Document:

SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

                                    Depositor

                            LITTON LOAN SERVICING LP

                                    Servicer

                                       and

                      DEUTSCHE BANK NATIONAL TRUST COMPANY

                                     Trustee

                         POOLING AND SERVICING AGREEMENT
                            Dated as of April 1, 2003

                Citigroup Home Equity Loan Trust, Series 2003-HE1
                     Asset Backed Pass-Through Certificates

                                 Series 2003-HE1

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS

                                                     ARTICLE I

                                                    DEFINITIONS
<S>                                                                                                            <C>
SECTION 1.01.     Defined Terms.................................................................................-1-
SECTION 1.02.     Allocation of Certain Interest Shortfalls....................................................-45-

                                                    ARTICLE II

                                           CONVEYANCE OF MORTGAGE LOANS;
                                         ORIGINAL ISSUANCE OF CERTIFICATES
SECTION 2.01.     Conveyance of the Mortgage Loans.............................................................-47-
SECTION 2.02.     Acceptance of REMIC I by Trustee.............................................................-49-
SECTION 2.03.     Repurchase or Substitution of Mortgage Loans by the
                           Originator..........................................................................-50-
SECTION 2.04.     Reserved.....................................................................................-52-
SECTION 2.05.     Representations, Warranties and Covenants of the Servicer....................................-52-
SECTION 2.06.     Issuance of the REMIC I Regular Interests and the Class R-I
                           Interest............................................................................-54-
SECTION 2.07.     Conveyance of the REMIC I Regular Interests; Acceptance of REMIC
                           II by  the Trustee..................................................................-55-
SECTION 2.08.     Issuance of Class R Certificates.............................................................-55-
SECTION 2.09.     Conveyance of the Class M-4 Interest; Acceptance of REMIC III
                           by the Trustee......................................................................-55-
SECTION 2.10.     Conveyance of the Class M-5 Interest; Acceptance of REMIC IV
                           by the Trustee......................................................................-55-
SECTION 2.11.     Conveyance of the Class CE-I Interest and the Class CE-II
                           Interest; Acceptance of REMIC V by the Trustee......................................-55-
SECTION 2.12.     Conveyance of the Class P Interest; Acceptance of REMIC VI by the
                           Trustee.............................................................................-56-
SECTION 2.13.     Issuance of Class R-X Certificates...........................................................-56-

                                                    ARTICLE III

                                           ADMINISTRATION AND SERVICING
                                               OF THE MORTGAGE LOANS
SECTION 3.01.     Servicer to Act as Servicer..................................................................-57-
SECTION 3.02.     Sub-Servicing Agreements Between Servicer and
                           Sub-Servicers.......................................................................-59-
SECTION 3.03.     Successor Sub-Servicers......................................................................-60-
SECTION 3.04.     No Contractual Relationship Between Sub-Servicer, Trustee or
                           the Certificateholders..............................................................-60-
SECTION 3.05.     Assumption or Termination of Sub-Servicing Agreement by
                           Trustee ............................................................................-60-

                                                        -i-

<PAGE>

SECTION 3.06.     [Reserved]...................................................................................-60-
SECTION 3.07.     Collection of Certain Mortgage Loan Payments.................................................-61-
SECTION 3.08.     [Reserved]...................................................................................-61-
SECTION 3.09.     Collection of Taxes, Assessments and Similar Items; Servicing
                           Accounts............................................................................-61-
SECTION 3.10.     Collection Account, Distribution Account and Initial Deposit
                           Accounts............................................................................-62-
SECTION 3.11.     Withdrawals from the Collection Account and Distribution Account.............................-64-
SECTION 3.12.     Investment of Funds in the Investment Accounts...............................................-66-
SECTION 3.13.     [Reserved]...................................................................................-67-
SECTION 3.14.     Maintenance of Hazard Insurance and Errors and Omissions and
                            Fidelity Coverage..................................................................-67-
SECTION 3.15.     Enforcement of Due-on-Sale Clauses; Assumption Agreements....................................-68-
SECTION 3.16.     Realization Upon Defaulted Mortgage Loans....................................................-69-
SECTION 3.17.     Trustee to Cooperate; Release of Mortgage Files..............................................-71-
SECTION 3.18.     Servicing Compensation.......................................................................-72-
SECTION 3.19.     Reports to the Trustee; Collection Account Statements........................................-73-
SECTION 3.20.     Statement as to Compliance...................................................................-73-
SECTION 3.21.     Independent Public Accountants' Servicing Report.............................................-73-
SECTION 3.22.     Access to Certain Documentation..............................................................-74-
SECTION 3.23.     Title, Management and Disposition of REO Property............................................-74-
SECTION 3.24.     Obligations of the Servicer in Respect of Prepayment Interest
                           Shortfalls..........................................................................-77-
SECTION 3.25.     [Reserved]...................................................................................-77-
SECTION 3.26.     Obligations of the Servicer in Respect of Mortgage Rates and
                           Monthly Payments....................................................................-77-
SECTION 3.27.     Reserve Fund.................................................................................-77-
SECTION 3.28.     Advance Facility.............................................................................-79-

                                                    ARTICLE IV

                                          PAYMENTS TO CERTIFICATEHOLDERS
SECTION 4.01.     Distributions................................................................................-80-
SECTION 4.02.     Statements to Certificateholders.............................................................-88-
SECTION 4.03.     Remittance Reports; Advances.................................................................-91-
SECTION 4.04.     Allocation of Realized Losses................................................................-92-
SECTION 4.05.     Compliance with Withholding Requirements.....................................................-94-
SECTION 4.06      Exchange Commission; Additional Information..................................................-95-
SECTION 4.07      Net WAC Rate Carryover Reserve Account.......................................................-95-
SECTION 4.08.     Excess Net WAC Rate Reserve Fund.............................................................-96-

                                                     ARTICLE V

                                                 THE CERTIFICATES
SECTION 5.01.     The Certificate..............................................................................-98-
SECTION 5.02.     Registration of Transfer and Exchange of Certificates.......................................-100-

                                                       -ii-

<PAGE>

SECTION 5.03.     Mutilated, Destroyed, Lost or Stolen Certificates...........................................-104-
SECTION 5.04.     Persons Deemed Owners.......................................................................-105-
SECTION 5.05.     Certain Available Information...............................................................-105-

                                                    ARTICLE VI

                                          THE DEPOSITOR AND THE SERVICER
SECTION 6.01.     Liability of the Depositor and the Servicer.................................................-107-
SECTION 6.02.     Merger or Consolidation of the Depositor or the Servicer....................................-107-
SECTION 6.03.     Limitation on Liability of the Depositor, the Servicer and Others...........................-107-
SECTION 6.04.     Limitation on Resignation of the Servicer...................................................-108-
SECTION 6.05.     Rights of the Depositor in Respect of the Servicer..........................................-109-

                                                    ARTICLE VII

                                                      DEFAULT
SECTION 7.01.     Servicer Events of Default..................................................................-110-
SECTION 7.02.     Trustee to Act; Appointment of Successor....................................................-112-
SECTION 7.03.     Notification to Certificateholders..........................................................-113-
SECTION 7.04.     Waiver of Servicer Events of Default........................................................-114-

                                                   ARTICLE VIII

                                              CONCERNING THE TRUSTEE
SECTION 8.01.     Duties of Trustee...........................................................................-115-
SECTION 8.02.     Certain Matters Affecting the Trustee.......................................................-116-
SECTION 8.04.     Trustee and Trust Administrator May Own Certificates. ......................................-117-
SECTION 8.05.     Trustee's and Trust Administrator's Fees and Expenses. .....................................-118-
SECTION 8.06.     Eligibility Requirements for Trustee. ......................................................-118-
SECTION 8.07.     Resignation and Removal of the Trustee .....................................................-119-
SECTION 8.08.     Successor Trustee...........................................................................-120-
SECTION 8.09.     Merger or Consolidation of Trustee..........................................................-121-
SECTION 8.10.     Appointment of Co-Trustee or Separate Trustee...............................................-121-
SECTION 8.11.     Appointment of Office or Agency.............................................................-122-
SECTION 8.12.     Representations and Warranties..............................................................-122-

                                                    ARTICLE IX

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

                                                     ARTICLE X

                                                 REMIC PROVISIONS

                                                       -iii-

<PAGE>

SECTION 10.01.             REMIC Administration...............................................................-127-
SECTION 10.02.             Prohibited Transactions and Activities.............................................-129-
SECTION 10.03.             Servicer and Trustee Indemnification...............................................-130-

                                                    ARTICLE XI

                                             MISCELLANEOUS PROVISIONS
SECTION 11.01.             Amendment..........................................................................-131-
SECTION 11.02.             Recordation of Agreement; Counterparts.............................................-132-
SECTION 11.03.             Limitation on Rights of Certificateholders.........................................-132-
SECTION 11.04.             Governing Law......................................................................-133-
SECTION 11.05.             Notices............................................................................-133-
SECTION 11.06.             Severability of Provisions.........................................................-134-
SECTION 11.07.             Notice to Rating Agencies..........................................................-134-
SECTION 11.08.             Article and Section References.....................................................-135-
SECTION 11.09.             Grant of Security Interest.........................................................-135-
</TABLE>

                                                       -iv-

<PAGE>

<TABLE>
<CAPTION>
Exhibits
--------
<S>               <C>
Exhibit A-1       Form of Class A Certificate
Exhibit A-2       Form of Class M-1 Certificate
Exhibit A-3       Form of Class M-2 Certificate
Exhibit A-4       Form of Class M-3 Certificate
Exhibit A-5       Form of Class M-4 Certificate
Exhibit A-6       Form of Class M-5 Certificate
Exhibit A-7       Form of Class CE Certificate
Exhibit A-8       Form of Class P Certificate
Exhibit A-9       Form of Class R Certificate
Exhibit A-10      Form of Class R-X Certificate
Exhibit B         [Reserved]
Exhibit C-1       Form of Trustee's Initial Certification
Exhibit C-2       Form of Trustee's Final Certification
Exhibit D-1       Form of Accredited Mortgage Loan Purchase Agreement
Exhibit D-2       Form of Encore Mortgage Loan Purchase Agreement
Exhibit E         Request for Release
Exhibit F-1       Form of Transferor Representation Letter and Form of Transferee Representation
                  Letter in Connection with Transfer of the Private Certificates Pursuant to Rule 144A
                  Under the 1933 Act
Exhibit F-2       Form of Transfer Affidavit and Agreement and Form of Transferor Affidavit in
                  Connection with Transfer of Residual Certificates
Exhibit G         Form of Certification with respect to ERISA and the Code
Exhibit H         [Reserved]
Exhibit I         [Reserved]
Exhibit J         Form of Officer's Certificate with respect to Prepayments
Exhibit K         Form of Lost Note Affidavit Exhibit L-1 Form of Certification to Be Provided by
                  the Depositor with Form 10-K
Exhibit L-2       Form of Certification to Be Provided to Depositor by the Trustee
Exhibit L-3       Form of Certification to Be Provided to Depositor by the Servicer

Schedule 1        Mortgage Loan Schedule
Schedule 2        Prepayment Charge Schedule
</TABLE>

                                       -v-

<PAGE>

                  This Pooling and Servicing Agreement, is dated and effective
as of April 1, 2003, among SALOMON BROTHERS MORTGAGE SECURITIES VII, INC. as
Depositor, LITTON LOAN SERVICING LP as Servicer and DEUTSCHE BANK NATIONAL TRUST
COMPANY as Trustee.

