and each Subsequent Transfer Agreement,
         and the fulfillment of or compliance with the terms thereof are in the
         ordinary course of business of Boston Safe and will not (A) result in a
         material breach of any term or provision of the charter or by-laws of
         Boston Safe or (B) materially conflict with, result in a material
         breach, violation or acceleration of, or

                                     S-II-1

<PAGE>   108

         result in a material default under, the terms of any other material
         agreement or instrument to which Boston Safe is a party or by which it
         may be bound, or (C) constitute a material violation of any statute,
         order or regulation applicable to Boston Safe of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over Boston Safe; and Boston Safe is not in breach or violation of any
         material indenture or other material agreement or instrument, or in
         violation of any statute, order or regulation of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over it which breach or violation may materially impair Boston Safe's
         ability to perform or meet any of its obligations under the Pooling and
         Servicing Agreement or any Subsequent Transfer Agreement.

                  (4) Boston Safe is an approved seller/servicer of conventional
         residential mortgage loans for FNMA or FHLMC, with the facilities,
         procedures, and experienced personnel necessary for the servicing, in
         accordance with Accepted Servicing Practices, of mortgage loans of the
         same type as the Mortgage Loans, and is in good standing, to sell
         mortgage loans to and service mortgage loans for FNMA or FHLMC, and no
         event has occurred, including but not limited to a change in insurance
         coverage, which would make Boston Safe unable to comply with FNMA or
         FHLMC eligibility requirements or which would require notification to
         either FNMA or FHLMC.

                  (5) No litigation is pending or, to the best of Boston Safe's
         knowledge, threatened, against Boston Safe that would materially and
         adversely affect the execution, delivery or enforceability of the
         Pooling and Servicing Agreement or any Subsequent Transfer Agreement or
         the ability of Boston Safe to sell or service the Mortgage Loans or to
         perform any of its other obligations under the Pooling and Servicing
         Agreement or any Subsequent Transfer Agreement in accordance with the
         terms thereof.

                  (6) No consent, approval, authorization or order of any court
         or governmental agency or body is required for the execution, delivery
         and performance by Boston Safe of, or compliance by Boston Safe with,
         the Pooling and Servicing Agreement or any Subsequent Transfer
         Agreement or the consummation of the transactions contemplated thereby,
         or if any such consent, approval, authorization or order is required,
         Boston Safe has obtained the same.

                  (7) Boston Safe intends to treat the transfer of the Mortgage
         Loans to the Depositor as a sale of the Mortgage Loans for all tax,
         accounting and regulatory purposes.

                  (8) The Initial Mortgage Loans were, and the Subsequent
         Mortgage Loans will be, selected from the outstanding adjustable rate
         one- to four- family mortgage loans in the Boston Safe's portfolio at
         the Closing Date as to which the representations and warranties set
         forth in Schedule III attached hereto could be made and such selection
         was not made in a manner so as to affect adversely the interests of the
         Depositor, the Trustee or the Certificateholders.

                                     S-II-2

<PAGE>   109
                                                                    SCHEDULE III

                     Mellon Residential Funding Corporation
                       Mortgage Pass-Through Certificates
                                Series 2000-TBC3

             Representations and Warranties as to the Mortgage Loans

         Boston Safe Deposit and Trust Company ("Boston Safe") hereby makes the
representations and warranties set forth in this Schedule III to the Depositor
and the Trustee, as of the Closing Date with respect to the Initial Mortgage
Loans or as of the applicable Subsequent Transfer Date with respect to the
related Subsequent Mortgage Loans, or if so specified herein, as of the related
Cut-off Date. Capitalized terms used but not otherwise defined in this Schedule
III shall have the meanings ascribed thereto in the Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement") relating to the
above-referenced Series, among Boston Safe, as seller and master servicer,
Mellon Residential Funding Corporation, as depositor, Wells Fargo Bank
Minnesota, National Association, as trustee, and Mellon Bank, N.A., as standby
purchaser.

                  (1) The information set forth on Schedule I to the Pooling and
         Servicing Agreement with respect to each related Mortgage Loan is true
         and correct in all material respects as of the Closing Date or
         Subsequent Transfer Date, as applicable.

                  (2) As of the Closing Date or Subsequent Transfer Date, as
         applicable, all payments due with respect to each related Mortgage Loan
         prior to the applicable Cut-off Date have been made; and as of the
         applicable Cut-off Date, no related Mortgage Loan has been
         contractually delinquent for 30 or more days during the twelve months
         prior to the applicable Cut-off Date.

                  (3) No Mortgage Loan has a Loan-to-Value Ratio at origination
         (or, if any Mortgage Loan has been the subject of a significant
         modification since origination, other than as a result of a default or
         imminent default, as of the date of such modification) greater than
         100%.

                  (4) Each Mortgage is a valid, subsisting, enforceable and
         perfected first lien on the Mortgaged Property subject only to (a) the
         lien of non delinquent current real property taxes and assessments, (b)
         covenants, conditions and restrictions, rights of way, easements and
         other matters of public record as of the date of recording of such
         Mortgage, such exceptions appearing of record being acceptable to
         mortgage lending institutions generally or specifically reflected in
         the appraisal made in connection with the origination of the related
         Mortgage Loan or which do not adversely affect the Property Value, and
         (c) other matters to which like properties are commonly subject which
         do not materially interfere with the benefits of the security intended
         to be provided by such Mortgage. Any security agreement, chattel
         mortgage or equivalent document related to and delivered in connection
         with the Mortgage Loan establishes and creates a valid, subsisting and
         enforceable first lien and first priority security interest on the
         Mortgaged Property and any Additional Collateral for the Mortgage Loan
         and the Seller has full right to sell and assign the same to the
         Depositor.

                  (5) Immediately prior to the assignment of the Mortgage Loans
         to the Depositor, the Seller had good title to, and was the sole owner
         of, each Mortgage Loan free and clear of any pledge, lien, encumbrance
         or security interest and had full right and authority, subject to no

                                     S-III-1

<PAGE>   110

         interest or participation of, or agreement with, any other party, to
         sell and assign the same pursuant to the Pooling and Servicing
         Agreement or Subsequent Transfer Agreement, as applicable.

                  (6) There is no delinquent tax or assessment lien against any
         Mortgaged Property.

                  (7) There is no valid offset, defense or counterclaim to any
         Mortgage Note or Mortgage, including the obligation of the Mortgagor to
         pay the unpaid principal of or interest on such Mortgage Note.

                  (8) There are no mechanics' or similar liens or claims for
         work, labor or material affecting any Mortgaged Property which are or
         may be a lien prior to, or equal with, the lien of such Mortgage,
         except those which are insured against by the title insurance policy
         referred to in item (12) below.

                  (9) To the best of the Seller's knowledge, each Mortgaged
         Property is free of material damage and in good repair.

                  (10) Each Mortgage Loan at origination complied in all
         material respects with applicable state, local and federal laws,
         including, without limitation, usury, equal credit opportunity, real
         estate settlement procedures, truth-in-lending and disclosure laws, and
         consummation of the transactions contemplated hereby will not involve
         the violation of any such laws.

                  (11) As of the Closing Date or Subsequent Transfer Date, as
         applicable, neither the Seller nor any related prior holder of any
         related Mortgage has modified the Mortgage in any material respect
         (except that a Mortgage Loan may have been modified by a written
         instrument which has been recorded or submitted for recordation, if
         necessary, to protect the interests of the Certificateholders and the
         original or a copy of which has been delivered to the Trustee);
         satisfied, cancelled or subordinated such Mortgage in whole or in part;
         released the related Mortgaged Property in whole or in part from the
         lien of such Mortgage; or executed any instrument of release,
         cancellation, modification or satisfaction with respect thereto, except
         in the circumstances contemplated in item (50) below. The Seller has
         not waived the performance by the Mortgagor of any action, if the
         Mortgagor's failure to perform such action would cause the Mortgage
         Loan to be in default, nor has the Seller waived any default resulting
         from any action or inaction by the Mortgagor.

                  (12) Except in the case of Cooperative Loans, the Mortgage
         Loan is covered by either (i) an attorney's opinion of title and
         abstract of title the form and substance of which is acceptable to
         mortgage lending institutions making mortgage loans in the area where
         the Mortgaged Property is located or (ii) an ALTA lender's title
         insurance policy or other generally acceptable form of policy of
         insurance acceptable to FNMA or FHLMC, issued by a title insurer
         acceptable to FNMA or FHLMC and qualified to do business in the
         jurisdiction where the Mortgaged Property is located, insuring the
         Seller, it successors and assigns, as to the first priority lien of the
         Mortgage, subject to the exceptions set forth in paragraph (4) above,
         at an amount at least equal to the Cut-off Date Stated Principal
         Balance of each such Mortgage Loan. If the Mortgaged Property is a
         condominium unit located in a state in which a title insurer will
         generally issue an endorsement, then the related title insurance policy
         contains an endorsement

                                     S-III-2

<PAGE>   111

         insuring the validity of the creation of the condominium form of
         ownership with respect to the project in which such unit is located.
         Each such title insurance policy is valid and remains in full force and
         effect. To the best of the Seller's knowledge, no claims have been made
         under such mortgage title insurance policy and no prior holder of the
         related Mortgage, including the Seller, has done, by act or omission,
         anything which would impair the coverage of such mortgage title
         insurance policy.

                  (13) Each Mortgage Loan was originated by an entity that
         satisfied at the time of origination the requirements of Section
         3(a)(41)(A)(ii) of the Securities Exchange Act of 1934, as amended.

                  (14) To the best of the Seller's knowledge, all improvements
         which were considered in determining the Property Value of the
         Mortgaged Property lay wholly within the boundaries and building
         restriction lines of the Mortgaged Property (and, if the property is a
         condominium unit, such improvements lie wholly within the project) and
         no improvements on adjoining properties encroach upon the Mortgaged
         Property.

                  (15) To the best of the Seller's knowledge, no improvement
         located on or being part of the Mortgaged Property is in violation of
         any applicable zoning law or regulation. To the best of the Seller's
         knowledge, all inspections, licenses and certificates required to be
         made or issued with respect to all occupied portions of the Mortgaged
         Property (or, in the case of a Cooperative Loan, the related
         Cooperative Unit) and, with respect to the use and occupancy of the
         same, including but not limited to certificates of occupancy and fire
         underwriting certificates, have been made or obtained from the
         appropriate authorities, unless the lack thereof would not have a
         material adverse effect on the value of such Mortgaged Property, and
         the Mortgaged Property (or, in the case of a Cooperative Loan, the
         related Cooperative Unit) is lawfully occupied under applicable law.

                  (16) The Mortgage Note and the related Mortgage are genuine,
         and each is the legal, valid and binding obligation of the maker
         thereof, enforceable in accordance with its terms and under applicable
         law. To the best of the Seller's knowledge, all parties to the Mortgage
         Note and the Mortgage had legal capacity to execute the Mortgage Note
         and the Mortgage and each Mortgage Note and Mortgage have been duly and
         properly executed by such parties.

                  (17) The proceeds of the Mortgage Loan have been fully
         disbursed, there is no requirement for future advances thereunder and
         any and all requirements as to completion of any on-site or off-site
         improvements and as to disbursements of any escrow funds therefor have
         been complied with. All costs, fees and expenses incurred in making, or
         closing or recording the Mortgage Loans were paid.

                  (18) The related Mortgage contains customary and enforceable
         provisions which render the rights and remedies of the holder thereof
         adequate for the realization against the Mortgaged Property of the
         benefits of the security, including, (i) in the case of a Mortgage
         designated as a deed of trust, by trustee's sale, and (ii) otherwise by
         judicial foreclosure.

                  (19) With respect to each Mortgage constituting a deed of
         trust, a trustee, duly qualified under applicable law to serve as such,
         has been properly designated and currently so serves and is named in
         such Mortgage, and no fees or expenses are or will become payable by

                                     S-III-3

<PAGE>   112

         the Certificateholders to the trustee under the deed of trust, except
         in connection with a trustee's sale after default by the Mortgagor.

                  (20) Each Mortgage Note and each Mortgage is in substantially
         one of the forms acceptable to FNMA or FHLMC, with such riders as have
         been acceptable to FNMA or FHLMC, as the case may be.

                  (21) There exist no deficiencies with respect to escrow
         deposits and payments, if such are required, for which customary
         arrangements for repayment thereof have not been made, and no escrow
         deposits or payments of other charges or payments due the Seller have
         been capitalized under the Mortgage or the related Mortgage Note.

                  (22) The origination and collection practices used by the
         Seller with respect to each Mortgage Loan have been in accordance with
         Accepted Servicing Practices, and have been in all respects in
         compliance with all applicable laws and regulations. All Mortgage Rate
         adjustments have been made in compliance with state and federal law and
         the terms of the related Mortgage Note. Any interest required to be
         paid pursuant to state and local law has been properly paid and
         credited.