                             PRELIMINARY STATEMENT:

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

                                     REMIC I
                                     -------

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

<TABLE>
<CAPTION>
                                         REMIC I                       Initial                   Latest Possible
         Designation                 Remittance Rate           Uncertificated Balance           Maturity Date(1)
         -----------                 ---------------           ----------------------           ----------------
<S>                                  <C>                       <C>                              <C>
           I-LTAA                      Variable(2)                 $226,809,732.59               April 25, 2033
            I-LTA                      Variable(2)                 $  1,886,220.00               April 25, 2033
           I-LTM1                      Variable(2)                 $    150,430.00               April 25, 2033
           I-LTM2                      Variable(2)                 $    115,720.00               April 25, 2033
           I-LTM3                      Variable(2)                 $     63,650.00               April 25, 2033
           I-LTM4                      Variable(2)                 $     28,930.00               April 25, 2033
           I-LTM5                      Variable(2)                 $     28,930.00               April 25, 2033
           I-LTZZ                      Variable(2)                 $  2,354,892.06               April 25, 2033
            I-LTP                      Variable(2)                 $        100.00               April 25, 2033
</TABLE>

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

                                      -vi-

<PAGE>

                                    REMIC II
                                    --------

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

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
           Class A                     Variable(2)                 $188,622,000.00               April 25, 2033
          Class M-1                    Variable(2)                 $ 15,043,000.00               April 25, 2033
          Class M-2                    Variable(2)                 $ 11,572,000.00               April 25, 2033
     Class M-3 Interest                Variable(2)                 $ 6,365,000.00                April 25, 2033
     Class M-4 Interest                Variable(2)                 $ 2,893,000.00                April 25, 2033
     Class M-5 Interest                Variable(2)                 $ 2,893,000.00                April 25, 2033
      Class CE Interest                Variable(3)                 $ 4,050,502.64                April 25, 2033
      Class P Interest                   N/A(4)                       $ 100.00                   April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  Calculated in accordance with the definition of "Pass-Through Rate" herein.
(3)  The Class CE Interest will accrue interest at its variable Pass-Through
     Rate on the Notional Amount of the Class CE Interest outstanding from time
     to time which shall equal the Uncertificated Balance of the REMIC I Regular
     Interests. The Class CE Interest will not accrue interest on its
     Certificate Principal Balance.
(4)  The Class P Interest will not accrue interest.

                                      -vii-

<PAGE>

                                    REMIC III
                                    ---------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Class M-3 Interest as a REMIC for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC III." The Class R-III Interest will evidence the sole class
of "residual interests" in REMIC III for purposes of the REMIC Provisions under
federal income tax law. The following table irrevocably sets forth the
designation, the Pass-Through Rate, the initial aggregate Certificate Principal
Balance and, solely for purposes of satisfying Treasury regulation section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for the indicated
Classes of Certificates.

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
          Class M-3                    Variable(2)                  $6,365,000.00                April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  The Class M-3 Certificates will receive 100% of amounts received in respect
     of the Class M-3 Interest.

                                     -viii-

<PAGE>

                                    REMIC IV
                                    --------

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

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
          Class M-4                    Variable(2)                  $2,893,000.00                April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  The Class M-4 Certificates will receive 100% of amounts received in respect
     of the Class M-5 Interest.

                                      -ix-

<PAGE>

                                     REMIC V
                                     -------

                  As provided herein, the Trustee will elect to treat the
segregated pool of assets consisting of the Class M-5 Interest as a REMIC for
federal income tax purposes, and such segregated pool of assets will be
designated as "REMIC V." The Class R-V Interest will evidence the sole class of
"residual interests" in REMIC V for purposes of the REMIC Provisions under
federal income tax law. The following table irrevocably sets forth the
designation, the Pass-Through Rate, the initial aggregate Certificate Principal
Balance and, solely for purposes of satisfying Treasury regulation section
1.860G-1(a)(4)(iii), the "latest possible maturity date" for the indicated
Classes of Certificates.

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
          Class M-5                    Variable(2)                  $2,893,000.00                April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  The Class M-5 Certificates will receive 100% of amounts received in respect
     of the Class M-5 Interest.

                                       -x-

<PAGE>

                                    REMIC VI
                                    --------

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

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
          Class CE                     Variable(2)                  $4,050,502.64                April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  The Class CE Certificates will receive 100% of amounts received in respect
     of the Class CE Interest.

                                      -xi-

<PAGE>

                                    REMIC VII
                                    ---------

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

<TABLE>
<CAPTION>
                                                                  Initial Aggregate
                                                                Certificate Principal            Latest Possible
         Designation                Pass-Through Rate                  Balance                  Maturity Date(1)
         -----------                -----------------                  -------                  ----------------
<S>                                 <C>                         <C>                             <C>
         Class P(2)                        N/A                         $100.00                   April 25, 2033
</TABLE>
_______________
(1)  Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
     regulations, the Distribution Date immediately following the maturity date
     for the Mortgage Loans with the latest maturity date has been designated as
     the "latest possible maturity date" for each Class of Certificates.
(2)  The Class P Certificates will receive 100% of amounts received in respect
     of the Class P Interest.

                  As of the Cut-off Date, the Mortgage Loans had an aggregate
principal balance equal to $231,438,602.64.

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

                                      -xii-

<PAGE>

                                   ARTICLE I

                                  DEFINITIONS

                  SECTION 1.01.             Defined Terms.

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

                  "Accepted Servicing Practices": The servicing standards set
forth in Section 3.01.

                  "Accredited Mortgage Loan": Each Mortgage Loan originated by
Accredited Home Loans, Inc.

                  "Accredited Mortgage Loan Purchase Agreement": The agreement
among Accredited Home Loans, Inc., the Seller and the Depositor, regarding the
sale of the Accredited Mortgage Loans by the Seller to the Depositor,
substantially in the form of Exhibit D-1 annexed hereto.

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

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

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

<PAGE>

                  "Advance": As to any Mortgage Loan, any advance made by the
Servicer in respect of any Distribution Date pursuant to Section 4.03.

                  "Advance Facility": As defined in Section 3.28(a) hereof.

                  "Advance Facility Notice": As defined in Section 3.28(b)
hereof.

                  "Advance Financing Person": As defined in Section 3.28(a)
hereof.

                  "Advance Reimbursement Amounts": As defined in Section 3.28(b)
hereof.

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

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

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

                  "Available Distribution Amount": With respect to any
Distribution Date, an amount equal to (1) the sum of (a) the aggregate of the
amounts on deposit in the Collection Account and Distribution Account
attributable to the Mortgage Loans as of the close of business on the related
Determination Date, (b) the aggregate of any amounts received in respect of an
REO Property withdrawn from any REO Account and deposited in the Distribution
Account for such Distribution Date pursuant to Section 3.23, (c) the aggregate
of any amounts deposited in the Distribution Account by the Servicer in respect
of Prepayment Interest Shortfalls attributable to the Mortgage Loans for such
Distribution Date pursuant to Section 3.24, (d) the aggregate of any Advances
attributable to the Mortgage Loans made by the Servicer for such Distribution
Date pursuant to Section 4.03 and (e) the aggregate of any advances made by the
Trustee as successor Servicer or any other successor Servicer for such
Distribution Date pursuant to Section 7.02(b), reduced (to not less than zero)
by (2) the portion of the amount described in clause (1)(a) above that
represents (i) Monthly Payments on the Mortgage Loans received from a Mortgagor
on or prior to the Determination Date but due during any Due Period subsequent
to the related Due Period, (ii) Principal Prepayments on the Mortgage Loans
received after the related Prepayment Period (together with any interest
payments received with such Principal Prepayments to the extent they represent
the payment of interest accrued on the Mortgage Loans during a period subsequent
to the related

                                       -2-

<PAGE>

Prepayment Period) (other than Prepayment Charges), (iii) Liquidation Proceeds
and Insurance Proceeds received in respect of the Mortgage Loans after the
related Prepayment Period, (iv) amounts reimbursable or payable to the
Depositor, the Servicer, the Trustee, the Seller or any Sub- Servicer pursuant
to Section 3.11, Section 3.12, Section 8.05 or otherwise payable in respect of
Extraordinary Trust Fund Expenses attributable to the Mortgage Loans, (v) the
Trustee Fee payable from the Distribution Account pursuant to Section 8.05, (vi)
amounts deposited in the Collection Account or the Distribution Account in error
and (vii) the amount of any Prepayment Charges collected by the Servicer in
connection with the Principal Prepayment of any of the Mortgage Loans or any
Servicer Prepayment Charge Payment Amount with respect to the Mortgage Loans.

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

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

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

                  "Bankruptcy Loss": With respect to any Mortgage Loan, a
Realized Loss resulting from a Deficient Valuation or Debt Service Reduction.

                  "Book-Entry Certificate": The Class A Certificates and the
Mezzanine Certificates for so long as the Certificates of such Class shall be
registered in the name of the Depository or its nominee.

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

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

                  "Cash-Out Refinancing": A Refinanced Mortgage Loan the
proceeds of which are more than a nominal amount in excess of the principal
balance of any existing first mortgage or subordinate mortgage on the related
Mortgaged Property and related closing costs.

                  "Certificate": Any one of the Citigroup Home Equity Loan
Trust, Series 2003-HE1, Asset Backed Pass-Through Certificates, Class A, Class
M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class CE, Class P, Class R and
Class R-X issued under this Agreement.

                  "Certificate Factor": With respect to any Class of Regular
Certificates as of any Distribution Date, a fraction, expressed as a decimal
carried to six places, the numerator of which is the aggregate Certificate
Principal Balance (or the Notional Amount, in the case of the Class CE

                                       -3-

<PAGE>

Certificates) of such Class of Certificates on such Distribution Date (after
giving effect to any distributions of principal and in the case of the Mezzanine
Certificates and the Class CE Certificates, the allocations of Realized Losses
in reduction of the Certificate Principal Balance (or the Notional Amount, in
the case of the Class CE Certificates) of such Class of Certificates to be made
on such Distribution Date), and the denominator of which is the initial
aggregate Certificate Principal Balance (or the Notional Amount, in the case of
the Class CE Certificates) of such Class of Certificates as of the Closing Date.

                  "Certificate Margin": With respect to the Class A-1
Certificates, 0.40% in the case of each Distribution Date through and including
the Distribution Date on which the aggregate Principal Balance of the Mortgage
Loans (and properties acquired in respect thereof) remaining in the Trust Fund
is reduced to less than 10% of the aggregate Principal Balance of the Mortgage
Loans as of the Cut-off Date and 0.80% in the case of each Distribution Date
thereafter.

                  With respect to the Class M-1 Certificates, 0.85% in the case
of each Distribution Date through and including the Distribution Date on which
the aggregate Principal Balance of the Mortgage Loans (and properties acquired
in respect thereof) remaining in the Trust Fund is reduced to less than 10% of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
1.275% in the case of each Distribution Date thereafter.

                  With respect to the Class M-2 Certificates, 1.85% in the case
of each Distribution Date through and including the Distribution Date on which
the aggregate Principal Balance of the Mortgage Loans (and properties acquired
in respect thereof) remaining in the Trust Fund is reduced to less than 10% of
the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
2.775% in the case of each Distribution Date thereafter.

                  With respect to the Class M-3 Interest, 3.00% in the case of
each Distribution Date through and including the Distribution Date on which the
aggregate Principal Balance of the Mortgage Loans (and properties acquired in
respect thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
4.50% in the case of each Distribution Date thereafter.

                  With respect to the Class M-4 Interest, 3.00% in the case of
each Distribution Date through and including the Distribution Date on which the
aggregate Principal Balance of the Mortgage Loans (and properties acquired in
respect thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
4.50% in the case of each Distribution Date thereafter.

                  With respect to the Class M-5 Interest, 2.50% in the case of
each Distribution Date through and including the Distribution Date on which the
aggregate Principal Balance of the Mortgage Loans (and properties acquired in
respect thereof) remaining in the Trust Fund is reduced to less than 10% of the
aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and
3.75% in the case of each Distribution Date thereafter.

                  "Certificateholder" or "Holder": The Person in whose name a
Certificate is registered in the Certificate Register, except that a
Disqualified Organization or a Non-United States Person

                                       -4-

<PAGE>

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

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

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

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

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

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

                  "Class A Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the Certificate Principal Balance of the
Class A Certificates immediately prior to such Distribution Date over (y) the
lesser of (A) the product of (i) 63.00% and (ii) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period and
(B) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period minus $1,157,193.

                                       -5-

<PAGE>

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

                  "Class CE Interest": An uncertificated interest in the Trust
Fund held by the Trustee on behalf of the Holders of the Class CE Certificates,
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

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

                  "Class M-1 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date) and (ii)
the Certificate Principal Balance of the Class M-1 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
76.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$1,157,193.

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

                  "Class M-2 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (iii) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 86.00% and (ii) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period and (B) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $1,157,193.

                  "Class M-3 Certificate": Any one of the Class M-3 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-4 and evidencing a Regular Interest in REMIC III for
purposes of the REMIC Provisions.

                  "Class M-3 Interest": An uncertificated interest in the Trust
Fund held by the Trustee on behalf of the Holders of the Class M-3 Certificates,
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class M-3 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after

                                       -6-

<PAGE>

taking into account the payment of the Class A Principal Distribution Amount on
such Distribution Date), (ii) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the payment of the Class M-1 Principal
Distribution Amount on such Distribution Date), (iii) the Certificate Principal
Balance of the Class M-2 Certificates (after taking into account the payment of
the Class M-2 Principal Distribution Amount on such Distribution Date) and (iv)
the Certificate Principal Balance of the Class M-3 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
91.50% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$1,157,193.

                  "Class M-4 Certificate": Any one of the Class M-4 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-5 and evidencing a Regular Interest in REMIC IV for
purposes of the REMIC Provisions.

                  "Class M-4 Interest": An uncertificated interest in the Trust
Fund held by the Trustee on behalf of the Holders of the Class M-4 Certificates,
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class M-4 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of the Class M-2 Principal
Distribution Amount on such Distribution Date), (iv) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the payment of
the Class M-3 Principal Distribution Amount on such Distribution Date) and (v)
the Certificate Principal Balance of the Class M-4 Certificates immediately
prior to such Distribution Date over (y) the lesser of (A) the product of (i)
94.00% and (ii) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (B) the aggregate Stated Principal
Balance of the Mortgage Loans as of the last day of the related Due Period minus
$1,157,193.

                  "Class M-5 Certificate": Any one of the Class M-5 Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-6 and evidencing a Regular Interest in REMIC V for
purposes of the REMIC Provisions.

                  "Class M-5 Interest": An uncertificated interest in the Trust
Fund held by the Trustee on behalf of the Holders of the Class M-5 Certificates,
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class M-5 Principal Distribution Amount": With respect to any
Distribution Date, the excess of (x) the sum of (i) the Certificate Principal
Balance of the Class A Certificates (after taking into account the payment of
the Class A Principal Distribution Amount on such Distribution Date), (ii) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the payment of the Class M-1 Principal Distribution Amount on such
Distribution Date), (iii) the Certificate Principal Balance of the Class M-2
Certificates (after taking into account the payment of

                                       -7-

<PAGE>

the Class M-2 Principal Distribution Amount on such Distribution Date), (iv) the
Certificate Principal Balance of the Class M-3 Certificates (after taking into
account the payment of the Class M-3 Principal Distribution Amount on such
Distribution Date), (v) the Certificate Principal Balance of the Class M-4
Certificates immediately prior to such Distribution Date and (vi) the
Certificate Principal Balance of the Class M-5 Certificates immediately prior to
such Distribution Date over (y) the lesser of (A) the product of (i) 96.50% and
(ii) the aggregate Stated Principal Balance of the Mortgage Loans as of the last
day of the related Due Period and (B) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period minus
$1,157,193.

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

                  "Class P Interest": An uncertificated interest in the Trust
Fund held by the Trustee on behalf of the Holders of the Class P Certificates,
evidencing a Regular Interest in REMIC II for purposes of the REMIC Provisions.

                  "Class R Certificate": Any one of the Class R Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-9 and evidencing the ownership of the Class R-I
Interest and the Class R-II Interest.

                  "Class R-X Certificate": Any one of the Class R-X Certificates
executed, authenticated and delivered by the Trustee, substantially in the form
annexed hereto as Exhibit A-10 and evidencing the ownership of the Class R-III
Interest, the Class R-IV Interest, the Class R-V Interest, the Class R-VI
Interest and the Class R-VII Interest.

                  "Class R-I Interest": The uncertificated Residual Interest in
REMIC I.

                  "Class R-II Interest": The uncertificated Residual Interest in
REMIC II.

                  "Class R-III Interest": The uncertificated Residual Interest
in REMIC III.

                  "Class R-IV Interest": The uncertificated Residual Interest in
REMIC IV.

                  "Class R-V Interest": The uncertificated Residual Interest in
REMIC V.

                  "Class R-VI Interest": The uncertificated Residual Interest in
REMIC VI.

                  "Class R-VII Interest": The uncertificated Residual Interest
in REMIC VII.

                  "Closing Date": April 25, 2003.

                  "Code": The Internal Revenue Code of 1986.

                  "Collection Account": The account or accounts created and
maintained, or caused to be created and maintained, by the Servicer pursuant to
Section 3.10(a), which shall be entitled

                                       -8-

<PAGE>

"Litton Loan Servicing LP, as Servicer for Deutsche Bank National Trust Company,
as Trustee, in trust for the registered holders of Salomon Brothers Mortgage
Securities VII, Inc., Citigroup Home Equity Loan Trust, Series 2003-HE1, Asset
Backed Pass-Through Certificates." The Collection Account must be an Eligible
Account.

                  "Commission": The Securities and Exchange Commission.

                  "Corporate Trust Office": The principal corporate trust office
of the Trustee at which at any particular time its corporate trust business in
connection with this Agreement shall be administered, which office at the date
of the execution of this instrument is located at 1761 East St. Andrew Place,
Santa Ana, CA 92705-4934, Attn: SB0301, or at such other address as the Trustee
may designate from time to time by notice to the Certificateholders, the
Depositor and the Servicer.

                  "Corresponding Certificate": With respect to (i) REMIC I
Regular Interest I-LTA, (ii) REMIC I Regular Interest I-LTM1, (iii) REMIC I
Regular Interest I-LTM2, (iv) REMIC I Regular Interest I-LTM3 and the Class M-3
Interest, (v) REMIC I Regular Interest I-LTM4 and the Class M-4 Interest, (vi)
REMIC I Regular Interest I-LTM5 and the Class M-5 Interest, (vii) the Class CE
Interest and (viii) REMIC I Regular Interest I-LTP and the Class P Interest, (i)
the Class A Certificates, (ii) the Class M-1 Certificates, (iii) the Class M-2
Certificates, (iv) the Class M-3 Certificates, (v) the Class M-4 Certificates,
(vi) the Class M-5 Certificates, (vii) the Class CE Certificates and (viii) the
Class P Certificates, respectively.

                  "Credit Enhancement Percentage": For any Distribution Date,
the percentage equivalent of a fraction, the numerator of which is the sum of
the aggregate Certificate Principal Balances of the Mezzanine Certificates and
the Class CE Interest, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period.

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

                  "Cut-off Date": With respect to each Original Mortgage Loan,
April 1, 2003. With respect to all Qualified Substitute Mortgage Loans, their
respective dates of substitution. References herein to the "Cut-off Date," when
used with respect to more than one Mortgage Loan, shall be to the respective
Cut-off Dates for such Mortgage Loans.

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

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

                                       -9-

<PAGE>

the Bankruptcy Code.

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

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

                  "Delinquency Percentage": As of the last day of any Due
Period, the percentage equivalent of a fraction, the numerator of which is the
aggregate Stated Principal Balance of the Mortgage Loans that, as of the last
day of the previous calendar month, are 60 or more days delinquent, are in
foreclosure, have been converted to REO Properties or have been discharged by
reason of bankruptcy, and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans and REO Properties as of the last day of
such calendar month; provided, however, that any Mortgage Loan purchased by the
Servicer pursuant to Section 3.16(c) shall not be included in either the
numerator or the denominator for purposes of calculating the Delinquency
Percentage.

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

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

                  "Depository Institution": Any depository institution or trust
company, including the Trustee, that (a) is incorporated under the laws of the
United States of America or any State thereof, (b) is subject to supervision and
examination by federal or state banking authorities and (c) has outstanding
unsecured commercial paper or other short-term unsecured debt obligations (or,
in the case of a depository institution that is the principal subsidiary of a
holding company, such holding company has unsecured commercial paper or other
short-term unsecured debt obligations) that are rated at least P-1 by Moody's,
F-1 by Fitch (if rated by Fitch) and A-1 by S&P.

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

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

                  "Directly Operate": With respect to any REO Property, the
furnishing or rendering of services to the tenants thereof, the management or
operation of such REO Property, the holding of such REO Property primarily for
sale to customers, the performance of any construction work thereon or any use
of such REO Property in a trade or business conducted by REMIC I other than

                                      -10-

<PAGE>

through an Independent Contractor; provided, however, that the Trustee (or the
Servicer on behalf of the Trustee) shall not be considered to Directly Operate
an REO Property solely because the Trustee (or the Servicer on behalf of the
Trustee) establishes rental terms, chooses tenants, enters into or renews
leases, deals with taxes and insurance, or makes decisions as to repairs or
capital expenditures with respect to such REO Property.

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

                  "Distribution Account": The trust account or accounts created
and maintained by the Trustee pursuant to Section 3.10(b), which shall be
entitled "Deutsche Bank National Trust Company, as Trustee, in trust for the
registered holders of Salomon Brothers Mortgage Securities VII, Inc., Citigroup
Home Equity Loan Trust, Series 2003-HE1, Asset Backed Pass-Through
Certificates." The Distribution Account must be an Eligible Account.

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

                  "Due Date": With respect to each Mortgage Loan and any
Distribution Date, the first day of the calendar month in which such
Distribution Date occurs on which the Monthly Payment for such Mortgage Loan was
due (or, in the case of any Mortgage Loan under terms of which the Monthly
Payment for such Mortgage Loan was due on a day other than the first day of the
calendar month in which such Distribution Date occurs, the day during the
related Due Period on which such Monthly Payment was due), in each case
exclusive of any days of grace.

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

                  "Eligible Account": Any of (i) an account or accounts
maintained with a Depository Institution, (ii) an account or accounts the
deposits in which are fully insured by the FDIC or (iii) a

                                      -11-

<PAGE>

segregated non-interest bearing trust account or accounts maintained with the
corporate trust department of a federal depository institution or
state-chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal Regulation
Section 9.10(b), which, in either case, has corporate trust powers, acting in
its fiduciary capacity.