                  (23) With the exception of Mortgage Loans identified on the
         Mortgage Loan Schedule as having Additional Collateral, the Mortgage
         Note is not secured by any collateral except the lien on Mortgaged
         Property created by the corresponding Mortgage and the security
         interest or any applicable security agreement or chattel mortgage
         referred to in paragraph (4) above.

                  (24) No Mortgage Loan has a shared appreciation feature, or
         other contingent interest feature.

                  (25) Each Mortgage Loan contains a customary "due on sale"
         clause.

                  (26) Approximately 97.92% of the Initial Mortgage Loans
         provide for a prepayment penalty if the Mortgagor prepays the related
         Mortgage Loan within the first year or three years, as applicable, of
         origination.

                  (27) No Mortgage Loan has a Loan-to-Collateral Value Ratio at
         origination greater than 90%.

                  (28) Except in the case of Cooperative Loans at the related
         Cut-off Date, the improvements upon each Mortgaged Property are covered
         by a valid and existing hazard insurance policy with a generally
         acceptable carrier that provides for fire and hazards of extended
         coverage and coverage for such other hazards as are customary in the
         area where the Mortgaged Property is located in an amount which is at
         least equal to the lesser of (i) the replacement value of the
         improvements securing such Mortgage Loan or (ii) the greater of (a) the
         outstanding principal balance of the Mortgage Loan and (b) an amount
         such that the proceeds of such policy shall be sufficient to prevent
         the Mortgagor and/or the mortgagee from becoming a co-insurer. If the
         Mortgaged Property is a condominium unit, it is included under the
         coverage afforded by a blanket policy for the condominium unit. All
         such individual insurance policies and all flood policies referred to
         in item (29) below contain a standard mortgagee clause naming

                                     S-III-4

<PAGE>   113

         the Seller or the original mortgagee, and its successors in interest,
         as mortgagee, and the Seller has received no notice that any premiums
         due and payable thereon have not been paid; the Mortgage obligates the
         Mortgagor thereunder to maintain all such insurance including flood
         insurance at the Mortgagor's cost and expense, and upon the Mortgagor's
         failure to do so, authorizes the holder of the Mortgage to obtain and
         maintain such insurance at the Mortgagor's cost and expense and to seek
         reimbursement therefor from the Mortgagor.

                  (29) If the Mortgaged Property is in an area identified in the
         Federal Register by the Federal Emergency Management Agency as having
         special flood hazards and such flood insurance has been made available,
         a flood insurance policy in a form meeting the requirements of the
         current guidelines of the Flood Insurance Administration is in effect
         with respect to such Mortgaged Property with a generally acceptable
         carrier in an amount representing coverage not less than the lesser of
         (A) the minimum amount required, under the terms of coverage, to
         compensate for any damage or loss on a replacement-cost basis or the
         unpaid balance of the Mortgage Loan (if replacement coverage is not
         available for the type of building insured), and (B) the maximum amount
         of insurance that is available under the Flood Disaster Protection Act
         of 1973, as amended.

                  (30) To the best of the Seller's knowledge, there is no
         proceeding occurring, pending or threatened for the total or partial
         condemnation of the Mortgaged Property.

                  (31) There is no material monetary default existing under any
         Mortgage or the related Mortgage Note and, to the best of the Seller's
         knowledge, there is no material event which, with the passage of time
         or with notice and the expiration of any grace or cure period, would
         constitute a default, breach, violation or event of acceleration under
         the Mortgage or the related Mortgage Note; and the Seller has not
         waived any default, breach, violation or event of acceleration.

                  (32) Except for Cooperative Loans, the Mortgaged Property is
         located in the state identified in the Mortgage Loan Schedule and
         consists of a parcel of real property with a detached single family
         residence will be erected, or a two- to four-family dwelling, or an
         individual condominium unit in a condominium project, or an individual
         unit in a PUD which, to the best of Seller's knowledge, does not
         include mobile homes and does not constitute other than real property
         under state law. For Cooperative Loans, the Mortgaged Property consists
         of shares of stock in a cooperative housing corporation and a leasehold
         interest in a cooperative apartment owned by such corporation located
         in the state identified in the Mortgaged Loan Schedule.

                  (33) Each Mortgage Loan is being serviced by the Master
         Servicer.

                  (34) Any future advances made prior to the related Cut-off
         Date have been consolidated with the outstanding principal amount
         secured by the Mortgage, and the secured principal amount, as
         consolidated, bears a single interest rate and single repayment term
         reflected on the Mortgage Loan Schedule. The consolidated principal
         amount does not exceed the original principal amount of the Mortgage
         Loan. The Mortgage Note does not permit or obligate the Master Servicer
         to make future advances to the Mortgagor at the option of the
         Mortgagor.

                                     S-III-5

<PAGE>   114

                  (35) All taxes, governmental assessments, insurance premiums,
         water, sewer and municipal charges, leasehold payments or ground rents
         which previously became due and owing have been paid, or an escrow of
         funds has been established in an amount sufficient to pay for every
         such item which remains unpaid and which has been assessed, but is not
         yet due and payable. Except for (A) payments in the nature of escrow
         payments, and (B) interest accruing from the date of the Mortgage Note
         or date of disbursement of the Mortgage proceeds, whichever is later,
         to the day which precedes by one month the Due Date of the first
         installment of principal and interest, including without limitation,
         taxes and insurance payments, the Master Servicer has not advanced
         funds, or induced, solicited or knowingly received any advance of funds
         by a party other than the Mortgagor, directly or indirectly, for the
         payment of any amount required by the Mortgage.

                  (36) Each Mortgage Loan was underwritten in all material
         respects in accordance with the Seller's underwriting guidelines as set
         forth in the Prospectus Supplement.

                  (37) Prior to the closing of the Mortgage Loan, an appraisal
         of the related Mortgaged Property was obtained from a qualified
         appraiser, duly appointed by the originator, who had no interest,
         direct or indirect, in the Mortgaged Property or in any loan made on
         the security thereof, and whose compensation is not affected by the
         approval or disapproval of the Mortgage Loan; such appraisal is in a
         form in compliance with applicable federal law governing appraisals
         generally acceptable to FNMA and FHLMC.

                  (38) None of the Mortgage Loans is a graduated payment
         mortgage loan or a growing equity mortgage loan and none of the
         Mortgage Loans are subject to a buydown or similar arrangement.

                  (39) Any leasehold estate securing a Mortgage Loan has a term
         of not less than five years in excess of the term of the related
         Mortgage Loan.

                  (40) The Mortgage Loans were selected from among the
         outstanding adjustable-rate one- to four-family mortgage loans in the
         Seller's portfolio at the Closing Date or Subsequent Transfer Date, as
         applicable, as to which the representations and warranties made as to
         the Mortgage Loans set forth in this Schedule III can be made. Such
         selection was not made in a manner that would adversely affect the
         interests of Certificateholders.

                  (41) Each Initial Mortgage Loan has a payment date on or
         before the Due Date in the month of the first Distribution Date.

                  (42) With respect to any Mortgage Loan as to which an
         affidavit has been delivered to the Trustee certifying that the
         original Mortgage Note is a Lost Mortgage Note, if such Mortgage Loan
         is subsequently in default, the enforcement of such Mortgage Loan or of
         the related Mortgage by or on behalf of the Trustee will not be
         materially adversely affected by the absence of the original Mortgage
         Note. A "Lost Mortgage Note" is a Mortgage Note the original of which
         was permanently lost or destroyed and has not been replaced.

                  (43) The Mortgage Loans, individually and in the aggregate,
         conform in all material respects to the descriptions thereof in the
         Prospectus Supplement.

                                     S-III-6

<PAGE>   115

                  (44) The Mortgage Rate is adjusted on each Adjustment Date to
         equal the applicable Loan Index plus the Gross Margin, which amount is
         added in accordance with the terms of the Mortgage Note, subject to the
         Periodic Rate Cap, if any, and Maximum Mortgage Rate or Minimum
         Mortgage Rate, if any. The Mortgage Note is payable each month in
         installments of principal and/or interest, which installments of
         interest are subject to change due to the adjustments to the Mortgage
         Rate on each Adjustment Date, with interest calculated and payable in
         arrears, sufficient to amortize the Mortgage Loan fully by the stated
         maturity date, over an original term of not more than thirty (30)
         years. The Mortgage Note provides for accrual of interest on the basis
         of a 360 day year consisting of twelve 30-day months. There is no
         negative amortization. At no time has the Mortgage Rate exceeded the
         Maximum Mortgage Rate as set forth in the related Mortgage Note.

                  (45) Certain Mortgage Loans contain a provision permitting or
         requiring conversion to a fixed interest rate Mortgage Loan.

                  (46) All parties which have had any interest in the Mortgage
         Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
         during the period in which they held and disposed of such interest,
         were) (1) in compliance with any and all applicable licensing
         requirements of the laws of the state wherein the real Mortgaged
         Property is located, and (2) organized under the laws of such state, or
         (3) qualified to do business in such state, or (4) federal savings and
         loan associations or national banks having principal offices in such
         state, or (5) not doing business in such state.

                  (47) To the best of Seller's knowledge, the Mortgaged Property
         is free from any and all toxic or hazardous substances and there exists
         no violation of any local, state or federal environmental law, rule or
         regulation.

                  (48) The Mortgagor has not notified the Seller, and the Seller
         has no knowledge, of any relief requested or allowed to the Mortgagor
         under the Soldiers' and Sailors' Civil Relief Act of 1940.

                  (49) Each Mortgage Loan is a "qualified mortgage" within the
         meaning of Section 860G of the Code and Treas. Reg. 1.860G-2.

                  (50) No Mortgage Loan requires the Mortgagee to release any
         portion of the Mortgaged Property from the lien of the Mortgage other
         than (i) upon payment in full of the Mortgage Loan or (ii) with respect
         to Mortgaged Property consisting of more than one piece of real
         property or shares of a cooperative corporation, a release of a portion
         of the Mortgaged Property upon a partial repayment of the Mortgage
         Loan, provided the Loan-to-Collateral Value Ratio of the remaining
         Mortgaged Property after the release does not exceed 90%.

                  (51) No Mortgage Loan is covered by a Primary Insurance
         Policy.

                                     S-III-7

<PAGE>   116
                                                                     SCHEDULE IV

                                   [RESERVED]

                                     S-IV-1

<PAGE>   117

                                                                      SCHEDULE V

                     Form of Monthly Master Servicer Report

           [TO BE AGREED UPON BY THE TRUSTEE AND THE MASTER SERVICER]

                                      S-V-1

<PAGE>   118

                                                                       EXHIBIT A

                          [FORM OF SENIOR CERTIFICATE]

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

[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").]

Certificate No.                             :

Cut-off Date                                :

First Distribution Date                     :

Initial Certificate Balance
of this Certificate
("Denomination")                            :        $

Initial Certificate Balances
of all Certificates of
this Class                                  :        $

Pass-Through Rate                           :

CUSIP                                       :

                     MELLON RESIDENTIAL FUNDING CORPORATION.
                Mortgage Pass-Through Certificates, Series 200 -
                                    Class [ ]

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class with respect to a Trust Fund
         consisting primarily of a pool of conventional mortgage loans (the
         "Mortgage Loans") secured by first liens on one- to four-family
         residential properties

                                      A-1
<PAGE>   119

              MELLON RESIDENTIAL FUNDING CORPORATION, as Depositor

         Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below or
any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality.

         This certifies that __________________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate Initial Certificate Balances
of all Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by Mellon Residential Funding Corporation (the
"Depositor"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of the Cut-off Date specified above (the "Agreement") among
the Depositor, _________________, as seller (in such capacity, the "Seller") and
as master servicer (in such capacity, the "Master Servicer"), and Wells Fargo
Bank Minnesota, National Association, as trustee (the "Trustee"). To the extent
not defined herein, the capitalized terms used herein have the meanings assigned
in the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                      A-2
<PAGE>   120

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  ____________, 20__

                        WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                          as Trustee

                        By _____________________________________

Countersigned:

By _______________________________
     Authorized Signatory of
     WELLS FARGO BANK MINNESOTA,
     NATIONAL ASSOCIATION, as Trustee

                                      A-3
<PAGE>   121

                                                                       EXHIBIT B

                       [FORM OF SUBORDINATED CERTIFICATE]

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

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO CERTAIN CERTIFICATES AS
DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.