                  "Encore Mortgage Loan": Each Mortgage Loan originated by
Encore Credit Corp.

                  "Encore Mortgage Loan Purchase Agreement": The agreement among
Encore Credit Corp., the Seller and the Depositor, regarding the sale of the
Encore Mortgage Loans by the Seller to the Depositor, substantially in the form
of Exhibit D-2 annexed hereto.

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

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

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

                  "Expense Adjusted Mortgage Rate": With respect to any Mortgage
Loan (or the related REO Property), as of any date of determination, a per annum
rate of interest equal to the applicable Mortgage Rate thereon as of the first
day of the related Due Period minus the sum of (i) the Trustee Fee Rate and (ii)
the Servicing Fee Rate.

                  "Expense Adjusted Maximum Mortgage Rate": With respect to any
Mortgage Loan (or the related REO Property), as of any date of determination, a
per annum rate of interest equal to the applicable Maximum Mortgage Rate (or the
applicable Mortgage Rate in the case of any Fixed- Rate Mortgage Loan) thereon
as of the first day of the related Due Period minus the sum of (i) the Trustee
Fee Rate and (ii) the Servicing Fee Rate.

                  "Extraordinary Trust Fund Expense": Any amounts reimbursable
to the Trustee or any director, officer, employee or agent of the Trustee from
the Trust Fund pursuant to Section 8.05 or Section 10.01(c) and any amounts
payable from the Distribution Account in respect of taxes pursuant to Section
10.01(g)(iii) and any costs of the Trustee for the recording of the Assignments
pursuant to Section 2.01 (to the extent the related Originator is unable to pay
such costs).

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

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

                  "Final Recovery Determination": With respect to any defaulted
Mortgage Loan or any REO Property (other than a Mortgage Loan or REO Property
purchased by an Originator, the Depositor or the Servicer pursuant to or as
contemplated by Section 2.03, Section 3.16(c) or Section 9.01), a determination
made by the Servicer that all Insurance Proceeds, Liquidation Proceeds and

                                      -12-

<PAGE>

other payments or recoveries which the Servicer, in its reasonable good faith
judgment, expects to be finally recoverable in respect thereof have been so
recovered. The Servicer shall maintain records, prepared by a Servicing Officer,
of each Final Recovery Determination made thereby.

                  "Fitch": Fitch Ratings, or its successor in interest.

                  "Fixed-Rate Mortgage Loan": Each of the Mortgage Loans
identified on the Mortgage Loan Schedule as having a fixed Mortgage Rate.

                  "Formula Rate": For any Distribution Date and the Class A
Certificates, the Mezzanine Certificates and, solely for purposes of calculating
the Marker Rate, REMIC I Regular Interest I-LTA, REMIC I Regular Interest
I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC
I Regular Interest I-LTM4 and REMIC I Regular Interest I-LTM5, the lesser of (i)
One-Month LIBOR plus the related Certificate Margin and (ii) the Maximum Cap
Rate.

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

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

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

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

                                      -13-

<PAGE>

Section 860D(a) of the Code), or cause any income realized in respect of such
REO Property to fail to qualify as Rents from Real Property.

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

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

                  "Interest Accrual Period": With respect to any Distribution
Date and the Class A Certificates and the Mezzanine Certificates, the period
commencing on the Distribution Date of the month immediately preceding the month
in which such Distribution Date occurs (or, in the case of the first
Distribution Date, commencing on the Closing Date) and ending on the day
preceding such Distribution Date. With respect to any Distribution Date and the
Class CE Interest and the REMIC I Regular Interests, the one-month period ending
on the last day of the calendar month preceding the month in which such
Distribution Date occurs.

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

                  "Interest Determination Date": With respect to the Class A
Certificates, the Mezzanine Certificates, REMIC I Regular Interest I-LTA, REMIC
I Regular Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular
Interest I-LTM3, REMIC I Regular Interest I-LTM4 and REMIC I Regular Interest
I-LTM5 and any Interest Accrual Period therefor, the second London Business Day
preceding the commencement of such Interest Accrual Period.

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

                  "Interest Remittance Amount": For any Distribution Date, that
portion of the Available Distribution Amount for the related Distribution Date
that represents interest received or advanced on the Mortgage Loans.

                  "Late Collections": With respect to any Mortgage Loan and any
Due Period, all amounts received subsequent to the Determination Date
immediately following such Due Period, whether as late payments of Monthly
Payments or as Insurance Proceeds, Liquidation Proceeds or

                                      -14-

<PAGE>

otherwise, which represent late payments or collections of principal and/or
interest due (without regard to any acceleration of payments under the related
Mortgage and Mortgage Note) but delinquent for such Due Period and not
previously recovered.

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

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

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

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

                  "Marker Rate": With respect to the Class CE Certificates and
any Distribution Date, a per annum rate equal to two (2) times the weighted
average of the REMIC I Remittance Rate for each of the REMIC I Regular Interests
(other than REMIC I Regular Interest I-LTP), with the rate on each such REMIC I
Regular Interest (other than REMIC I Regular Interest I-LTZZ) subject to a cap
equal to the related Formula Rate for the purpose of this calculation for such
Distribution Date and with the rate on REMIC I Regular Interest I-LTZZ subject
to a cap of zero for the purpose of this calculation; provided, however, each
cap shall be multiplied by a fraction, the numerator of which is the actual
number of days in the related Interest Accrual Period and the denominator of
which is 30.

                  "Maximum Cap Rate": For any Distribution Date and the Class A
Certificates and the Mezzanine Certificates, a per annum rate equal to the
product of (x) the weighted average of the Expense Adjusted Maximum Mortgage
Rates of the Mortgage Loans, weighted based on their Principal Balances as of
the first day of the related Due Period and (y) a fraction, the numerator of
which is 30 and the denominator of which is the actual number of days elapsed in
the related Interest Accrual Period.

                  "Maximum I-LTZZ Uncertificated Interest Deferral Amount": With
respect to any Distribution Date, the excess of (i) accrued interest at the
REMIC I Remittance Rate applicable to

                                      -15-

<PAGE>

REMIC I Regular Interest I-LTZZ for such Distribution Date on a balance equal to
the Uncertificated Balance of REMIC I Regular Interest I-LTZZ minus the REMIC I
Overcollateralized Amount, in each case for such Distribution Date, over (ii)
Uncertificated Interest on REMIC I Regular Interest I-LTA, REMIC I Regular
Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular Interest
I-LTM3, REMIC I Regular Interest I-LTM4 and REMIC I Regular Interest I-LTM5 for
such Distribution Date, with the rate on each of REMIC I Regular Interest I-LTA,
REMIC I Regular Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I
Regular Interest I-LTM3, REMIC I Regular Interest I-LTM4 and REMIC I Regular
Interest I-LTM5 subject to a cap equal to the related Formula Rate; provided,
however, each cap shall be multiplied by a fraction, the numerator of which is
the actual number of days in the related Interest Accrual Period and the
denominator of which is 30.

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

                  "MERS": Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of Delaware, or
any successor thereto.

                  "MERS(R) System": The system of recording transfers of
Mortgages electronically maintained by MERS.

                  "MIN": The Mortgage Identification Number for Mortgage Loans
registered with MERS on the MERS(R)System.

                  "MOM Loan": With respect to any Accredited Mortgage Loan, MERS
acting as the mortgagee of such Mortgage Loan, solely as nominee for the
originator of such Mortgage Loan and its successors and assigns, at the
origination thereof.

                  "Mezzanine Certificates": The Class M-1 Certificates, the
Class M-2 Certificates, the Class M-3 Certificates or the Class M-3 Interest, as
applicable, the Class M-4 Certificates or the Class M-4 Interest, as applicable
and the Class M-5 Certificates or the Class M-5 Interest, as applicable.

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

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

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

                                      -16-

<PAGE>

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

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

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

                  "Mortgage Loan Purchase Agreement": The Encore Mortgage Loan
Purchase Agreement or the Accredited Mortgage Loan Purchase Agreement, as the
context requires.

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

                  (i) the Mortgage Loan identifying number;

                  (ii) the Originator of the Mortgage Loan;

                  (iii) the state and zip code;

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

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

                  (vi) the original months to maturity;

                  (vii) the stated remaining months to maturity from the Cut-off
         Date based on the original amortization schedule;

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

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

                  (x) (A) the date on which the first Monthly Payment was due on
         the Mortgage Loan and (B) if such date is not consistent with the Due
         Date currently in effect, such Due Date;

                  (xi) the stated maturity date;

                  (xii) the amount of the Monthly Payment at origination;

                                      -17-

<PAGE>

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

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

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

                  (xvi) the principal balance of the Mortgage Loan as of the
         close of business on the Cut-off Date;

                  (xvii) a code indicating the purpose of the Mortgage Loan
         (i.e., purchase financing, Rate/Term Refinancing, Cash-Out
         Refinancing);

                  (xviii) with respect to each Adjustable-Rate Mortgage Loan,
         the Adjustment Dates, the Gross Margin, the Maximum Mortgage Rate, the
         Minimum Mortgage Rate, the Periodic Rate Cap, the maximum first
         Adjustment Date Mortgage Rate adjustment and the first Adjustment Date
         immediately following the Cut-off Date;

                  (xix) the Mortgage Rate at origination;

                  (xx) a code indicating the documentation program;

                  (xxi) the risk grade;

                  (xxii) the Value of the Mortgaged Property;

                  (xxiii) the sale price of the Mortgaged Property, if
         applicable;

                  (xxiv) the actual unpaid principal balance of the Mortgage
         Loan as of the Cut-off Date;

                  (xxv) a code indicating the type and term of the related
         Prepayment Charge;

                  (xxvi) with respect to each Adjustable-Rate Mortgage Loan, the
         rounding code (i.e., nearest 0.125%, next highest 0.125%);

                  (xxvii) the program code; and

                  (xxviii) whether such Mortgage Loan is an Adjustable-Rate
         Mortgage Loan or a Fixed-Rate Mortgage Loan.

                  The Mortgage Loan Schedule shall set forth the following
information with respect to the Mortgage Loans in the aggregate as of the
Cut-off Date: (1) the number of Mortgage Loans; (2) the current principal
balance of the Mortgage Loans; (3) the weighted average Mortgage Rate of the
Mortgage Loans and (4) the weighted average maturity of the Mortgage Loans. The
Mortgage

                                      -18-

<PAGE>

Loan Schedule shall be amended from time to time by the Depositor in accordance
with the provisions of this Agreement. With respect to any Qualified Substitute
Mortgage Loan, the Cut-off Date shall refer to the related Cut-off Date for such
Mortgage Loan, determined in accordance with the definition of Cut-off Date
herein.

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

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

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

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

                  "Mortgagor": The obligor on a Mortgage Note.

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

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

                                      -19-

<PAGE>

                  "Net WAC Pass-Through Rate": With respect to the Class A
Certificates and the Mezzanine Certificates and any Distribution Date, a rate
per annum equal to the product of (x) the weighted average of the Expense
Adjusted Mortgage Rates of the Mortgage Loans, weighted based on their Stated
Principal Balances as of the first day of the related Due Period and (y) a
fraction, the numerator of which is 30 and the denominator of which is the
actual number of days elapsed in the related Interest Accrual Period. With
respect to each REMIC I Regular Interest and any Distribution Date, a rate per
annum equal to the weighted average of the Expense Adjusted Mortgage Rates of
the Mortgage Loans, weighted based on their Stated Principal Balances as of the
first day of the related Due Period.