[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE TO
THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS _________, 200_. THE
INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ________%. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF PREPAYMENT OF _________%
PER ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH
$__________ OF OID PER $1,000 OF THE ORIGINAL PRINCIPAL AMOUNT OF THIS
CERTIFICATE; THE ANNUAL YIELD TO MATURITY OF THIS CERTIFICATE FOR PURPOSES OF
COMPUTING THE ACCRUAL OF OID IS APPROXIMATELY % (COMPOUNDED MONTHLY); THE AMOUNT
OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS $________ PER $1,000 OF
THE ORIGINAL PRINCIPAL AMOUNT OF THIS CERTIFICATE COMPUTED USING THE MONTHLY
YIELD AND DAILY COMPOUNDING DURING THE SHORT ACCRUAL PERIOD. NO REPRESENTATION
IS MADE THAT THE MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT
ASSUMPTION OR AT ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY MAY DIFFER FROM
THAT SET FORTH ABOVE, AND THE ACCRUAL OF OID WILL BE ADJUSTED, IN ACCORDANCE
WITH SECTION 1272(a)(6) OF THE CODE, TO TAKE INTO ACCOUNT EVENTS WHICH HAVE
OCCURRED DURING ANY ACCRUAL PERIOD. THE PREPAYMENT ASSUMPTION IS INTENDED TO BE
THE PREPAYMENT ASSUMPTION REFERRED TO IN SECTION 1272(a)(6)(B)(iii) OF THE
CODE.]

[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS CERTIFICATE WITHOUT
REGISTRATION THEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPTED
FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND IN ACCORDANCE WITH THE
PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.]

                                      B-1
<PAGE>   122

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE EITHER (i) REPRESENTS TO THE TRUSTEE THAT SUCH TRANSFEREE EITHER (A)
IS NOT AN EMPLOYEE BENEFIT PLAN OR ARRANGEMENT SUBJECT TO THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR A PLAN OR ARRANGEMENT
SUBJECT TO SECTION 4975 OF THE CODE, OR (B) IS AN "INSURANCE COMPANY GENERAL
ACCOUNT" AS SUCH TERM IS DEFINED IN SECTION V(e) OF PROHIBITED TRANSACTION CLASS
EXEMPTION 95-60 OR (ii) DELIVERS TO THE TRUSTEE AN OPINION OF COUNSEL IN
ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN. [ANY SUCH
REPRESENTATION UNDER (A)(i) OR (ii) SHALL BE DEEMED TO HAVE BEEN MADE TO THE
TRUSTEE BY THE TRANSFEREE'S ACCEPTANCE OF A CERTIFICATE OF THIS CLASS AND BY A
BENEFICIAL OWNER'S ACCEPTANCE OF ITS INTEREST IN A CERTIFICATE OF THIS CLASS.]
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY PURPORTED TRANSFER OF
THIS CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA OR
TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE AS
DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.

Certificate No.                             :

Cut-off Date                                :

First Distribution Date                     :

Initial Certificate Balance
of this Certificate
("Denomination")                            :        $

Initial Certificate Balances
of all Certificates of
this Class                                  :        $

Pass-Through Rate                           :

[CUSIP                                      :]

                     MELLON RESIDENTIAL FUNDING CORPORATION.
                Mortgage Pass-Through Certificates, Series 200 -
                                    Class [ ]

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class with respect to a Trust Fund
         consisting primarily of a pool of conventional mortgage loans (the
         "Mortgage Loans") secured by first liens on one- to four-family
         residential properties

              MELLON RESIDENTIAL FUNDING CORPORATION, as Depositor

         Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below or
any of their respective

                                      B-2
<PAGE>   123

affiliates. Neither this Certificate nor the Mortgage Loans are guaranteed or
insured by any governmental agency or instrumentality.

         This certifies that _______________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
denomination of this Certificate by the aggregate Initial Certificate Balances
of all Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by Mellon Residential Funding Corporation (the
"Depositor"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of the Cut-off Date specified above (the "Agreement") among
the Depositor, ____________________, as seller (in such capacity, the "Seller")
and as master servicer (in such capacity, the "Master Servicer"), and Wells
Fargo Bank Minnesota, National Association, as trustee (the "Trustee"). To the
extent not defined herein, the capitalized terms used herein have the meanings
assigned in the Agreement. This Certificate is issued under and is subject to
the terms, provisions and conditions of the Agreement, to which Agreement the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which such Holder is bound.

         [No transfer of a Certificate of this Class shall be made unless such
transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under said Act and such laws. In the event that a
transfer is to be made in reliance upon an exemption from the Securities Act and
such laws, in order to assure compliance with the Securities Act and such laws,
the Certificateholder desiring to effect such transfer and such
Certificateholder's prospective transferee shall each certify to the Trustee in
writing the facts surrounding the transfer. In the event that such a transfer is
to be made within three years from the date of the initial issuance of
Certificates pursuant hereto, there shall also be delivered (except in the case
of a transfer pursuant to Rule 144A of the Securities Act) to the Trustee an
Opinion of Counsel that such transfer may be made pursuant to an exemption from
the Securities Act and such state securities laws, which Opinion of Counsel
shall not be obtained at the expense of the Trustee, the Seller, the Master
Servicer or the Depositor. The Holder hereof desiring to effect such transfer
shall, and does hereby agree to, indemnify the Trustee 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.]

         No transfer of a Certificate of this Class shall be made unless the
Trustee shall have received either (i) a representation [letter] from the
transferee of such Certificate, acceptable to and in form and substance
satisfactory to the Trustee, to the effect that such transferee is not an
employee benefit plan or arrangement subject to Section 406 of ERISA or Section
4975 of the Code, nor a person acting on behalf of any such plan or arrangement,
which representation letter shall not be an expense of the Trustee or the Master
Servicer, (ii) 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")), or (iii) in the case of any such Certificate presented for
registration in the name of an employee benefit plan subject to ERISA or Section
4975 of the Code (or comparable provisions of any subsequent enactments), or a
trustee of any such plan or any other person acting on behalf of any such plan,
an Opinion of Counsel satisfactory to the Trustee and the Master Servicer to the
effect that the purchase or holding of such Certificate will not result in a
prohibited transaction and will not subject the Trustee to any obligation in
addition to those undertaken in the Agreement, which Opinion of Counsel shall
not be an expense of the Trustee or the Master Servicer. [Such representation
shall be deemed to have been made to the Trustee by the Transferee's acceptance
of a Certificate of this

                                      B-3
<PAGE>   124

Class and by a beneficial owner's acceptance of its interest in a Certificate of
this Class.] Notwithstanding anything else to the contrary herein, any purported
transfer of a Certificate of this Class to or on behalf of an employee benefit
plan subject to ERISA or to the Code without the opinion of counsel satisfactory
to the Trustee as described above shall be void and of no effect.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                      B-4
<PAGE>   125

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  ____________, 20__

                               WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                                  as Trustee

                               By ______________________________________

Countersigned:

By _______________________________
     Authorized Signatory of
     WELLS FARGO BANK MINNESOTA,
     NATIONAL ASSOCIATION, as Trustee

                                      B-5
<PAGE>   126

                                                                       EXHIBIT C

                         [FORM OF RESIDUAL CERTIFICATE]

SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "RESIDUAL
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
PROPOSED TRANSFEREE DELIVERS TO THE TRUSTEE A TRANSFER AFFIDAVIT IN ACCORDANCE
WITH THE PROVISIONS OF THE AGREEMENT REFERRED TO HEREIN.

[THIS CERTIFICATE REPRESENTS THE "TAX MATTERS PERSON RESIDUAL INTEREST" ISSUED
UNDER THE POOLING AND SERVICING AGREEMENT REFERRED TO BELOW AND MAY NOT BE
TRANSFERRED TO ANY PERSON EXCEPT IN CONNECTION WITH THE ASSUMPTION BY THE
TRANSFEREE OF THE DUTIES OF THE SERVICER UNDER SUCH AGREEMENT.]

NEITHER THIS CERTIFICATE NOR ANY INTEREST HEREIN MAY BE TRANSFERRED UNLESS THE
TRANSFEREE EITHER (i) DELIVERS TO THE TRUSTEE A REPRESENTATION LETTER TO THE
EFFECT THAT SUCH TRANSFEREE EITHER (A) IS NOT AN EMPLOYEE BENEFIT PLAN OR
ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED, OR A PLAN OR ARRANGEMENT SUBJECT TO SECTION 4975 OF THE CODE, OR (B) IS
AN "INSURANCE COMPANY GENERAL ACCOUNT" AS SUCH TERM IS DEFINED IN SECTION V(e)
OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60 OR (ii) DELIVERS TO THE TRUSTEE
AN OPINION OF COUNSEL IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT
REFERRED TO HEREIN. NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY HEREIN, ANY
PURPORTED TRANSFER OF THIS CERTIFICATE TO OR ON BEHALF OF AN EMPLOYEE BENEFIT
PLAN SUBJECT TO ERISA OR TO THE CODE WITHOUT THE OPINION OF COUNSEL SATISFACTORY
TO THE TRUSTEE AS DESCRIBED ABOVE SHALL BE VOID AND OF NO EFFECT.

Certificate No.                             :

Cut-off  Date                               :

Initial Certificate Balance
of this Certificate
("Denomination")                            :        $

Initial Certificate Balances
of all Certificates of
this Class                                  :        $

Pass-Through Rate                           :

CUSIP                                       :

                                      C-1
<PAGE>   127

                     MELLON RESIDENTIAL FUNDING CORPORATION.
                Mortgage Pass-Through Certificates, Series 200 -

         evidencing the distributions allocable to the Class A-R Certificates
         with respect to a Trust Fund consisting primarily of a pool of
         conventional mortgage loans (the "Mortgage Loans") secured by first
         liens on one- to four-family residential properties

              MELLON RESIDENTIAL FUNDING CORPORATION, as Depositor

         Principal in respect of this Certificate is distributable monthly as
set forth herein. Accordingly, the Certificate Balance at any time may be less
than the Certificate Balance as set forth herein. This Certificate does not
evidence an obligation of, or an interest in, and is not guaranteed by the
Depositor, the Seller, the Master Servicer or the Trustee referred to below or
any of their respective affiliates. Neither this Certificate nor the Mortgage
Loans are guaranteed or insured by any governmental agency or instrumentality.

         This certifies that ______________ is the registered owner of the
Percentage Interest evidenced by this Certificate (obtained by dividing the
Denomination of this Certificate by the aggregate Initial Certificate Balances
of all Certificates of the Class to which this Certificate belongs) in certain
monthly distributions with respect to a Trust Fund consisting of the Mortgage
Loans deposited by Mellon Residential Funding Corporation (the "Depositor"). The
Trust Fund was created pursuant to a Pooling and Servicing Agreement dated as of
the Cut-off Date specified above (the "Agreement") among the Depositor,
_________________ as seller (in such capacity, the "Seller") and as master
servicer (in such capacity, the "Master Servicer"), and Wells Fargo Bank
Minnesota, National Association, as trustee (the "Trustee"). To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

         Any distribution of the proceeds of any remaining assets of the Trust
Fund will be made only upon presentment and surrender of this Class A-R
Certificate at the Corporate Trust Office.

         No transfer of a Class A-R Certificate shall be made unless the Trustee
shall have received either (i) a representation letter from the transferee of
such Certificate, acceptable to and in form and substance satisfactory to the
Trustee, to the effect that such transferee is not an employee benefit plan
subject to Section 406 of ERISA or Section 4975 of the Code, nor a person acting
on behalf of any such plan, which representation letter shall not be an expense
of the Trustee or the Master Servicer, (ii) if the purchaser is an insurance
company, a representation letter 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")) or (iii) in the case of any
such Class A-R Certificate presented for registration in the name of an employee
benefit plan subject to ERISA, or Section 4975 of the Code (or comparable
provisions of any subsequent enactments), or a trustee of any such plan or any
other person acting on behalf of any such plan, an Opinion of Counsel
satisfactory to the Trustee and the Master Servicer to the effect that the
purchase or holding of such Class A-R Certificate will not result in a
prohibited transaction and will not subject the Trustee or the Master Servicer
to any obligation in addition to those undertaken in this Agreement, which
Opinion of Counsel shall not be an expense of the Trustee or the Master
Servicer. Notwithstanding anything else to the contrary herein, any purported
transfer of a Class

                                      C-2
<PAGE>   128

A-R Certificate to or on behalf of an employee benefit plan subject to ERISA or
to the Code without the opinion of counsel satisfactory to the Trustee as
described above shall be void and of no effect.

         Each Holder of this Class A-R Certificate will be deemed to have agreed
to be bound by the restrictions of the Agreement, including but not limited to
the restrictions that (i) each person holding or acquiring any Ownership
Interest in this Class A-R Certificate must be a Permitted Transferee, (ii) no
Ownership Interest in this Class A-R Certificate may be transferred without
delivery to the Trustee of (a) a transfer affidavit of the proposed transferee
and (b) a transfer certificate of the transferor, each of such documents to be
in the form described in the Agreement, (iii) each person holding or acquiring
any Ownership Interest in this Class A-R Certificate must agree to require a
transfer affidavit and to deliver a transfer certificate to the Trustee as
required pursuant to the Agreement, (iv) each person holding or acquiring an
Ownership Interest in this Class A-R Certificate must agree not to transfer an
Ownership Interest in this Class A-R Certificate if it has actual knowledge that
the proposed transferee is not a Permitted Transferee and (v) any attempted or
purported transfer of any Ownership Interest in this Class A-R Certificate in
violation of such restrictions will be absolutely null and void and will vest no
rights in the purported transferee.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                      C-3
<PAGE>   129

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  ____________, 20__

                             WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                               as Trustee

                             By _______________________________________

Countersigned:

By _______________________________
     Authorized Signatory of
     WELLS FARGO BANK MINNESOTA,
     NATIONAL ASSOCIATION, as Trustee

                                      C-4
<PAGE>   130

                                                                       EXHIBIT D

                      [FORM OF NOTIONAL AMOUNT CERTIFICATE]

[SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A "REGULAR
INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE TERMS ARE
DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE").]

THIS CERTIFICATE HAS NO PRINCIPAL BALANCE AND IS NOT ENTITLED TO ANY
DISTRIBUTIONS IN RESPECT OF PRINCIPAL.

[THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR THE PURPOSE OF APPLYING THE
U.S. FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT ("OID") RULES UNDER THE CODE TO
THIS CERTIFICATE. THE ISSUE DATE OF THIS CERTIFICATE IS __________, 200_. THE
INITIAL PER ANNUM RATE OF INTEREST ON THIS CERTIFICATE IS ________%. ASSUMING
THAT THE MORTGAGE LOANS PREPAY AT AN ASSUMED RATE OF PREPAYMENT OF __________%
PER ANNUM (THE "PREPAYMENT ASSUMPTION"), THIS CERTIFICATE HAS BEEN ISSUED WITH
$_______ OF OID ON THE INITIAL POOL STATED PRINCIPAL BALANCE; THE ANNUAL YIELD
TO MATURITY OF THIS CERTIFICATE FOR PURPOSES OF COMPUTING THE ACCRUAL OF OID IS
APPROXIMATELY _____% (COMPOUNDED MONTHLY); THE AMOUNT OF OID ALLOCABLE TO THE
SHORT FIRST ACCRUAL PERIOD IS $________ ON THE INITIAL POOL STATED PRINCIPAL
BALANCE; AND THE METHOD USED TO CALCULATE THE ANNUAL YIELD TO MATURITY AND THE
AMOUNT OF OID ALLOCABLE TO THE SHORT FIRST ACCRUAL PERIOD IS THE EXACT METHOD AS
DEFINED IN PROPOSED TREASURY REGULATIONS. NO REPRESENTATION IS MADE THAT THE
MORTGAGE LOANS WILL PREPAY AT A RATE BASED ON THE PREPAYMENT ASSUMPTION OR AT
ANY OTHER RATE. THE ACTUAL YIELD TO MATURITY MAY DIFFER FROM THAT SET FORTH
ABOVE, AND THE ACCRUAL OF OID WILL BE ADJUSTED, IN ACCORDANCE WITH SECTION
1272(a)(6) OF THE CODE, TO TAKE INTO ACCOUNT EVENTS WHICH HAVE OCCURRED DURING
ANY ACCRUAL PERIOD. THE PREPAYMENT ASSUMPTION IS INTENDED TO BE THE PREPAYMENT
ASSUMPTION REFERRED TO IN SECTION 1272(a)(6)(B)(iii) OF THE CODE.]

Certificate No.                             :

Cut-off Date                                :

First Distribution Date                     :

Initial Notional Amount
of this Certificate
("Denomination")                            :

Initial Notional Amount
of all Certificates
of this Class                               :

Pass-Through Rate                           :

CUSIP                                       :

                                      D-1
<PAGE>   131

                     MELLON RESIDENTIAL FUNDING CORPORATION
                Mortgage Pass-Through Certificates, Series 200 -
                                    Class [ ]

         evidencing a percentage interest in the distributions allocable to the
         Certificates of the above-referenced Class with respect to a Trust Fund
         consisting primarily of a pool of conventional loans (the "Mortgage
         Loans") secured by first liens on one- to four-family residential
         properties

              MELLON RESIDENTIAL FUNDING CORPORATION, as Depositor

         This Certificate does not evidence an obligation of, or an interest in,
and is not guaranteed by the Depositor, the Seller, the Master Servicer or the
Trustee referred to below or any of their respective affiliates. Neither this
Certificate nor the Mortgage Loans are guaranteed or insured by any governmental
agency or instrumentality.

         This certifies that ___________________ is the registered owner of the
Percentage Interest evidenced by this Certificate specified above in certain
monthly distributions with respect to a Trust Fund consisting primarily of the
Mortgage Loans deposited by Mellon Residential Funding Corporation (the
"Depositor"). The Trust Fund was created pursuant to a Pooling and Servicing
Agreement dated as of Cut-off Date specified above (the "Agreement") among the
Depositor, _______________ as seller (in such capacity, the "Seller") and as
master servicer (in such capacity, the "Master Servicer"), and Wells Fargo Bank
Minnesota, National Association, as trustee (the "Trustee"). To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

         Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         This Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose unless manually countersigned by an
authorized signatory of the Trustee.

                                      * * *

                                      D-2
<PAGE>   132

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated:  ____________, 20__

                              WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                              as Trustee

                              By ______________________________________

Countersigned:

By ______________________________
    Authorized Signatory of
    WELLS FARGO BANK MINNESOTA,
    NATIONAL ASSOCIATION, as Trustee

                                      D-3
<PAGE>   133

                                                                       EXHIBIT E

                        [Form of Reverse of Certificates]

                     MELLON RESIDENTIAL FUNDING CORPORATION
                       Mortgage Pass-Through Certificates

         This Certificate is one of a duly authorized issue of Certificates
designated as Mellon Residential Funding Corporation., Mortgage Pass-Through
Certificates, of the Series specified on the face hereof (herein collectively
called the "Certificates"), and representing a beneficial ownership interest in
the Trust Fund created by the Agreement.

         The Certificateholder, by its acceptance of this Certificate, agrees
that it will look solely to the funds on deposit in the Distribution Account for
payment hereunder and that the Trustee is not liable to the Certificateholders
for any amount payable under this Certificate or the Agreement or, except as
expressly provided in the Agreement, subject to any liability under the
Agreement.

         This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for the interests, rights and limitations of
rights, benefits, obligations and duties evidenced thereby, and the rights,
duties and immunities of the Trustee.

                  Pursuant to the terms of the Agreement, a distribution will be
made on the _____ day of each month or, if such _____ day is not a Business Day,
the Business Day immediately following (the "Distribution Date"), commencing on
the first Distribution Date specified on the face hereof, to the Person in whose
name this Certificate is registered at the close of business on the applicable
Record Date in an amount equal to the product of the Percentage Interest
evidenced by this Certificate and the amount required to be distributed to
Holders of Certificates of the Class to which this Certificate belongs on such
Distribution Date pursuant to the Agreement. The Record Date applicable to each
Distribution Date is the last Business Day of the month next preceding the month
of such Distribution Date.

         Distributions on this Certificate shall be made by wire transfer of
immediately available funds to the account of the Holder hereof at a bank or
other entity having appropriate facilities therefor, if such Certificateholder
shall have so notified the Trustee in writing at least five Business Days prior
to the related Record Date and such Certificateholder shall satisfy the
conditions to receive such form of payment set forth in the Agreement, or, if
not, by check mailed by first class mail to the address of such
Certificateholder appearing in the Certificate Register. The final distribution
on each Certificate will be made in like manner, but only upon presentment and
surrender of such Certificate at the Corporate Trust Office or such other
location specified in the notice to Certificateholders of such final
distribution.

         The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Trustee and the rights of the Certificateholders under the Agreement at any time
by the Depositor, the Master Servicer and the Trustee with the consent of the
Holders of Certificates affected by such amendment evidencing the requisite
Percentage Interest, as provided in the Agreement. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange therefor or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.

                                      E-1
<PAGE>   134

         As provided in the Agreement and subject to certain limitations therein
set forth, the transfer of this Certificate is registrable in the Certificate
Register of the Trustee upon surrender of this Certificate for registration of
transfer at the Corporate Trust Office, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations and evidencing the same aggregate Percentage Interest
in the Trust Fund will be issued to the designated transferee or transferees.

         The Certificates are issuable only as registered Certificates without
coupons in denominations specified in the Agreement. As provided in the
Agreement and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

         No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Depositor, the Master Servicer, the Seller and the Trustee and any
agent of the Depositor or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and neither the
Depositor, the Trustee, nor any such agent shall be affected by any notice to
the contrary.

         On any Distribution Date on which the Pool Stated Principal Balance is
less than or equal to _% of the aggregate Cut-off Date Principal Balances of the
Mortgage Loans and the amount deposited in Pre-Funding Account on the Closing
Date, the Master Servicer will have the option to repurchase, in whole, from the
Trust Fund all remaining Mortgage Loans and all property acquired in respect of
the Mortgage Loans at a purchase price determined as provided in the Agreement.
In the event that no such optional termination occurs, the obligations and
responsibilities created by the Agreement will terminate upon the later of the
maturity or other liquidation (or any advance with respect thereto) of the last
Mortgage Loan remaining in the Trust Fund or the disposition of all property in
respect thereof and the distribution to Certificateholders of all amounts
required to be distributed pursuant to the Agreement. In no event, however, will
the trust created by the Agreement continue beyond the expiration of 21 years
from the death of the last survivor of the descendants living at the date of the
Agreement of a certain person named in the Agreement.

         As described in the Agreement, during the Put Period,
Certificateholders (other than Holders of the Class A-R and Class X
Certificates) will have an option to sell their Certificates to Mellon Bank,
N.A. and if Certificateholders holding more than 90% of the outstanding
aggregate Class Certificate Balance of the Certificates exercise this option,
Mellon Bank, N.A. will have the right to purchase all of the remaining
Certificates (other than the Class A-R and Class X Certificates).

         Any term used herein that is defined in the Agreement shall have the
meaning assigned in the Agreement, and nothing herein shall be deemed
inconsistent with that meaning.

                                      E-2
<PAGE>   135

                                   ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

________________________________________________________________________________
Please print or typewrite name and address including postal zip code of
assignee)

the Percentage Interest evidenced by the within Certificate and hereby
authorizes the transfer of registration of such Percentage Interest to assignee
on the Certificate Register of the Trust Fund.

         I (We) further direct the Trustee to issue a new Certificate of a like
denomination and Class, to the above named assignee and deliver such Certificate
to the following address:

_________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                            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.

STATE OF                                )
                                        )   ss.:
COUNTY OF                               )

         On the ____ day of ______________, 20__ before me, a notary public in
and for said State, personally appeared _________________, known to me who,
being by me duly sworn, did depose and say that he executed the foregoing
instrument.

                                                   _____________________________
                                                   Notary Public

[Notarial Seal]

                                      E-3
<PAGE>   136

                                                                       EXHIBIT F

                                   [RESERVED]

                                      F-1

<PAGE>   137

                                                                       EXHIBIT G

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Master Servicer]

[Seller]

          Re:      Pooling and Servicing Agreement among
                   Mellon Residential Funding Corporation,
                   as Depositor, ________________________,
                   as Seller and Master Servicer, and
                   Wells Fargo Bank Minnesota, National Association, as Trustee
                   Mortgage Pass-Through Certificates, Series 200 -_______
                   ------------------------------------------------------------

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that, as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached schedule) it has received:

         (i) the original Mortgage Note endorsed in the following form: "Pay to
the order of __________, without recourse"; and

         (ii) except with respect to a Cooperative Loan, a duly executed
assignment of the Mortgage (which may be included in a blanket assignment or
assignments).

         Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan.

                                      G-1
<PAGE>   138

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                               WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                               as Trustee

                               By: ______________________________________

                               Name: ____________________________________

                               Title: ___________________________________

                                      G-2
<PAGE>   139

                                                                       EXHIBIT H

                     FORM OF FINAL CERTIFICATION OF TRUSTEE

                                     [date]

[Depositor]

[Master Servicer]

[Seller]

          Re:      Pooling and Servicing Agreement among
                   Mellon Residential Funding Corporation,
                   as Depositor , _______________, as Seller and
                   Master Servicer and Wells Fargo Bank Minnesota,
                   National Association, as Trustee, Mortgage Pass-Through
                   Certificates, Series 200_-________________________
                   -------------------------------------------------------

Gentlemen:

         In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement (the "Pooling and Servicing Agreement"), the undersigned, as
Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage
Loan Schedule (other than any Mortgage Loan paid in full or listed on the
attached Document Exception Report) it has received:

         (i)   The original Mortgage Note endorsed in the form provided in
Section 2.01(c)(i) of the Pooling and Servicing Agreement, with all intervening
endorsements showing a complete chain of endorsement from the originator to the
Seller.