                  "Net WAC Rate Carryover Amount": With respect to any Class of
the Class A Certificates and the Mezzanine Certificates and any Distribution
Date, the sum of (A) the positive excess of (i) the amount of interest accrued
on such Class of Certificates for such Distribution Date calculated at the
related Formula Rate for such Distribution Date over (ii) the amount of interest
accrued on such Class of Certificates at the applicable Net WAC Pass-Through
Rate for such Distribution Date and (B) the related Net WAC Rate Carryover
Amount for the previous Distribution Date not previously paid, together with
interest thereon at a rate equal to the related Formula Rate for such Class of
Certificates for such Distribution Date.

                  "Net WAC Rate Carryover Reserve Account": As defined in
Section 3.27.

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

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

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

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

                  "Notional Amount": With respect to the Class CE Interest and
any Distribution Date, the aggregate Uncertificated Balance of the REMIC I
Regular Interests for such Distribution Date.

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

                                      -20-

<PAGE>

                  "One-Month LIBOR": With respect to the Class A Certificates,
the Mezzanine Certificates and for purposes of the Formula Rate, REMIC I Regular
Interest I-LTA, REMIC I Regular Interest I-LTM1, REMIC I Regular Interest
I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I Regular Interest I-LTM4 and
REMIC I Regular Interest I-LTM5 and any Interest Accrual Period therefor, the
rate determined by the Trustee on the related Interest Determination Date on the
basis of the offered rate for one-month U.S. dollar deposits, as such rate
appears on Telerate Page 3750 as of 11:00 a.m. (London time) on such Interest
Determination Date; provided that if such rate does not appear on Telerate Page
3750, the rate for such date will be determined on the basis of the offered
rates of the Reference Banks for one-month U.S. dollar deposits, as of 11:00
a.m. (London time) on such Interest Determination Date. In such event, the
Trustee will request the principal London office of each of the Reference Banks
to provide a quotation of its rate. If on such Interest Determination Date, two
or more Reference Banks provide such offered quotations, One-Month LIBOR for the
related Interest Accrual Period shall be the arithmetic mean of such offered
quotations (rounded upwards if necessary to the nearest whole multiple of
1/16%). If on such Interest Determination Date, fewer than two Reference Banks
provide such offered quotations, One-Month LIBOR for the related Interest
Accrual Period shall be the higher of (i) LIBOR as determined on the previous
Interest Determination Date and (ii) the Reserve Interest Rate. Notwithstanding
the foregoing, if, under the priorities described above, LIBOR for an Interest
Determination Date would be based on LIBOR for the previous Interest
Determination Date for the third consecutive Interest Determination Date, the
Trustee, after consultation with the Depositor, shall select an alternative
comparable index (over which the Trustee has no control), used for determining
one-month Eurodollar lending rates that is calculated and published (or
otherwise made available) by an independent party.

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

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

                  "Originator": Either (i) Accredited Home Loans, Inc. or its
successor in interest, in its capacity as originator under the Accredited
Mortgage Loan Purchase Agreement or (ii) Encore Credit Corp. or its successor in
interest, in its capacity as originator under the Encore Mortgage Loan Purchase
Agreement, as the context requires.

                  "Overcollateralization Deficiency Amount": With respect to any
Distribution Date, the excess, if any, of (a) the Overcollateralization Target
Amount applicable to such Distribution Date over (b) the Overcollateralized
Amount applicable to such Distribution Date (calculated for this purpose only,
after taking into account the distributions to be made of the Principal
Remittance Amount on such Distribution Date).

                  "Overcollateralization Increase Amount": With respect to any
Distribution Date, the lesser of (a) the Overcollateralization Deficiency Amount
as of such Distribution Date (after taking

                                      -21-

<PAGE>

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

                  "Overcollateralization Reduction Amount": With respect to any
Distribution Date, an amount equal to the lesser of (a) the Principal Remittance
Amount on such Distribution Date and (b) the excess, if any, of (i) the
Overcollateralized Amount for such Distribution Date (calculated for this
purpose only after assuming that 100% of the Principal Remittance Amount on such
Distribution Date have been distributed) over (ii) the Overcollateralization
Target Amount for such Distribution Date.

                  "Overcollateralization Target Amount": With respect to any
Distribution Date, (i) prior to the Stepdown Date, an amount equal to
$4,050,702.64, (ii) on or after the Stepdown Date provided a Trigger Event is
not in effect, the greater of (x) 3.50% of the then current aggregate
outstanding principal balance of the Mortgage Loans as of the last day of the
related Due Period and (y) $1,157,193, or (iii) on or after the Stepdown Date
and if a Trigger Event is in effect, the Overcollateralization Target Amount for
the immediately preceding Distribution Date.

                  "Overcollateralized Amount": With respect to any Distribution
Date, the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans and REO Properties as of the last day of the related Due Period
over (b) the sum of the aggregate Certificate Principal Balances of the Class A
Certificates, the Mezzanine Certificates and the Class P Certificates after
giving effect to distributions to be made on such Distribution Date.

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

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

                  (A) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTAA minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTAA;

                  (B) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTA minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTA;

                                      -22-

<PAGE>

                  (C) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTM1 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTM1;

                  (D) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTM2 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTM2;

                  (E) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTM3 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTM3;

                  (F) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTM4 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTM4;

                  (G) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTM5 minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTM5;

                  (H) the REMIC I Remittance Rate for REMIC I Regular Interest
         I-LTZZ minus the Marker Rate, applied to an amount equal to the
         Uncertificated Balance of REMIC I Regular Interest I-LTZZ; and

                  (I) 100% of the interest on REMIC I Regular Interest I-LTP.

                  With respect to the Class CE Certificates, 100% of the
interest payable to the Class CE Interest.

                  "Percentage Interest": With respect to any Class of
Certificates (other than the Residual Certificates), the undivided percentage
ownership in such Class evidenced by such Certificate, expressed as a
percentage, the numerator of which is the initial Certificate Principal Balance
or Notional Amount represented by such Certificate and the denominator of which
is the aggregate initial Certificate Principal Balance or initial Notional
Amount of all of the Certificates of such Class. The Class A Certificates and
the Mezzanine Certificates are issuable only in minimum Percentage Interests
corresponding to minimum initial Certificate Principal Balances of $100,000 and
integral multiples of $1.00 in thereof. The Class P Certificates are issuable
only in Percentage Interests corresponding to initial Certificate Principal
Balances of $20 and integral multiples thereof. The Class CE Certificates are
issuable only in minimum Percentage Interests corresponding to minimum initial
Certificate Principal Balances of $100,000 and integral multiples of $1.00 in
thereof; provided, however, that a single Certificate of each such Class of
Certificates may be issued having a Percentage Interest corresponding to the
remainder of the aggregate initial Certificate Principal Balance or Notional
Amount of such Class or to an otherwise authorized denomination for such Class
plus such remainder. With respect to any Residual Certificate, the undivided
percentage ownership in such Class evidenced by such Certificate, as set forth
on the face of such Certificate. The Residual Certificates are issuable in
Percentage Interests of 20% and multiples thereof.

                                      -23-

<PAGE>

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

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

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

                  (ii) demand and time deposits in, certificates of deposit of,
         or bankers' acceptances issued by, any Depository Institution;

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

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

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

                  (vi) units of money market funds that have been rated "AAA" by
         Fitch (if rated by Fitch) and "AAAm" or "AAAm-G" by S&P or "Aaa" by
         Moody's; and

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

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

                                      -24-

<PAGE>

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

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

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

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

                  "Prepayment Charge": With respect to any Prepayment Period,
any prepayment premium, penalty or charge payable by a Mortgagor in connection
with any Principal Prepayment on a Mortgage Loan pursuant to the terms of the
related Mortgage Note (other than any Servicer Prepayment Charge Payment
Amount).

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

                  (i)      the Mortgage Loan identifying number;

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

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

                  (iv)     the term of the related Prepayment Charge;

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

                  (vi)     the Stated Principal Balance of the related Mortgage
         Loan as of the Cut-off Date.

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

                                      -25-

<PAGE>

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

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

                  "Principal Balance": As to any Mortgage Loan other than a
Liquidated Mortgage Loan, and any day, the related Stated Principal Balance as
of the Cut-off Date, MINUS all collections credited against the Principal
Balance of any such Mortgage Loan. For purposes of this definition, a Liquidated
Mortgage Loan shall be deemed to have a Principal Balance equal to the Principal
Balance of the related Mortgage Loan as of the final recovery of related
Liquidation Proceeds and a Principal Balance of zero thereafter. As to any REO
Property and any day, the Principal Balance of the related Mortgage Loan
immediately prior to such Mortgage Loan becoming REO Property minus any REO
Principal Amortization received with respect thereto on or prior to such day.

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

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

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

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

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

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

                  "Principal Prepayment": Any payment of principal made by the
Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due
Date and which is not accompanied by an amount of interest representing the full
amount of scheduled interest due on any Due Date in any month or months
subsequent to the month of prepayment.

                                      -26-

<PAGE>

                  "Principal Remittance Amount": The sum of the amounts set
forth in (i) through (iii) of the definition of Principal Distribution Amount.

                  "Private Certificates":  As defined in Section 5.02(b).

                  "PTCE": A Prohibited Transaction Class Exemption issued by the
United States Department of Labor which provides that exemptive relief is
available to any party to any transaction which satisfies the conditions of the
exemption.

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

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

                                      -27-

<PAGE>

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

                  "Rate/Term Refinancing": A Refinanced Mortgage Loan, the
proceeds of which are not more than a nominal amount in excess of the existing
first mortgage loan and any subordinate mortgage loan on the related Mortgaged
Property and related closing costs, and were used exclusively (except for such
nominal amount) to satisfy the then existing first mortgage loan and any
subordinate mortgage loan of the Mortgagor on the related Mortgaged Property and
to pay related closing costs.

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

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

                                      -28-

<PAGE>

net of amounts that are payable therefrom to the Servicer with respect to such
Mortgage Loan pursuant to Section 3.11(a)(iii).

                  With respect to any REO Property as to which a Final Recovery
Determination has been made, an amount (not less than zero) equal to (i) the
unpaid principal balance of the related Mortgage Loan as of the date of
acquisition of such REO Property on behalf of REMIC I, plus (ii) accrued
interest from the Due Date as to which interest was last paid by the Mortgagor
in respect of the related Mortgage Loan through the end of the calendar month
immediately preceding the calendar month in which such REO Property was
acquired, calculated in the case of each calendar month during such period (A)
at an annual rate equal to the annual rate at which interest was then accruing
on the related Mortgage Loan and (B) on a principal amount equal to the Stated
Principal Balance of the related Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, plus (iii) REO Imputed
Interest for such REO Property for each calendar month commencing with the
calendar month in which such REO Property was acquired and ending with the
calendar month in which such Final Recovery Determination was made, plus (iv)
any amounts previously withdrawn from the Collection Account in respect of the
related Mortgage Loan pursuant to Section 3.11(a)(ix) and Section 3.16(b), minus
(v) the aggregate of all Advances and Servicing Advances (in the case of
Servicing Advances, without duplication of amounts netted out of the rental
income, Insurance Proceeds and Liquidation Proceeds described in clause (vi)
below) made by the Servicer in respect of such REO Property or the related
Mortgage Loan for which the Servicer has been or, in connection with such Final
Recovery Determination, will be reimbursed pursuant to Section 3.23 out of
rental income, Insurance Proceeds and Liquidation Proceeds received in respect
of such REO Property, minus (vi) the total of all net rental income, Insurance
Proceeds and Liquidation Proceeds received in respect of such REO Property that
has been, or in connection with such Final Recovery Determination, will be
transferred to the Distribution Account pursuant to Section 3.23.