         (ii)  Except with respect to a Cooperative Loan, the original recorded
Mortgage.

         (iii) Except with respect to a Cooperative Loan, a duly executed
assignment of the Mortgage in the form provided in Section 2.01(c)(iii) of the
Pooling and Servicing Agreement, or, if the Depositor has certified or the
Trustee otherwise knows that the related Mortgage has not been returned from the
applicable recording office, a copy of the assignment of the Mortgage (excluding
information to be provided by the recording office).

         (iv)  Except with respect to a Cooperative Loan, the original or
duplicate original recorded assignment or assignments of the Mortgage showing a
complete chain of assignment from the originator to the Seller.

         (v)   The original or copies of each assumption, modification, written
assurance or substitution agreement, if applicable.

                                      H-1
<PAGE>   140

         (vi) Except with respect to a Cooperative Loan, the original or
duplicate original lender's title policy and all riders thereto or, any one of
an original title binder, an original preliminary title report or an original
title commitment, or a copy thereof certified by the title company.

         Based on its review and examination and only as to the foregoing
documents, (a) such documents appear regular on their face and related to such
Mortgage Loan, and (b) the information set forth in items (i), (ii) (except for
zip code), (iii), (iv) and (vi) of the definition of the "Mortgage Loan
Schedule" in Section 1.01 of the Pooling and Servicing Agreement accurately
reflects information set forth in the Mortgage File.

         The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
Pooling and Servicing Agreement. The Trustee makes no representations as to: (i)
the validity, legality, sufficiency, enforceability or genuineness of any of the
documents contained in each Mortgage File of any of the Mortgage Loans
identified on the Mortgage Loan Schedule, or (ii) the collectibility,
insurability, effectiveness or suitability of any such Mortgage Loan.

         Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the Pooling and Servicing Agreement.

                           WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                           as Trustee

                           By : __________________________________

                           Name: _________________________________

                           Title: ________________________________

                                      H-2
<PAGE>   141

                                                                       EXHIBIT I

                           FORM OF TRANSFER AFFIDAVIT

                     Mellon Residential Funding Corporation
                       Mortgage Pass-Through Certificates
                                  Series 200 -_

STATE OF                            )
                                    )   ss.:
COUNTY OF                           )

         The undersigned, being first duly sworn, deposes and says as follows:

         a. The undersigned is an officer of ____________, the proposed
Transferee of an Ownership Interest in a Class A-R Certificate (the
"Certificate") issued pursuant to the Pooling and Servicing Agreement, (the
"Agreement"), relating to the above-referenced Series, by and among Mellon
Residential Funding Corporation, as depositor (the "Depositor"),
________________, as seller and master servicer and Wells Fargo Bank Minnesota,
National Association, as Trustee. Capitalized terms used, but not defined herein
or in Exhibit 1 hereto, shall have the meanings ascribed to such terms in the
Agreement. The Transferee has authorized the undersigned to make this affidavit
on behalf of the Transferee.

         b. The Transferee is, as of the date hereof, and will be, as of the
date of the Transfer, a Permitted Transferee. The Transferee is acquiring its
Ownership Interest in the Certificate 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.

         c. The Transferee has been advised of, and understands that (i) a tax
will be imposed on Transfers of the Certificate to Persons that are not
Permitted Transferees; (ii) such tax will be imposed on the transferor, or, if
such Transfer is through an agent (which includes a broker, nominee or
middleman) for a Person that is not a Permitted Transferee, on the agent; and
(iii) the Person otherwise liable for the tax shall be relieved of liability for
the tax if the subsequent Transferee furnished to such Person an affidavit that
such subsequent Transferee is a Permitted Transferee and, at the time of
Transfer, such Person does not have actual knowledge that the affidavit is
false.

         d. The Transferee has been advised of, and understands that a tax will
be imposed on a "pass-through entity" holding the Certificate if at any time
during the taxable year of the pass-through entity a Person that is not a
Permitted Transferee is the record holder of an interest in such entity. The
Transferee understands that such tax will not be imposed for any period with
respect to which the record holder furnishes to the pass-through entity an
affidavit that such record holder is a Permitted Transferee and the pass-through
entity does not have actual knowledge that such affidavit is false. (For this
purpose, a "pass-through entity" includes a 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.)

                                      I-1
<PAGE>   142

         e. The Transferee has reviewed the provisions of Section 5.02(c) of the
Agreement (attached hereto as Exhibit 2 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Certificate including, without limitation, the restrictions on
subsequent Transfers and the provisions regarding voiding the Transfer and
mandatory sales. The Transferee expressly agrees to be bound by and to abide by
the provisions of Section 5.02(c) of the Agreement and the restrictions noted on
the face of the Certificate. The Transferee understands and agrees that any
breach of any of the representations included herein shall render the Transfer
to the Transferee contemplated hereby null and void.

         f. The Transferee agrees to require a Transfer Affidavit from any
Person to whom the Transferee attempts to Transfer its Ownership Interest in the
Certificate, and in connection with any Transfer by a Person for whom the
Transferee is acting as nominee, trustee or agent, and the Transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the Transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the Transferee, the
Transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit J 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.

         g. The Transferee does not have the intention to impede the assessment
or collection of any tax legally required to be paid with respect to the
Certificate.

         h. The Transferee's taxpayer identification number is .

         i. The Transferee is a U.S. Person as defined in Code Section
7701(a)(30).

         j. The Transferee is aware that the Certificate may be a "noneconomic
residual interest" within the meaning of proposed Treasury regulations
promulgated pursuant to the Code and that the transferor of a noneconomic
residual interest will remain liable for any taxes due with respect to the
income on such residual interest, unless no significant purpose of the transfer
was to impede the assessment or collection of tax.

         k. The Transferee is not an employee benefit plan that is subject to
ERISA or a plan that is subject to Section 4975 of the Code, and the Transferee
is not acting on behalf of such a plan.

                                      * * *

                                      I-2
<PAGE>   143

         IN WITNESS WHEREOF, the Transferee has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
duly authorized officer and its corporate seal to be hereunto affixed, duly
attested, this _____ day of _________, 20__.

                                              __________________________________
                                              PRINT NAME OF TRANSFEREE

                                              By: ______________________________

                                                  Name:
                                                  Title:

[Corporate Seal]

ATTEST:

[Assistant] Secretary

         Personally appeared before me the above-named __________________, known
or proved to me to be the same person who executed the foregoing instrument and
to be the _________________ of the Transferee, and acknowledged that he executed
the same as his free act and deed and the free act and deed of the Transferee.

         Subscribed and sworn before me this _____ day of _________, 20__.

                   NOTARY PUBLIC

                   My Commission expires the ____ day of ________________, 20__.

                                      I-3
<PAGE>   144

                                                                       EXHIBIT 1
                                                                    to EXHIBIT I

                               Certain Definitions

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

         "Permitted Transferee": Any Person other than (i) the United States,
any State or political subdivision thereof, or any agency or instrumentality of
any of the foregoing, (ii) a foreign government, International Organization or
any agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in Code Section 521) which is
exempt from tax imposed by Chapter 1 of the Code (including the tax imposed by
Code Section 511 on unrelated business taxable income) on any excess inclusions
(as defined in Code Section 860E(c)(1)) with respect to any Class A-R
Certificate, (iv) rural electric and telephone cooperatives described in Code
Section 1381(a)(2)(c), (v) an "electing partnership as defined in Code Section
775, (vi) a Person that is not a citizen or resident of the United States, a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States is includible in gross
income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States, or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
fiduciaries have the authority to control all substantial decisions of the trust
unless such Person has furnished the transferor and the Trustee with a duly
completed Internal Revenue Service Form 4224 or any applicable successor form,
and (vii) any other Person so designated by the Trustee based upon an Opinion of
Counsel that the Transfer of an Ownership Interest in a Class A-R Certificate to
such Person may cause either REMIC hereunder to fail to qualify as a REMIC at
any time that certain Certificates are Outstanding. The terms "United States,"
"State" and "International Organization" shall have the meanings set forth in
Code Section 7701 or successor provisions. 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, with the exception of
the FHLMC, a majority of its board of directors is not selected by such
governmental unit.

         "Person": Any individual, corporation, partnership, joint venture,
bank, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political subdivision
thereof.

         "Transfer": Any direct or indirect transfer or sale of any Ownership
Interest in a Certificate, including the acquisition of a Certificate by the
Depositor.

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

                                      I-4
<PAGE>   145

                                                                       EXHIBIT 2
                                                                    to EXHIBIT I

                        Section 5.02(c) of the Agreement

         (a) Each Person who has or who acquires any Ownership Interest in a
Class A-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
the rights of each Person acquiring any Ownership Interest in a Class A-R
Certificate are expressly subject to the following provisions:

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

                  (ii)  No Ownership Interest in a Class A-R Certificate may be
         registered on the Closing Date or thereafter transferred, and the
         Trustee shall not register the Transfer of any Class A-R Certificate
         unless, in addition to the certificates required to be delivered to the
         Trustee under subparagraph (b) above, the Trustee shall have been
         furnished with an affidavit (a "Transfer Affidavit") of the initial
         owner or the proposed transferee in the form attached hereto as Exhibit
         I.

                  (iii) Each Person holding or acquiring any Ownership Interest
         in a Class A-R Certificate shall agree (A) to obtain a Transfer
         Affidavit from any other Person to whom such Person attempts to
         Transfer its Ownership Interest in a Class A-R Certificate, (B) to
         obtain a Transfer Affidavit from any Person for whom such Person is
         acting as nominee, trustee or agent in connection with any Transfer of
         a Class A-R Certificate and (C) not to Transfer its Ownership Interest
         in a Class A-R Certificate or to cause the Transfer of an Ownership
         Interest in a Class A-R Certificate to any other Person if it has
         actual knowledge that such Person is not a Permitted Transferee.

                  (iv)  Any attempted or purported Transfer of any Ownership
         Interest in a Class A-R Certificate in violation of the provisions of
         this Section 5.02(c) shall be absolutely null and void and shall vest
         no rights in the purported Transferee. If any purported transferee
         shall become a Holder of a Class A-R Certificate in violation of the
         provisions of this Section 5.02(c), then the last preceding Permitted
         Transferee shall be restored to all rights as Holder thereof
         retroactive to the date of registration of Transfer of such Class A-R
         Certificate. The Trustee shall be under no liability to any Person for
         any registration of Transfer of a Class A-R Certificate that is in fact
         not permitted by Section 5.02(b) and this Section 5.02(c) or for making
         any payments due on such Certificate to the Holder thereof or taking
         any other action with respect to such Holder under the provisions of
         this Agreement so long as the Transfer was registered after receipt of
         the related Transfer Affidavit, Transferor Certificate and either the
         Rule 144A Letter or the Investment Letter. The Trustee shall be
         entitled but not obligated to recover from any Holder of a Class A-R
         Certificate that was in fact not a Permitted Transferee at the time it
         became a Holder or, at such subsequent time as it became other than a
         Permitted Transferee, all payments made on such Class A-R Certificate
         at and after either such time. Any such payments so recovered by the
         Trustee shall be paid and delivered by the Trustee to the last
         preceding Permitted Transferee of such Certificate.

                                      I-5
<PAGE>   146

                  (v) The Depositor shall compute any tax or use its best
         efforts to make available, upon receipt of written request from the
         Trustee, all information necessary to compute any tax imposed under
         Section 860E(e) of the Code as a result of a Transfer of an Ownership
         Interest in a Class A-R Certificate to any Holder who is not a
         Permitted Transferee. The Trustee will compute such tax upon receipt of
         an additional, reasonable fee.

                                      I-6
<PAGE>   147

                                                                     EXHIBIT J-1

                         FORM OF TRANSFEROR CERTIFICATE
                              (Private Certificate)

                                                              __________________
                                                              Date

Mellon Residential Funding Corporation
One Mellon Bank Center
500 Grant Street, Room 410
Pittsburgh, PA  15258
Attention:

Wells Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota  55479-0113
Attention: Corporate Trust Services-Mellon Residential Funding
           Corporation Mortgage Pass-Through Certificates, Series 200_-_

                  Re:      Mellon Residential Funding Corporation
                           Mortgage Pass-Through Certificates,
                           Series 200_-_ , Class,
                           --------------------------------------

Ladies and Gentlemen:

         In connection with our disposition of the above Certificates we certify
that (a) we understand that the Certificates have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are being disposed by us in
a transaction that is exempt from the registration requirements of the Act and
(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.

                                                     Very truly yours,

                                                     __________________________
                                                     Print Name of Transferor

                                                     By:_______________________
                                                        Authorized Officer

                                     J-1-1
<PAGE>   148

                                                                     EXHIBIT J-2

                         FORM OF TRANSFEROR CERTIFICATE
                                   (Class A-R)

                                                              __________________
                                                              Date

Mellon Residential Funding Corporation
One Mellon Bank Center
500 Grant Street, Room 410
Pittsburgh, PA  15258
Attention:

Wells Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota  55479-0113
Attention: Corporate Trust Services-Mellon Residential Funding
           Corporation Mortgage Pass-Through Certificates, Series 200_-_

                  Re:      Mellon Residential Funding Corporation
                           Mortgage Pass-Through Certificates,
                           Series 200_, Class A-R Certificates
                           --------------------------------------

Ladies and Gentlemen:

         In connection with our disposition of the above Certificates we certify
that we have no knowledge the Transferee is not a Permitted Transferee.

                                                     Very truly yours,

                                                     __________________________
                                                     Print Name of Transferor

                                                     By:_______________________
                                                        Authorized Officer

                                     J-2-1
<PAGE>   149

                                                                       EXHIBIT K

                    FORM OF INVESTMENT LETTER (NON-RULE 144A)

                                                              __________________
                                                              Date

Mellon Residential Funding Corporation
One Mellon Bank Center
500 Grant Street, Room 410
Pittsburgh, PA  15258
Attention:

Wells Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota  55479-0113
Attention: Corporate Trust Services-Mellon Residential Funding
           Corporation Mortgage Pass-Through Certificates, Series 200_-_

                  Re:      Mellon Residential Funding Corporation
                           Mortgage Pass-Through Certificates,
                           Series 200_-_ , Class
                           --------------------------------------

Ladies and Gentlemen:

         In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D 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)(i) we are either: (A) not an employee benefit
plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan or arrangement that is subject to Section 4975 of the
Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any
such plan or arrangement, nor are we using the assets of any such plan or
arrangement to effect such acquisition, or (B) an insurance company which is
acquiring 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) or (ii) we have delivered an Opinion of
Counsel satisfactory to the Trustee to the effect that the purchase or holding
of such Certificates will not result in a prohibited transaction and will not
subject the Trustee to any obligation in addition to those expressly undertaken
in the Pooling and Servicing Agreement or to any liability, (e) 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), (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

                                      K-1
<PAGE>   150

with respect thereto, or taken any other action which would result in a
violation of Section 5 of the Act, and (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.

                                                     Very truly yours,

                                                     __________________________
                                                     Print Name of Transferor

                                                     By:_______________________
                                                        Authorized Officer

                                      K-2
<PAGE>   151

                                                                       EXHIBIT L

                            FORM OF RULE 144A LETTER

                                                              __________________
                                                              Date

Mellon Residential Funding Corporation
One Mellon Bank Center
500 Grant Street, Room 410
Pittsburgh, PA  15258
Attention:

Wells Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue
Minneapolis, Minnesota  55479-0113
Attention: Corporate Trust Services-Mellon Residential Funding
           Corporation Mortgage Pass-Through Certificates, Series 200_-_

                  Re:      Mellon Residential Funding Corporation
                           Mortgage Pass-Through Certificates,
                           Series 200 -  , Class
                           --------------------------------------

Ladies and Gentlemen:

         In connection with our acquisition of the above Certificates we certify
that (a) we understand that the Certificates are not being registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities laws and
are being transferred to us in a transaction that is exempt from the
registration requirements of the Act and any such laws, (b) we have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) (i) we are either (A): not an employee benefit
plan that is subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan or arrangement that is subject to Section 4975 of the
Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any
such plan or arrangement, nor are we using the assets of any such plan or
arrangement to effect such acquisition, or (B) an insurance company which is
acquiring 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) or (ii) we have delivered an Opinion of
Counsel satisfactory to the Trustee to the effect that the purchase or holding
of such Certificates will not result in a prohibited transaction and will not
subject the Trustee to any obligation in addition to those expressly undertaken
in the Agreement or to any liability, (e) we have not, nor has anyone acting on
our behalf offered, transferred, pledged, sold or otherwise disposed of the
Certificates, any interest in the Certificates or any other similar security to,
or solicited any offer to buy or accept a transfer, pledge or other disposition
of the Certificates, any interest in the Certificates or any other similar
security from, or otherwise approached or negotiated with respect to the
Certificates, any interest in the Certificates or any other similar security
with, any person in any manner, or made any

                                      L-1
<PAGE>   152

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,
(f) we are a "qualified institutional buyer" as that term is defined in Rule
144A under the Securities Act and have completed either of the forms of
certification to that effect attached hereto as Annex 1 or Annex 2. We are aware
that the sale to us is being made in reliance on Rule 144A. We are acquiring the
Certificates for our own account or for resale pursuant to Rule 144A and
further, understand that such Certificates may be resold, pledged or transferred
only (i) to a person reasonably believed to be a qualified institutional buyer
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or transfer
is being made in reliance on Rule 144A, or (ii) pursuant to another exemption
from registration under the Securities Act.

                                      L-2
<PAGE>   153

                                                            ANNEX 1 TO EXHIBIT L

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.

         2. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned and/or
invested on a discretionary basis either at least $100,000 in securities or, if
Buyer is a dealer, Buyer must own and/or invest on a discretionary basis at
least $10,000,000 in securities (except for the excluded securities referred to
below) as of the end of the Buyer's most recent fiscal year (such amount being
calculated in accordance with Rule 144A and (ii) the Buyer satisfies the
criteria in the category marked below.

         ___      Corporation, etc. The Buyer is a corporation (other than a
                  bank, savings and loan association or similar institution),
                  Massachusetts or similar business trust, partnership, or
                  charitable organization described in Section 501(c)(3) of the
                  Internal Revenue Code of 1986, as amended.

         ___      Bank. The Buyer (a) is a national bank or banking institution
                  organized under the laws of any State, territory or the
                  District of Columbia, the business of which is substantially
                  confined to banking and is supervised by the State or
                  territorial banking commission or similar official or is a
                  foreign bank or equivalent institution, and (b) has an audited
                  net worth of at least $25,000,000 as demonstrated in its
                  latest annual financial statements, a copy of which is
                  attached hereto.

         ___      Savings and Loan. The Buyer (a) is a savings and loan
                  association, building and loan association, cooperative bank,
                  homestead association or similar institution, which is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent institution and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, a copy of which is
                  attached hereto.

         ___      Broker-dealer. The Buyer is a dealer registered pursuant to
                  Section 15 of the Securities Exchange Act of 1934.

         ___      Insurance Company. The Buyer is an insurance company whose
                  primary and predominant business activity is the writing of
                  insurance or the reinsuring of

                                      L-3
<PAGE>   154

                  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.

         3. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer, (ii) securities that are part of
an unsold allotment to or subscription by the Buyer, if the Buyer is a dealer,
(iii) securities issued or guaranteed by the U.S. or any instrumentality
thereof, (iv) bank deposit notes and certificates of deposit, (v) loan
participations, (vi) repurchase agreements, (vii) securities owned but subject
to a repurchase agreement and (viii) currency, interest rate and commodity
swaps.

         4. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used the cost
of such securities to the Buyer and did not include any of the securities
referred to in the preceding paragraph, except (i) where the Buyer reports its
securities holdings in its financial statements on the basis of their market
value, and (ii) no current information with respect to the cost of those
securities has been published. If clause (ii) in the preceding sentence applies,
the securities may be valued at market. Further, in determining such aggregate
amount, the Buyer may have included securities owned by subsidiaries of the
Buyer, but only if such subsidiaries are consolidated with the Buyer in its
financial statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed under the
Buyer's direction. However, such securities were not included if the Buyer is a
majority-owned, consolidated subsidiary of another enterprise and the Buyer is
not itself a reporting company under the Securities Exchange Act of 1934, as
amended.

         5. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Buyer may be in reliance on Rule 144A.

         6. Until the date of purchase of the Rule 144A Securities, the Buyer
will notify each of the parties to which this certification is made of any
changes in the information and conclusions herein. Until such notice is given,
the Buyer's purchase of the Certificates will constitute a reaffirmation

                                      L-4
<PAGE>   155

of this certification as of the date of such purchase. In addition, if the Buyer
is a bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.

                                 ________________________________________
                                 Print Name of Buyer

                                 By: ____________________________________
                                      Name:
                                      Title:

                                 Date: ______________________

                                      L-5
<PAGE>   156

                                                            ANNEX 2 TO EXHIBIT L

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

         The undersigned (the "Buyer") hereby certifies as follows to the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates with respect to the Certificates described therein:

         1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.

         2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

         ___      The Buyer owned $_________ in securities (other than the
                  excluded securities referred to below) as of the end of the
                  Buyer's most recent fiscal year (such amount being calculated
                  in accordance with Rule 144A).

         ___      The Buyer is part of a Family of Investment Companies which
                  owned in the aggregate $ in securities (other than the
                  excluded securities referred to below) as of the end of the
                  Buyer's most recent fiscal year (such amount being calculated
                  in accordance with Rule 144A).

         3. The term "Family of Investment Companies" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

         4. The term "securities" as used herein does not include (i) securities
of issuers that are affiliated with the Buyer or are part of the Buyer's Family
of Investment Companies, (ii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iii) bank deposit notes and certificates of deposit,
(iv) loan participations, (v) repurchase agreements, (vi) securities owned but
subject to a repurchase agreement and (vii) currency, interest rate and
commodity swaps.

         5. The Buyer is familiar with Rule 144A and under-stands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to

                                      L-6
<PAGE>   157

rely on the statements made herein because one or more sales to the Buyer will
be in reliance on Rule 144A. In addition, the Buyer will only purchase for the
Buyer's own account.

                  6. Until the date of purchase of the Certificates, the
undersigned will notify the parties listed in the Rule 144A Transferee
Certificate to which this certification relates of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification by the undersigned as of the date of such purchase.

                                 _______________________________
                                 Print Name of Buyer or Adviser

                                 By:____________________________
                                      Name:
                                      Title:

                                 IF AN ADVISER:

                                 _______________________________
                                 Print Name of Buyer

                                 Date:_________________

                                      L-7
<PAGE>   158

                                                                       EXHIBIT M

                           FORM OF REQUEST FOR RELEASE
                                  (for Trustee)

                     MELLON RESIDENTIAL FUNDING CORPORATION.
                       Mortgage Pass-Through Certificates
                                  Series 200 -_

Loan Information

         Name of Mortgagor: ___________________________________________________

         Servicer
         Loan No.:          ___________________________________________________

Trustee

         Name:               __________________________________________________

         Address:            __________________________________________________

                             __________________________________________________

         Trustee
         Mortgage File No.:  __________________________________________________

         The undersigned Master Servicer hereby acknowledges that it has
received from Wells Fargo Bank Minnesota, National Association, as Trustee for
the Holders of Mortgage Pass-Through Certificates, of the above-referenced
Series, the documents referred to below (the "Documents"). All capitalized terms
not otherwise defined in this Request for Release shall have the meanings given
them in the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") relating to the above-referenced Series among the Trustee,
________________, as Seller and Master Servicer and Mellon Residential Funding
Corporation, as Depositor.

         ( )      Mortgage Note dated ___________ , 20__, in the original
                  principal sum of $__________, made by ____________, payable
                  to, or endorsed to the order of, the Trustee.

         ( )      Mortgage recorded on _________________ as instrument no.
                  _____________________ in the County Recorder's Office of the
                  County of ___________________, State of _______________ in
                  book/reel/docket ________________ of official records at
                  page/image ________________.

         ( )      Deed of Trust recorded on __________________ as instrument
                  no. _________________ in the County Recorder's Office of the
                  County of _________________, State of _________________ in
                  book/reel/docket _________________ of official records at
                  page/image _________________.

         ( )      Assignment of Mortgage or Deed of Trust to the Trustee,
                  recorded on _________________ as instrument no.
                  _________________ in the County Recorder's Office of the
                  County of _________________, State of _________________ in
                  book/reel/docket _________________ of official records at
                  page/image _________________.

                                      M-1
<PAGE>   159

         ( )      Mortgage Loan File with respect to Mortgage Note dated _______
                  in the original principal sum of $_____ made by __________.

         ( )      Other documents, including any amendments, assignments or
                  other assumptions of the Mortgage Note or Mortgage.

                  ( )      _____________________________________________________

                  ( )      _____________________________________________________

                  ( )      _____________________________________________________

                  ( )      _____________________________________________________

         The undersigned Master Servicer hereby acknowledges and agrees as
follows:

                  (1) The Master Servicer shall hold and retain possession of
         the Documents in trust for the benefit of the Trustee, solely for the
         purposes provided in the Agreement.

                  (2) The Master Servicer shall not cause or knowingly permit
         the Documents to become subject to, or encumbered by, any claim, liens,
         security interest, charges, writs of attachment or other impositions
         nor shall the Master Servicer assert or seek to assert any claims or
         rights of setoff to or against the Documents or any proceeds thereof.