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

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

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

                  "Reference Banks": Deutsche Bank AG, Barclays' Bank PLC, The
Tokyo Mitsubishi Bank and National Westminster Bank PLC and their successors in
interest; provided, however, that if any of the foregoing banks are not suitable
to serve as a Reference Bank, then any leading banks selected by the Trustee,
after consultation with the Depositor, which are engaged in transactions in

                                      -29-

<PAGE>

Eurodollar deposits in the international Eurocurrency market (i) with an
established place of business in London and (ii) not controlling, under the
control of or under common control with the Depositor or any Affiliate thereof.

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

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

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

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

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

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

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

                  "REMIC I Interest Loss Allocation Amount": With respect to any
Distribution Date, an amount (subject to adjustment based on the actual number
of days elapsed in the respective Interest Accrual Periods for the indicated
Regular Interests for such Distribution Date) equal to (a) the product of (i)
the aggregate Stated Principal Balance of the Mortgage Loans and REO Properties
then outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular
Interest I-LTAA minus the Marker Rate, divided by (b) 12.

                                      -30-

<PAGE>

                  "REMIC I Overcollateralized Amount": With respect to any date
of determination, (i) 1% of the aggregate Uncertificated Balances of the REMIC I
Regular Interests minus (ii) the aggregate of the Uncertificated Balances of
REMIC I Regular Interest I-LTA, REMIC I Regular Interest I-LTM1, REMIC I Regular
Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I Regular Interest
I-LTM4, REMIC I Regular Interest I-LTM5 and REMIC I Regular Interest I-LTP, in
each case as of such date of determination.

                  "REMIC I Principal Loss Allocation Amount": With respect to
any Distribution Date, an amount equal to the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Balances of REMIC I Regular Interest I-LTA,
REMIC I Regular Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I
Regular Interest I-LTM3, REMIC I Regular Interest I-LTM4 and REMIC I Regular
Interest I-LTM5 and the denominator of which is the aggregate of the
Uncertificated Balances of REMIC I Regular Interest I-LTA, REMIC I Regular
Interest I-LTM1, REMIC I Regular Interest I-LTM2, REMIC I Regular Interest
I-LTM3, REMIC I Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5 and
REMIC I Regular Interest I-LTZZ.

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

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

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

                  "REMIC I Regular Interest I-LTM1": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTM1
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                                      -31-

<PAGE>

                  "REMIC I Regular Interest I-LTM2": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTM2
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I Regular Interest I-LTM3": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTM3
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I Regular Interest I-LTM4": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTM4
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

                  "REMIC I Regular Interest I-LTM5": One of the separate
non-certificated beneficial ownership interests in REMIC I issued hereunder and
designated as a Regular Interest in REMIC I. REMIC I Regular Interest I-LTM5
shall accrue interest at the related REMIC I Remittance Rate in effect from time
to time, and shall be entitled to distributions of principal, subject to the
terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Balance as set forth in the Preliminary Statement hereto.

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

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

                  "REMIC I Remittance Rate": With respect to each REMIC I
Regular Interest and any Distribution Date, the Net WAC Pass-Through Rate.

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

                                      -32-

<PAGE>

Target Amount.

                  "REMIC II": The segregated pool of assets consisting of all of
the REMIC I Regular Interests conveyed in trust to the Trustee, for the benefit
of the Class A Certificates, the Class M-1 Certificates, the Class M-2
Certificates, the Class M-3 Interest, the Class M-4 Interest, the Class M-5
Interest, the Class CE Interest, the Class P Interest and the Class R-II
Interest and all amounts deposited therein, with respect to which a separate
REMIC election is to be made.

                  "REMIC III": The segregated pool of assets consisting of the
Class M-3 Interest conveyed in trust to the Trustee, for the benefit of the
Class M-3 Certificates and the Class R-III Interest and all amounts deposited
therein, with respect to which a separate REMIC election is to be made.

                  "REMIC IV": The segregated pool of assets consisting of the
Class M-4 Interest conveyed in trust to the Trustee, for the benefit of the
Class M-4 Certificates and the Class R-IV Interest and all amounts deposited
therein, with respect to which a separate REMIC election is to be made.

                  "REMIC V": The segregated pool of assets consisting of the
Class M-5 Interest conveyed in trust to the Trustee, for the benefit of the
Class M-5 Certificates and the Class R-V Interest and all amounts deposited
therein, with respect to which a separate REMIC election is to be made.

                  "REMIC VI": The segregated pool of assets consisting of the
Class CE Interest conveyed in trust to the Trustee, for the benefit of the Class
CE Certificates and the Class R-VI Interest and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

                  "REMIC VII": The segregated pool of assets consisting of the
Class P Interest conveyed in trust to the Trustee, for the benefit of the Class
P Certificates and the Class R-VII Interest and all amounts deposited therein,
with respect to which a separate REMIC election is to be made.

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

                  "Remittance Report": A report in form and substance acceptable
to the Trustee on an electronic data file or tape prepared by the Servicer
pursuant to Section 4.03 with such additions, deletions and modifications as
agreed to by the Trustee and the Servicer.

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

                                      -33-

<PAGE>

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

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

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

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

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

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

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

                  "Residential Dwelling": Any one of the following: (i) an
attached, detached or semi- detached one-family dwelling, (ii) an attached,
detached or semi-detached two-to four-family dwelling, (iii) a one-family
dwelling unit in a Fannie Mae eligible condominium project, or (iv) an attached,
detached or semi-detached one-family dwelling in a planned unit development,
none of which is a co-operative, mobile or manufactured home (as defined in 42
United States Code, Section 5402(6)).

                                      -34-

<PAGE>

                  "Residual Certificates": The Class R Certificates and the
Class R-X Certificates.

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

                  "Responsible Officer": When used with respect to the Trustee,
any vice president, managing director, director, any assistant vice president,
the Secretary, any assistant secretary, the Treasurer, any assistant treasurer,
any associate, any trust officer or assistant trust officer or any other officer
of the Trustee having direct responsibility over this Agreement or otherwise
engaged in performing functions similar to those performed by any of the above
designated officers and, with respect to a particular matter, to whom such
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.

                  "S&P": Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or its successor in interest.

                  "Seller": Citigroup Global Markets Realty Corp. or its
successor in interest, in its capacity as seller under each Mortgage Loan
Purchase Agreement.

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

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

                  "Servicer's Assignee": As defined in Section 3.28 hereof.

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

                  "Servicer Prepayment Charge Payment Amount": The amounts
payable by the Servicer in respect of any waived Prepayment Charges pursuant to
Section 3.01.

                  "Servicer Remittance Date": With respect to any Distribution
Date, by 3:00 p.m. New York time on the Business Day preceding the related
Distribution Date.

                  "Servicer Termination Trigger": With respect to any
Distribution Date, the Realized Losses incurred since the Cut-off Date through
the last day of the related Due Period exceeds the applicable percentages set
forth below with respect to such Distribution Date:

      DISTRIBUTION DATE OCCURRING IN                    PERCENTAGE
      ------------------------------                    ----------
May 2003 through April 2007                               4.50%
May 2007 through April 2008                               5.50%
May 2008 through April 2009                               6.50%
May 2009 through April 2010                               7.50%

                                                       -35-

<PAGE>

May 2010 and thereafter                                   8.50%

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

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

                  "Servicing Fee": With respect to each Mortgage Loan and for
any calendar month, an amount equal to the Servicing Fee Rate accrued for one
month (or in the event of any payment of interest which accompanies a Principal
Prepayment in full or in part made by the Mortgagor during such calendar month,
interest for the number of days covered by such payment of interest) on the same
principal amount on which interest on such Mortgage Loan accrues for such
calendar month, calculated on the basis of a 360-day year consisting of twelve
30-day months. A portion of such Servicing Fee may be retained by any
Sub-Servicer as its servicing compensation.

                  "Servicing Fee Rate": 0.50% per annum.

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

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

                  "Servicing Transfer Costs": Shall mean all reasonable costs
and expenses incurred by the Trustee in connection with the transfer of
servicing from a predecessor servicer, including, without limitation, any
reasonable 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 (or any successor
servicer appointed pursuant to Section 7.02) to service the Mortgage Loans
properly and effectively.

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

                                      -36-

<PAGE>

With respect to the Class P Certificates and the Residual Certificates, a
hypothetical Certificate of such Class evidencing a 100% Percentage Interest in
such Class.

                  "Startup Day": With respect to each Trust REMIC, the day
designated as such pursuant to Section 10.01(b) hereof.

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

                  "Stepdown Date": The earlier to occur of (i) the Distribution
Date on which the Certificate Principal Balance of the Class A Certificates has
been reduced to zero and (ii) the later to occur of (a) the Distribution Date
occurring in May 2006 and (b) the first Distribution Date on which the Credit
Enhancement Percentage (calculated for this purpose only prior to any
distribution of the Principal Distribution Amount to the Certificates then
entitled to distributions of principal on such Distribution Date) is equal to or
greater than 37.00%.

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

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

                                      -37-

<PAGE>

3.02.

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

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

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

                  "Termination Price": As defined in Section 9.01.

                  "Terminator": As defined in Section 9.01.

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

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

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

                  "Trigger Event": A Trigger Event is in effect on any
Distribution Date following the Stepdown Date if:

                  (a) the Delinquency Percentage exceeds 40.00% of the then
current Credit Enhancement Percentage; or

                  (b) the aggregate amount of Realized Losses incurred since the
Cut-off Date through the last day of the related Due Period divided by aggregate
Principal Balance of the Mortgage Loans as of the Cut-off Date exceeds the
applicable percentages set forth below with respect to such Distribution Date:

<TABLE>
<CAPTION>
       DISTRIBUTION DATE OCCURRING IN              PERCENTAGE
       ------------------------------              ----------
<S>                                                   <C>
May 2006 through April 2007                           3.00%
May 2007 through April 2008                           4.50%
May 2008 through April 2009                           5.25%
May 2009 through April 2010                           6.00%

                                      -38-

<PAGE>

May 2010 and thereafter                               7.00%
</TABLE>

                  "Trust Fund": Collectively, all of the assets of REMIC I,
REMIC II, REMIC III, REMIC IV, REMIC V, REMIC VI, REMIC VII, the Net WAC Rate
Carryover Reserve Account and the other assets conveyed by the Depositor to the
Trustee pursuant to Section 2.01.

                  "Trust REMIC": Any of REMIC I, REMIC II, REMIC III, REMIC IV,
REMIC V, REMIC VI or REMIC VII.

                  "Trustee": Deutsche Bank National Trust Company, a national
banking association, or its successor in interest, or any successor trustee
appointed as herein provided.

                  "Trustee Fee": The amount payable to the Trustee on each
Distribution Date pursuant to Section 8.05 as compensation for all services
rendered by it in the execution of the trust hereby created and in the exercise
and performance of any of the powers and duties of the Trustee hereunder, which
amount shall equal the Trustee Fee Rate accrued for one month on the aggregate
Scheduled Principal Balance of the Mortgage Loans and any REO Properties as of
the first day of the related Due Period (or, in the case of the initial
Distribution Date, as of the Cut-off Date), calculated on the basis of a 360-day
year consisting of twelve 30-day months.