                  (3) The Master Servicer shall return each and every Document
         previously requested from the Mortgage File to the Trustee when the
         need therefor no longer exists, unless the Mortgage Loan relating to
         the Documents has been liquidated and the proceeds thereof have been
         remitted to the Certificate Account and except as expressly provided in
         the Agreement.

                  (4) The Documents and any proceeds thereof, including any
         proceeds of proceeds, coming into the possession or control of the
         Master Servicer shall at all times be earmarked for the account of the
         Trustee, and the Master Servicer shall keep the Documents and any
         proceeds separate and distinct from all other property in the Master
         Servicer's possession, custody or control.

                                              __________________________________

                                              By _______________________________

                                              Its ______________________________

Date: ______________, 20__

                                      M-2
<PAGE>   160

                                                                       EXHIBIT N

                        REQUEST FOR RELEASE OF DOCUMENTS

To:      Wells Fargo Bank Minnesota, N.A.
         1015 10th Avenue S.E.
         Minneapolis, MN  55414-0031
         Attn:   Inventory Control

         Re:      Custodial Agreement dated as of ________, among _____________.
                  and Wells Fargo Bank  Minnesota, N.A., as Custodian

         In connection with the administration of the Mortgage Loans held by you
as Custodian for the Owner pursuant to the above-captioned Custody Agreement, we
request the release, and hereby acknowledge receipt, of the Custodian's Mortgage
File for the Mortgage Loan described below, for the reason indicated.

Mortgage Loan Number:

Mortgagor Name, Address & Zip Code:

Reason for Requesting Documents (check one):

_______           1.       Mortgage Paid in Full

_______           2.       Foreclosure

_______           3.       Substitution

_______           4.       Other Liquidation (Repurchases, etc.)

_______           5.       Nonliquidation  Reason:______________________________

Address to which Custodian should
Deliver the Custodian's Mortgage File: _________________________________________

                                       _________________________________________

                                       _________________________________________

                                    By:_________________________________________
                                                  (authorized signer)

                                    Issuer:_____________________________________

                                    Address:____________________________________

                                            ____________________________________

                                    Date:_______________________________________

                                      N-1
<PAGE>   161

Custodian

Wells Fargo Bank Minnesota, N.A.

Please acknowledge the execution of the above request by your signature and date
below:

____________________________________                 _________________
Signature                                                   Date

Documents returned to Custodian:

____________________________________                 _________________
Custodian                                                   Date

                                      N-2
<PAGE>   162

                                                                       EXHIBIT O

                      Form of Additional Pledged Collateral

                               Custodial Agreement

         THIS ADDITIONAL PLEDGED COLLATERAL CUSTODIAL AGREEMENT, dated as of
______, 200_, is by and among Wells Fargo Bank Minnesota, National Association,
a national banking association with an office at Sixth Street and Marquette
Avenue, Minneapolis, Minnesota 55479-0113, ("Wells Fargo"), Boston Safe Deposit
and Trust Company, a Massachusetts trust company with its principal place of
business at One Boston Place, Boston, MA 02108 ("Boston Safe" or the
"Custodian") and Mellon Residential Funding Corporation, a Delaware corporation
with its principal place of business at One Mellon Bank Center, Pittsburgh, PA
15258 ("MRFC");

                                   WITNESSETH

         WHEREAS, pursuant to the terms of a Pooling and Servicing Agreement of
even date herewith by and among MRFC, as depositor, Wells Fargo, as trustee,
Mellon Bank N.A., as standby purchaser, and Boston Safe, as master servicer and
seller (the "Pooling Agreement"), MRFC has agreed to purchase certain loans
(each a "Mortgage Loan") from Boston Safe and to cause the Mortgage Loans to be
assigned to Wells Fargo for the benefit of the holders of certificates to be
issued by MRFC Mortgage Pass-Through Trust, Series 200_ ____ (the
"Certificateholders"); and

         WHEREAS, certain Mortgage Loans are secured by Additional Collateral
(as defined in the Pooling Agreement) currently in the custody of Boston Safe;
and

         WHEREAS, Wells Fargo desires to have Boston Safe retain possession of
the Additional Pledged Collateral for the benefit of the Trustee and the
Certificateholders, in accordance with the terms and conditions hereof;

         NOW, THEREFORE, in consideration of the mutual undertakings herein
expressed the parties hereto hereby agree as follows:

         Section 1. Definitions.

         Capitalized terms shall have the meanings assigned to them, except that
capitalized terms used and not defined herein shall have the meanings assigned
to such terms by the Pooling Agreement.

         Section 2. Appointment of the Custodian.

         Wells Fargo hereby appoints and designates the Custodian as the
custodian of the Additional Collateral. The Custodian hereby accepts such
appointment and designation and agrees that it shall maintain custody of the
Additional Collateral in accordance with this Agreement. In its discretion, the
Custodian is permitted to engage sub-contractors to assist in providing certain
of the services to Wells Fargo under this Agreement.

                                      O-1
<PAGE>   163

         Section 3. Obligations of the Custodian.

         The Custodian shall hold all Additional Collateral for the use and
benefit of Wells Fargo and the Certificateholders, and shall make disposition
thereof in accordance with this Agreement and the instructions furnished by
Wells Fargo. The Custodian shall segregate and maintain continuous custody of
all Additional Collateral in accordance with customary standards for such
custody.

         Section 4. Custodian Duties.

         As Custodian for the Additional Collateral, the Custodian shall:

                  (a) hold the Additional Collateral, as applicable, in
         safekeeping facilities, including, without limitation, in central
         depositories including The Depository Trust Company, in the Book Entry
         System of the U.S. Treasury Department ("Fed Book Entry"), or in the
         safekeeping of other custodian banks, clearing corporations and
         depositories or similar organizations in the U.S. or elsewhere, as
         required for the secure and efficient handling of the property and as
         the Custodian in its sole discretion shall select;

                  (b) collect all income earned by, and all distributions due
         to, the Additional Collateral, if any;

                  (c) collect all proceeds from securities, certificates of
         deposit or other investments which may mature or be called;

                  (d) attend to exchanges of securities, to deposits or
         exchanges of the securities of companies in reorganization, and to
         other so-called corporate actions which affect the Additional
         Collateral as directed by Wells Fargo; and

                  (e) upon Wells Fargo's written instructions, deliver to any
         person, agent, financial institution, partnership, corporation or other
         designated recipient any or all of the Additional Collateral held under
         this Agreement.

         The Custodian shall have no duty or responsibility to manage or
recommend investments of the assets held by it hereunder or to initiate any
purchase, sale or other investment transaction in the absence of proper
instructions (as set forth in Section 5 below).

         Section 5. Directions And Instructions.

         All directions to the Custodian from Wells Fargo shall be in writing
(provided that the Custodian may, in its discretion, accept oral directions
subject to confirmation in writing), and the Custodian shall be fully protected
in acting in accordance therewith or for failing to act in the absence thereof.
Wells Fargo shall certify to the Custodian the names and specimen signatures of
persons authorized to act for Wells Fargo in relation to the Custodian.
Communications to the Custodian shall be sent to its offices at One Boston
Place, Boston, Massachusetts 02108 or to such other address as the Custodian
shall specify, and such communications shall be binding upon the Custodian when
received by it.

         Notwithstanding anything herein to the contrary, the Custodian shall be
fully protected in acting in accordance with directions with respect to
securities transactions (including without limitation the

                                      O-2
<PAGE>   164

affirmation and/or confirmation of such transactions) received by it through a
system or arrangement for the coordination of securities transaction settlements
operated by The Depository Trust Company or by any central securities
depository, securities clearing organization or book entry system which serves
to link investment managers, securities brokers and custodian banks, pursuant to
an agreement entered into by the Custodian and Wells Fargo to the same extent as
if the directions were in writing.

         Section 6. Without Express Authority.

         The Custodian may, in its discretion and without express authority from
Wells Fargo:

                  (a) endorse for collection, in the name of Wells Fargo,
         checks, drafts and other negotiable instruments; and

                  (b) in general, attend to all non-discretionary details in
         connection with the sale, exchange, substitution, purchase, transfer
         and other dealings with the Additional Collateral of Wells Fargo except
         as otherwise provided by proper instructions.

         Section 7. Standard of Care.

         The duties of the Custodian shall only be those specifically undertaken
pursuant to this Agreement, and the Custodian shall not be liable for an act or
omission of another person in carrying out any responsibility imposed upon such
person with respect to the Additional Collateral held under this Agreement
whether such responsibility is allocated to such other person by this Agreement
or pursuant to a procedure established in this Agreement or otherwise. In
performing its duties under this Agreement, the Custodian shall exercise the
same care and diligence that it would devote to its own property and shall be
liable only for losses arising from its negligence or willful misconduct.

         Section 8. Indemnification of the Custodian.

         MRFC agrees to indemnify and hold harmless the Custodian and its
directors, officers, employees, agents and nominees from all taxes (except taxes
on the net income of the Custodian, its agents and its nominees), charges,
expenses, assessments, claims and liabilities (including reasonable legal fees
and expenses) incurred by any of them in connection with the performance of this
Agreement, except such as may arise from any negligent action, negligent failure
to act or willful misconduct on the part of the indemnified entity.

         Section 9. Compensation of the Custodian.

         Throughout the Term of this Agreement, as set forth in Section 14
below, the Custodian shall perform its duties hereunder without compensation.
Thereafter, the Custodian shall be entitled to reimbursement of expenses
incurred in connection with any necessary transfer following notice of
termination or removal under Sections 11, 12 or 14.

         Section 10. Examination of Custodial Files.

         Upon reasonable prior notice to the Custodian, Wells Fargo and MRFC and
any of their respective agents, accounts, attorneys and auditors will be
permitted during normal business hours to

                                      O-3
<PAGE>   165

examine the records relating to Additional Pledged Collateral in the possession
of or under the control of the Custodian relating to any or all of the Mortgage
Loans.

         Section 11. Removal of the Custodian.

         Upon at least 45 days' prior written notice to the Custodian and MRFC,
and only for cause, Wells Fargo may remove and discharge the Custodian from the
performance of its duties under this Agreement. Having given notice of such
removal and having received the prior written consent of Wells Fargo, MRFC
promptly shall appoint a successor Custodian to act on behalf of Wells Fargo by
written instrument, one original counterpart of which instrument shall be
delivered to the Custodian. Any termination by Wells Fargo shall be accompanied
or followed promptly by proper instructions in writing setting forth the names
of the persons to whom the Custodian shall deliver the Additional Collateral.
The Custodian will deliver promptly the Additional Collateral to the persons so
specified, after deducting therefrom any amounts which the Custodian is owed for
services or reimbursement of expenses hereunder. MRFC shall cause the Master
Servicer to pay the fees of the successor Custodian, provided, that if Wells
Fargo is the successor to the Master Servicer under the Pooling and Servicing
Agreement, MRFC shall pay such fees.

         Section 12. Termination by the Custodian.

         The Custodian may terminate its obligations under this Agreement upon
at least 45 days' prior written notice to Wells Fargo and the MRFC. In the event
of such termination and with the prior written consent of Wells Fargo, MRFC
shall appoint a successor Custodian. MRFC shall cause the Master Servicer or any
successor to Boston Safe as the Master Servicer pursuant to the Pooling
Agreement, except to the extent Wells Fargo is such successor in which case MRFC
agrees, to pay such successor Custodian's fees and expenses. If notice of
termination is given by the Custodian, Wells Fargo shall, within 30 days
following the giving of such notice, deliver to the Custodian proper
instructions in writing specifying the names of the persons to whom the
Custodian shall deliver the Additional Pledged Collateral held by it. The
Custodian will deliver promptly the Additional Pledged Collateral to the persons
so specified, after deducting therefrom any amounts which the Custodian is owed
for services or reimbursement of expenses hereunder.

         If within 30 days following the giving of a notice of termination by
the Custodian, the Custodian does not receive from Wells Fargo proper
instructions in writing specifying the names of the persons to whom the
Custodian shall deliver the assets of Wells Fargo held by it, the Custodian, at
its election, may seek court action with respect to the appointment of a
successor custodian.

         Section 13. Survival.

         The obligations of the parties hereto regarding the use of reasonable
care, indemnities and payment of fees and expenses shall survive the termination
of this Agreement.

         Section 14. Term of Agreement.

         Unless terminated pursuant to Section 11 or Section 12 hereof, this
Agreement shall terminate upon the earlier of (1) the resignation or removal of
the Custodian, its agent or affiliate as the Master Servicer under the Pooling
Agreement, and (2) the termination of the Trust Fund pursuant to Section

                                      O-4
<PAGE>   166
9.01 of the Pooling Agreement. In such event, all Additional Pledged Collateral
shall be released in accordance with the written instructions of Wells Fargo.

         Section 15. Notices.

         Except as otherwise specified herein, each notice or other
communication hereunder shall be in writing and shall be delivered to the
intended recipient at the following address (or at such other address as the
intended recipient shall have specified in a written notice given to the other
parties hereto):

         if to Wells Fargo Bank:

                  Wells Fargo Bank Minnesota, National Association
                  11000 Broken Land Parkway
                  Columbia, Maryland  21044-3562
                  Attention: Corporate Trust Services-Mellon Residential Funding
                             Corporation, Series 2000-TBC3

         if to the Custodian:

                  Boston Safe Deposit and Trust Company
                  One Boston Place
                  Boston, MA 02108 Attention:

         if to MRFC:

                  Mellon Residential Funding Corporation
                  One Mellon Bank Center
                  Room 410
                  Pittsburgh, PA  15258
                  Attention:  Stephen Cobain, President

         Section 16. Amendments.

         Unless otherwise specifically provided herein, this Agreement may not
be amended, modified, altered or supplemented other than by means of an
agreement or instrument executed on behalf of each of the parties hereto.

         Section 17. Waiver.

         No failure on the part of any person to exercise any power, right,
privilege or remedy hereunder, and no delay on the part of any person in the
exercise of any power, right, privilege or remedy hereunder, shall operate as a
waiver thereof; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.

                                      O-5
<PAGE>   167

         Section 18. Severability.

         In the event that any provision of this Agreement, or the application
of any such provision to any person or set of circumstances, shall be determined
to be invalid, unlawful, void or unenforceable to any extent, the remainder of
this Agreement, and the application of such provision to persons or
circumstances other than those as to which it is determined to be invalid,
unlawful, void or unenforceable, shall not be impaired or otherwise affected and
shall continue to be valid and enforceable to the fullest extent permitted by
law.

         Section 19. Successor and Assigns.

         This agreement shall inure to the benefit of the successors and assigns
of the parties hereto.

         Section 20. Governing Law.

         This Agreement shall be construed in accordance with, and governed in
all respects by, the laws of the Commonwealth of Massachusetts.

         Section 21. Counterparts.

         This Agreement may be executed in counterparts, each of which shall
constitute an original and both of which, when taken together, shall constitute
one agreement.

         IN WITNESS WHEREOF, Wells Fargo, the Custodian and MRFC have caused
their names to be signed hereto by their respective duly-authorized officers,
all as of the date first above written.

                           WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,
                             as Trustee

                           By:______________________________________________

                              Name:

                              Title:

                           BOSTON SAFE DEPOSIT AND TRUST COMPANY

                           By:______________________________________________

                              Name:

                              Title:

                           MELLON RESIDENTIAL FUNDING CORPORATION

                           By:______________________________________________

                              Name:

                              Title:

                                      O-6
<PAGE>   168

                                                                       EXHIBIT P

                      FORM OF SUBSEQUENT TRANSFER AGREEMENT

         SUBSEQUENT TRANSFER AGREEMENT (the "Agreement"), dated as of
________, 2000 by and among Mellon Residential Funding Corporation, as depositor
(the "Depositor"), Boston Safe Deposit and Trust Company, as seller and master
servicer (the "Seller") and MRFC Mortgage Pass-Through Trust, 2000-TBC3 (the
"Trust Fund") pursuant to the Pooling and Servicing Agreement referred to below.

                                   WITNESSETH:

         WHEREAS, pursuant to a Pooling and Servicing Agreement (the "Pooling
and Servicing Agreement"), dated as of August 1, 2000, among the Seller, the
Depositor and Wells Fargo Bank Minnesota, National Association, as trustee (the
"Trustee"), the Seller wishes to convey the Subsequent Mortgage Loans (as
defined below) to the Depositor, and the Depositor wishes to acquire the same
for the consideration set forth in Section IV below and the Depositor wishes to
convey the Subsequent Mortgage Loans to the Trust Fund and the Trust Fund wishes
to acquire the same for the consideration set forth in Section V below; and

         WHEREAS, the Seller and the Depositor shall timely deliver to the
Trustee an Addition Notice related to such conveyance as required by Section
2.09 of the Pooling and Servicing Agreement;

         NOW THEREFORE, the Trust Fund, the Depositor and the Seller hereby
agree as follows:

         Section I. Capitalized terms used herein shall have the meanings
ascribed to them in the Pooling and Servicing Agreement unless otherwise
defined.

                  "Subsequent Mortgage Loans" shall mean, for purposes of this
         Agreement, the Subsequent Mortgage Loans listed in the Subsequent
         Mortgage Loan Schedule attached hereto as Schedule I.

                  "Subsequent Transfer Date" shall mean, with respect to the
         Subsequent Mortgage Loans transferred hereby, the date hereof.

         Section II. Subsequent Mortgage Loan Schedule. (a) The Subsequent
Mortgage Loan Schedule attached hereto as Schedule I is a supplement to the
Mortgage Loan Schedule attached as Schedule I to the Pooling and Servicing
Agreement. The Mortgage Loans listed in the Subsequent Mortgage Loan Schedule
constitute the Subsequent Mortgage Loans to be transferred pursuant to this
Agreement on __________, 2000.

         Section III. Transfer of Subsequent Mortgage Loans. As of the related
Cut-off Date, subject to and upon the terms and conditions set forth in Sections
2.09 of the Pooling and Servicing Agreement and set forth in this Agreement, the
Seller and the Depositor hereby irrevocably sell, transfer, assign, set over and
otherwise convey to the Trustee on behalf of the Trust Fund without recourse
other than as expressly provided herein and in the Pooling and Servicing
Agreement, all the right, title and interest of the Seller in and to the (i)
Subsequent Mortgage Loans including the related Stated Principal Balance as of
the related Cut-off Date, all interest accruing thereon after the related
Cut-off Date, and all collections in

                                      P-1
<PAGE>   169

respect of principal received after the related Cut-Off Date; (ii) property
which secured a Subsequent Mortgage Loan and which is acquired by foreclosure or
in lieu of foreclosure; (iii) interest of the Seller in any insurance policies
in respect of the Subsequent Mortgage Loans; and (iv) all proceeds of any of the
foregoing.

         Section IV. Representations and Warranties of the Seller. (a) The
Seller hereby represents and warrants to the Depositor for the benefit of the
Certificateholders that the representations and warranties of the Seller set
forth in Sections 2.01, 2.02, 2.03 and 2.09 of the Pooling and Servicing
Agreement are true and correct with respect to the Seller and the Subsequent
Mortgage Loans as of the Closing Date.

         (b) The Seller hereby represents and warrants that (i) the aggregate of
the Principal Balances of the Subsequent Mortgage Loans listed on the Subsequent
Mortgage Loan Schedule and conveyed to the Depositor pursuant to this Agreement
as of the related Cut-off Date is $__________, and (ii) the conditions precedent
for the transfer of Subsequent Mortgage Loans set forth in Section 2.09(b) of
the Pooling and Servicing Agreement have been satisfied as of the Closing Date.

         (c) The Seller hereby represents and warrants that the Seller is not
(i) insolvent and will not be rendered insolvent by the transfer of Subsequent
Mortgage Loans pursuant to this Agreement or (ii) aware of any pending
insolvency of the Seller.

         Section V. Representations and Warranties of the Depositor. (a) The
Depositor hereby represents and warrants to the Trust Fund for the benefit of
the Certificateholders that the representations and warranties of the Depositor
set forth in Sections 2.01, 2.02, 2.04, and 2.09 of the Pooling and Servicing
Agreement are true and correct with respect to the Depositor and the Subsequent
Mortgage Loans as of the Subsequent Transfer Date.

         (b) The Depositor hereby represents and warrants that (i) the aggregate
of the Principal Balances of the Subsequent Mortgage Loans listed on the
Subsequent Mortgage Loan Schedule and conveyed to the Trust Fund pursuant to
this Agreement as of the related Cut-off Date is $__________, and (ii) the
conditions precedent for the transfer of Subsequent Mortgage Loans set forth in
Section 2.09(b) of the Pooling and Servicing Agreement have been satisfied as of
the Subsequent Transfer Date.

         (c) The Depositor hereby represents and warrants that the Depositor is
not (i) insolvent and will not be rendered insolvent by the transfer of
Subsequent Mortgage Loans pursuant to this Agreement or (ii) aware of any
pending insolvency of the Depositor.

         Section VI. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.

         Section VII. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws.

                                      P-2
<PAGE>   170

         IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
executed by their respective officers thereunto authorized as of the date first
written above.

                                   BOSTON SAFE DEPOSIT AND TRUST COMPANY
                                     as Seller

                                   By:_________________________________________

                                      Name:

                                      Title:

                                   MRFC MORTGAGE PASS-THROUGH TRUST, 2000-TBC3

                                   By: WELLS FARGO BANK MINNESOTA,
                                         NATIONAL ASSOCIATION,
                                         not in its individual capacity but
                                         solely as Trustee

                                   By:_________________________________________

                                      Name:

                                      Title:

                                   MELLON RESIDENTIAL FUNDING CORPORATION
                                     as Depositor

                                   By:_________________________________________

                                      Name:

                                      Title:

                                      P-3
<PAGE>   171

STATE OF NEW YORK          )
                           )
COUNTY OF NEW YORK         )

         On the ____ day of _________, 200_ before me, a Notary Public in and
for said State, personally appeared ______________, known to me to be a Vice
President of MELLON RESIDENTIAL FUNDING CORPORATION, the 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

                                      P-4
<PAGE>   172

STATE OF NEW YORK          )
                           )
COUNTY OF NEW YORK         )

         On the ____ day of ________, 200_ before me, a Notary Public in and for
said State, personally appeared _______________, known to me to be an
_______________________ of WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, the
company 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

                                      P-5
<PAGE>   173

         On the ____ day of ________, 200_ before me, a Notary Public in and for
said State, personally appeared _______________, known to me to be an
_______________________ of BOSTON SAFE DEPOSIT AND TRUST COMPANY, the company
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

                                      P-6
<PAGE>   174

                                                                       EXHIBIT Q

                          SUBSEQUENT FUNDING PARAMETERS

Subsequent Mortgage Loan Criteria. Following the addition of the Subsequent
Mortgage Loans, the Mortgage Loans must be in compliance with the following
characteristics:

(a)      The Weighted Average Mortgage Rate will be at least 7.700%.

(b)      The Weighted Average Gross Margin will be at least 1.200%.

(c)      The Weighted Average Maximum Mortgage Rate will be at least 10.750%.

(d)      The Weighted Average Remaining Term to Stated Maturity will be at least
         328 months.

(e)      The Weighted Average Original Loan-to-Value Ratio will be not more than
         70%.

(f)      The Original Loan-to-Value Ratio concentration above 80% will be not
         more than 16%.

(g)      The Average Outstanding Principal Balance will be not more than
         $640,000.

(h)      The Second home property concentration will be not more than 23%.

(i)      The Largest State concentration will be not more than 28%.

(j)      The Largest Zip code concentration will be not more than 2.25%.

The obligation of the Trust Fund to purchase Subsequent Mortgage Loans on any
date during the Pre-Funding Period is subjected to the following requirements:

(a)      No Subsequent Mortgage Loan will have an outstanding Principal Balance
         greater than $3,000,000.

(b)      The Subsequent Mortgage Loan may not be 30 or more days contractually
         delinquent as of the related Cut-off Date.

(c)      The remaining term to stated maturity of the Subsequent Mortgage Loan
         will not exceed 30 years.

(d)      The Subsequent Mortgage Loan will be secured by a mortgage in a first
         lien position.

(e)      The Subsequent Mortgage Loan will not have a Mortgage Rate less than
         7.000%.

(f)      The Subsequent Mortgage Loan will not be secured by a non-owner
         occupied property.

(g)      The Subsequent Mortgage Loan will not have a Periodic Rate Cap.

                                      Q-1
<PAGE>   175

(h)      The Loan Index for each Subsequent Mortgage Loan will be 1-month LIBOR
         and each Subsequent Mortgage Loan shall have a Mortgage Rate which
         adjusts monthly.

(i)      The Loan-to-Value Ratio at origination will not exceed 100%, and the
         Loan-to-Collateral Value Ratio at origination will not exceed 90%.

(j)      The Subsequent Mortgage Loan will not (1) be subject to a buydown
         agreement, (2) be covered by a primary mortgage guaranty policy or (3)
         provide for deferred interest or negative amortization.

(k)      Each Subsequent Mortgage Loan will have been originated under the same
         underwriting criteria as the Initial Mortgage Loans.

(l)      The addition of the Subsequent Mortgage Loans will not result in the
         withdrawal or downgrading of the ratings assigned to the Certificates.

                                      Q-2

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