                  "Trustee Fee Rate": 0.0125% per annum.

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

                  "Uncertificated Interest": With respect to any REMIC I Regular
Interest for any Distribution Date, one month's interest at the REMIC I
Remittance Rate applicable to such REMIC I Regular Interest for such
Distribution Date, accrued on the Uncertificated Balance thereof immediately
prior to such Distribution Date. Uncertificated Interest in respect of any REMIC
I Regular Interest shall accrue on the basis of a 360-day year consisting of
twelve 30-day months. Uncertificated Interest with respect to each Distribution
Date, as to any REMIC I Regular Interest, shall be reduced by an amount equal to
the sum of (a) the aggregate Prepayment Interest Shortfall, if any, for such
Distribution Date to the extent not covered by payments pursuant to Section 3.24
and (b) the aggregate amount of any Relief Act Interest Shortfall, if any
allocated, in each case, to such REMIC I Regular Interest pursuant to Section
1.02. In addition, Uncertificated Interest with respect to each Distribution
Date, as to any REMIC I Regular Interest shall be reduced by Realized Losses, if
any, allocated to such REMIC I Regular Interest pursuant to Section 1.02 and
Section 4.04.

                                      -39-

<PAGE>

                  "Underwriters' Exemption": An individual exemption issued by
the United States Department of Labor, Prohibited Transaction Exemption 91-23
(56 Fed. Reg. 15936, April 19, 1991), as amended, to Citigroup Global Markets
Inc. (formerly known as Salomon Smith Barney Inc.), for specific offerings in
which Citigroup Global Markets Inc. or any person directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with Citigroup Global Markets Inc. is an underwriter, placement agent or
a manager or co-manager of the underwriting syndicate or selling group where the
trust and the offered certificates meet specified conditions. The Underwriters'
Exemption, as amended, provides a partial exemption for transactions involving
certificates representing a beneficial interest in a trust and entitling the
holder to pass-through payments of principal, interest and/or other payments
with respect to the trust's assets.

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

                  "United States Person": A citizen or resident of the United
States, a corporation, partnership (or other entity treated as a corporation or
partnership for United States federal income tax purposes) created or organized
in, or under the laws of, the United States, any state thereof, or the District
of Columbia (except in the case of a partnership, to the extent provided in
Treasury regulations) provided that, for purposes solely of the restrictions on
the transfer of Class R Certificates, no partnership or other entity treated as
a partnership for United States federal income tax purposes shall be treated as
a United States Person unless all persons that own an interest in such
partnership either directly or through any entity that is not a corporation for
United States federal income tax purposes are required by the applicable
operative agreement to be United States Persons, or an estate the income of
which 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 persons have authority
to control all substantial decisions of the trust. The term "United States"
shall have the meaning set forth in Section 7701 of the Code or successor
provisions.

                  "Value": With respect to any Mortgaged Property, the value
thereof as determined by an independent appraisal made at the time of the
origination of the related Mortgage Loan or the sale price, if the appraisal is
not available; except that, with respect to any Mortgage Loan that is a purchase
money mortgage loan, the lesser of (i) the value thereof as determined by an
independent appraisal made at the time of the origination of such Mortgage Loan,
if any, and (ii) the sales price of the related Mortgaged Property.

                  "Voting Rights": The portion of the voting rights of all of
the Certificates which is allocated to any Certificate. With respect to any date
of determination, 98% of all Voting Rights will be allocated among the holders
of the Class A Certificates, the Mezzanine Certificates and the Class CE
Certificates in proportion to the then outstanding Certificate Principal
Balances of their respective Certificates, 1% of all Voting Rights will be
allocated to the holders of the Class P Certificates and 1% of all Voting Rights
will be allocated among the holders of the Residual Certificates. The Voting
Rights allocated to each Class of Certificate shall be allocated among

                                      -40-

<PAGE>

Holders of each such Class in accordance with their respective Percentage
Interests as of the most recent Record Date.

                  SECTION 1.02. Allocation of Certain Interest Shortfalls.

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

                  For purposes of calculating the amount of Uncertificated
Interest for the REMIC I Regular Interests for any Distribution Date, the
aggregate amount of any Prepayment Interest Shortfalls (to the extent not
covered by payments by the Servicer pursuant to Section 3.24) and any Relief Act
Interest Shortfalls incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to Uncertificated Interest payable
to REMIC I Regular Interest I-LTAA and REMIC I Regular Interest I-LTZZ up to an
aggregate amount equal to the REMIC I Interest Loss Allocation Amount, 98% and
2%, respectively, and thereafter among REMIC I Regular Interest I- LTAA, REMIC I
Regular Interest I-LTA, REMIC I Regular Interest I-LTM1, REMIC I Regular
Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I Regular Interest
I-LTM4, REMIC I Regular Interest I-LTM5 and REMIC I Regular Interest I-LTZZ PRO
RATA based on, and to the extent of, one month's interest at the then applicable
respective Pass-Through Rate on the respective Uncertificated Balance of each
such REMIC I Regular Interest.

                                      -41-

<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                        ORIGINAL ISSUANCE OF CERTIFICATES

                  SECTION 2.01. Conveyance of the Mortgage Loans.

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

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

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

                  (ii) the original Mortgage, noting the presence of the MIN of
         the Mortgage Loan and language indicating that the Mortgage Loan is a
         MOM Loan if the Mortgage Loan is a MOM Loan, with evidence of recording
         thereon, and the original recorded power of attorney, if the Mortgage
         was executed pursuant to a power of attorney, with evidence of
         recording thereon;

                  (iii) unless the Mortgage Loan is registered on the
         MERS(R)System, an original Assignment in blank;

                  (iv) the original recorded Assignment or Assignments showing a
         complete chain of assignment from the originator to the Person
         assigning the Mortgage to the Trustee (or to MERS, if the Mortgage Loan
         is registered on the MERS(R) System and noting the presence of the MIN)
         as contemplated by the immediately preceding clause (iii);

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

                  (vi) the original lender's title insurance policy, together
         with all endorsements or

                                      -42-

<PAGE>

         riders that were issued with or subsequent to the issuance of such
         policy, insuring the Mortgage on the Mortgaged Property represented
         therein as a fee interest vested in the Mortgagor, or in the event such
         original title policy is unavailable, a written commitment or uniform
         binder or preliminary report of title issued by the title insurance or
         escrow company.

                  With respect to a maximum of 2.0% of the Original Mortgage
Loans, by outstanding principal balance of the Original Mortgage Loans as of the
Cut-off Date, if any original Mortgage Note referred to in Section 2.01(i) above
cannot be located, the obligations of the Depositor to deliver such documents
shall be deemed to be satisfied upon delivery to the Trustee of a photocopy of
such Mortgage Note, if available, with a lost note affidavit substantially in
the form of Exhibit K attached hereto. If any of the original Mortgage Notes for
which a lost note affidavit was delivered to the Trustee is subsequently
located, such original Mortgage Note shall be delivered to the Trustee within
three Business Days.

                  If any of the documents referred to in Sections 2.01(ii),
(iii) or (iv) above has, as of the Closing Date, been submitted for recording
but either (x) has not been returned from the applicable public recording office
or (y) has been lost or such public recording office has retained the original
of such document, the obligations of the Depositor to deliver such documents
shall be deemed to be satisfied upon (1) delivery to the Trustee of a copy of
each such document certified by the related Originator in the case of (x) above
or the applicable public recording office in the case of (y) above to be a true
and complete copy of the original that was submitted for recording and (2) if
such copy is certified by the related Originator, delivery to the Trustee
promptly upon receipt thereof of either the original or a copy of such document
certified by the applicable public recording office to be a true and complete
copy of the original. Notice shall be provided to the Trustee and the Rating
Agencies by the Seller if delivery pursuant to clause (2) above will be made
more than 180 days after the Closing Date. If the original lender's title
insurance policy was not delivered pursuant to Section 2.01(vi) above, the
Depositor shall deliver or cause to be delivered to the Trustee, promptly after
receipt thereof, the original lender's title insurance policy. The Depositor
shall deliver or cause to be delivered to the Trustee promptly upon receipt
thereof any other original documents constituting a part of a Mortgage File
received with respect to any Mortgage Loan, including, but not limited to, any
original documents evidencing an assumption or modification of any Mortgage
Loan.

                  Except with respect to any Mortgage Loan for which MERS is
identified on the Mortgage or on a properly recorded assignment of the Mortgage
as the mortgagee of record, the Trustee shall enforce the obligation of the
Seller or the related Originator, as applicable, under the related Mortgage Loan
Purchase Agreement to promptly (within sixty days following the later of the
Closing Date and the date of receipt by the Trustee of the recording information
for a Mortgage, but in no event later than ninety days following the Closing
Date) submit or cause to be submitted for recording, at the expense of the
related Originator and at no expense to the Trust Fund, the Trustee, the
Servicer or the Depositor, in the appropriate public office for real property
records, each Assignment referred to in Sections 2.01(iii) and (iv) above and
the Depositor shall execute each original Assignment or cause each original
Assignment to be executed in the following form: "Deutsche Bank National Trust
Company, as Trustee under the applicable agreement." In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Seller or the related Originator, as applicable, shall promptly prepare or cause
to be prepared a substitute Assignment or cure or cause to be cured such defect,
as the case may be, and thereafter cause each

                                      -43-

<PAGE>

such Assignment to be duly recorded. If the related Originator is unable to pay
the cost of recording the Assignments, such expense will be paid by the Trustee
and shall be reimbursable to the Trustee as an Extraordinary Trust Fund Expense.
Notwithstanding the foregoing, the Trustee shall not be responsible for
determining whether any Assignment delivered by the Depositor hereunder is in
recordable form.

                  In connection with the assignment of any Mortgage Loan
registered on the MERS(R) System, the Depositor further agrees that it will
cause, within 30 Business Days after the Closing Date, the MERS(R) System to
indicate that such Mortgage Loans have been assigned by the Depositor to the
Trustee in accordance with this Agreement for the benefit of the
Certificateholders by including (or deleting, in the case of Mortgage Loans
which are repurchased in accordance with this Agreement) in such computer files
(a) the code in the field which identifies the specific Trustee and (b) the code
in the field "Pool Field" which identifies the series of the Certificates issued
in connection with such Mortgage Loans. The Depositor further agrees that it
will not, and will not permit the Servicer to, and the Servicer agrees that it
will not, alter the codes referenced in this paragraph with respect to any
Mortgage Loan during the term of this Agreement unless and until such Mortgage
Loan is repurchased in accordance with the terms of this Agreement.

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

                  SECTION 2.02. Acceptance of REMIC I by Trustee.

                  The Trustee, acknowledges receipt, subject to the provisions
of Section 2.01 and subject to any exceptions noted on the exception report
described in the next paragraph below, of the documents referred to in Section
2.01 (other than such documents described in Section 2.01(v)) above and all
other assets included in the definition of "REMIC I" under clauses (i), (iii),
(iv) and (v) (to the extent of amounts attributable thereto deposited into the
Distribution Account) and declares that it holds and will hold such documents
and the other documents delivered to it constituting a Mortgage File, and that
it holds or will hold all such assets and such other assets included in the
definition of "REMIC I" in trust for the exclusive use and benefit of all
present and future Certificateholders.

                  The Trustee agrees, for the benefit of the Certificateholders,
to review each Mortgage File on or before the Closing Date and to certify in
substantially the form attached hereto as Exhibit C-1 that, as to each Mortgage
Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in
full or any Mortgage Loan specifically identified in the exception report
annexed thereto as not being covered by such certification), (i) all documents
constituting part of such Mortgage File (other than such documents described in
Section 2.01(v)) required to be delivered to it pursuant to this Agreement are
in its possession, (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan and (iii) based on its
examination and

                                      -44-

<PAGE>

only as to the foregoing, the information set forth in the Mortgage Loan
Schedule that corresponds to items (i), (iii), (xi), (xii) and (xv) of the
definition of "Mortgage Loan Schedule" accurately reflects information set forth
in the Mortgage File. It is herein acknowledged that, in conducting such review,
the Trustee was under no duty or obligation (i) to inspect, review or examine
any such documents, instruments, certificates or other papers to determine
whether they are genuine, enforceable, valid, legally binding, effective or
appropriate for the represented purpose or whether they have actually been
recorded or are in recordable form or that they are other than what they purport
to be on their face, (ii) to determine whether any Mortgage File should include
any of the documents specified in clause (v) of Section 2.01 or (iii) to
determine the perfection or priority of any security interest in any such
documents or instruments. Notwithstanding the foregoing, in conducting the
review described in this Section 2.02, the Trustee shall not be responsible for
determining (i) if an Assignment is sufficient under the laws of the
jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale of the Mortgage or (ii) if a Mortgage creates a first lien on,
or first priority security interest in, a Mortgaged Property.

                  Prior to the first anniversary date of this Agreement, the
Trustee shall deliver to the Depositor and the Servicer a final certification in
the form annexed hereto as Exhibit C-2 evidencing the completeness of the
Mortgage Files, with any applicable exceptions noted thereon, and the Servicer
shall forward a copy thereof to any Sub-Servicer.

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

                  The Trustee shall, at the written request and expense of any
Certificateholder, provide a written report to such Certificateholder of all
Mortgage Files released to the Servicer for servicing purposes.

                  SECTION 2.03. Repurchase or Substitution of Mortgage Loans by
                                the Originators and the Seller.

                  (a) Upon discovery or receipt of notice of any materially
defective document in, or that a document is missing from, a Mortgage File or of
the breach by either Originator or the Seller of any representation, warranty or
covenant under the Mortgage Loan Purchase Agreement in respect of any Mortgage
Loan that materially adversely affects the value of such Mortgage Loan or the
interest therein of the Certificateholders, the Trustee shall promptly notify
the Seller, the related Originator and the Servicer of such defect, missing
document or breach and request that the related Originator or the Seller, as
applicable, deliver such missing document or cure such defect or breach within
60 days from the date the related Originator or the Seller, as applicable, was
notified of such missing document, defect or breach, and if the related
Originator or the Seller, as applicable,

                                      -45-

<PAGE>

does not deliver such missing document or cure such defect or breach in all
material respects during such period, the Servicer, in accordance with Section
3.02(b), shall enforce the obligations of the related Originator or the Seller,
as applicable, under the Mortgage Loan Purchase Agreement to repurchase such
Mortgage Loan from REMIC I at the Purchase Price within 90 days after the date
on which the related Originator or the Seller, as applicable, was notified
(subject to Section 2.03(c)) of such missing document, defect or breach, if and
to the extent that the related Originator or the Seller is obligated to do so
under the Mortgage Loan Purchase Agreement. The Purchase Price for the
repurchased Mortgage Loan shall be remitted to the Servicer for deposit in the
Collection Account and the Trustee, upon receipt of written certification from
the Servicer of such deposit, shall release to the related Originator or the
Seller, as applicable, the related Mortgage File and the Trustee shall execute
and deliver such instruments of transfer or assignment, in each case without
recourse, as the related Originator or the Seller, as applicable, shall furnish
to it and as shall be necessary to vest in the related Originator or the Seller,
as applicable, any Mortgage Loan released pursuant hereto. In furtherance of the
foregoing, if the related Originator or the Seller, as applicable, is not a
member of MERS and repurchases a Mortgage Loan which is registered on the
MERS(R) System, the related Originator or the Seller, as applicable, at its own
expense and without any right of reimbursement, shall cause MERS to execute and
deliver an assignment of the Mortgage in recordable form to transfer the
Mortgage from MERS to the related Originator or the Seller, as applicable, and
shall cause such Mortgage to be removed from registration on the MERS(R) System
in accordance with MERS' rules and regulations. The Trustee shall not have any
further responsibility with regard to such Mortgage File. In lieu of
repurchasing any such Mortgage Loan as provided above, if so provided in the
Mortgage Loan Purchase Agreement, the related Originator or the Seller, as
applicable, may cause such Mortgage Loan to be removed from REMIC I (in which
case it shall become a Deleted Mortgage Loan) and substitute one or more
Qualified Substitute Mortgage Loans in the manner and subject to the limitations
set forth in Section 2.03(b). It is understood and agreed that the obligation of
the related Originator and the Seller to cure or to repurchase (or to substitute
for) any Mortgage Loan as to which a document is missing, a material defect in a
constituent document exists or as to which such a breach has occurred and is
continuing shall constitute the sole remedy respecting such omission, defect or
breach available to the Trustee and the Certificateholders.

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

                  As to any Deleted Mortgage Loan for which the related
Originator or the Seller substitutes a Qualified Substitute Mortgage Loan or
Loans, such substitution shall be effected by the related Originator or the
Seller, as applicable, delivering to the Trustee, for such Qualified Substitute
Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the Assignment to the
Trustee, and such other documents and agreements, with all necessary
endorsements thereon, as are required by Section 2.01, together with an
Officers' Certificate providing that each such Qualified Substitute Mortgage
Loan satisfies the definition thereof and specifying the Substitution Shortfall
Amount (as described below), if any, in connection with such substitution. The
Trustee shall acknowledge receipt for such Qualified Substitute Mortgage Loan or
Loans and, within ten Business Days thereafter, shall review such documents as
specified in Section 2.02 and deliver to the Depositor and the Servicer, with
respect to such Qualified Substitute Mortgage Loan or Loans, a certification

                                      -46-

<PAGE>

substantially in the form attached hereto as Exhibit C-1, with any applicable
exceptions noted thereon. Within one year of the date of substitution, the
Trustee shall deliver to the Depositor and the Servicer a certification
substantially in the form of Exhibit C-2 hereto with respect to such Qualified
Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon.
Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the
month of substitution are not part of REMIC I and will be retained by the
Originator or the Seller, as applicable. For the month of substitution,
distributions to Certificateholders will reflect the Monthly Payment due on such
Deleted Mortgage Loan on or before the Due Date in the month of substitution,
and the related Originator or the Seller, as applicable, shall thereafter be
entitled to retain all amounts subsequently received in respect of such Deleted
Mortgage Loan. The Depositor shall give or cause to be given written notice to
the Certificateholders that such substitution has taken place, shall amend the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan from
the terms of this Agreement and the substitution of the Qualified Substitute
Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan
Schedule to the Trustee. Upon such substitution, such Qualified Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be
subject in all respects to the terms of this Agreement and the Mortgage Loan
Purchase Agreement, including, all applicable representations and warranties
thereof included in the Mortgage Loan Purchase Agreement.

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

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

                  (c) Upon discovery by the Depositor, the Seller, the Servicer
or the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of Section 860G(a)(3) of the Code, the party discovering such
fact shall within two Business Days give written

                                      -47-

<PAGE>

notice thereof to the other parties. In connection therewith, the Seller shall
repurchase or, subject to the limitations set forth in Section 2.03(b),
substitute one or more Qualified Substitute Mortgage Loans for the affected
Mortgage Loan within 90 days of the earlier of discovery or receipt of such
notice with respect to such affected Mortgage Loan. Any such repurchase or
substitution shall be made in the same manner as set forth in Section 2.03(a).
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.

                  SECTION 2.04. Reserved.

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

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

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

                  (ii) The Servicer has the full power and authority to conduct
         its business as presently conducted by it and to execute, deliver and
         perform, and to enter into and consummate, all transactions
         contemplated by this Agreement. The Servicer has duly authorized the
         execution, delivery and performance of this Agreement, has duly
         executed and delivered this Agreement, and this Agreement, assuming due
         authorization, execution and delivery by the Depositor and the Trustee,
         constitutes a legal, valid and binding obligation of the Servicer,
         enforceable against it in accordance with its terms except as the
         enforceability thereof may be limited by bankruptcy, insolvency,
         reorganization or similar laws affecting the enforcement of creditors'
         rights generally and by general principles of equity;

                  (iii) The execution and delivery of this Agreement by the
         Servicer, the servicing of the Mortgage Loans by the Servicer
         hereunder, the consummation by the Servicer of any other of the
         transactions herein contemplated, and the fulfillment of or compliance
         with the terms hereof are in the ordinary course of business of the
         Servicer and will not (A) result in a breach of any term or provision
         of the limited partnership agreement of the Servicer or (B) conflict
         with, result in a breach, violation or acceleration of, or result in a
         default under, the terms of any other material agreement or instrument
         to which the Servicer is a party or by which it may be bound, or any
         statute, order or regulation applicable to the Servicer of any court,
         regulatory body, administrative agency or governmental body having
         jurisdiction over the Servicer; and the Servicer is not a party to,
         bound by, or in breach or violation of any

                                      -48-

<PAGE>

         indenture or other agreement or instrument, or subject to or in
         violation of any statute, order or regulation of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over it, which materially and adversely affects or, to the Servicer's
         knowledge, would in the future materially and adversely affect, (x) the
         ability of the Servicer to perform its obligations under this
         Agreement, (y) the business, operations, financial condition,
         properties or assets of the Servicer taken as a whole or (z) the
         legality, validity or enforceability of this Agreement;

                  (iv) The Servicer is a HUD approved mortgagee pursuant to
         Section 203 and Section 211 of the National Housing Act. No event has
         occurred, including but not limited to a change in insurance coverage,
         that would make the Servicer unable to comply with HUD eligibility
         requirements or that would require notification to HUD;

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

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

                  (vii) There are no actions or proceedings against, or
         investigations known to it of, the Servicer before any court,
         administrative or other tribunal (A) that might prohibit its entering
         into this Agreement, (B) seeking to prevent the consummation of the
         transactions contemplated by this Agreement or (C) that might prohibit
         or materially and adversely affect the performance by the Servicer of
         its obligations under, or the validity or enforceability of, this
         Agreement;

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

                  (ix) The Servicer does and will continue to accurately report
         its borrower credit files for each Mortgage Loan to the three major
         credit bureaus in existence as of the Closing Date in a timely manner;
         and

                  (x) The Servicer is a member of MERS in good standing, and
         will comply in all material respects with the rules and procedures of
         MERS in connection with the servicing of the Mortgage Loans that are
         registered with MERS.

                  It is understood and agreed that the representations,
warranties and covenants set forth in this Section 2.05 shall survive delivery
of the Mortgage Files to the Trustee and shall inure to the benefit of the
Trustee, the Depositor and the Certificateholders. Upon discovery by any of the
Depositor, the Servicer or the Trustee of a breach of any of the foregoing
representations, warranties

                                      -49-

<PAGE>

and covenants which materially and adversely affects the value of any Mortgage
Loan, Prepayment Charge or the interests therein of the Certificateholders, the
party discovering such breach shall give prompt written notice (but in no event
later than two Business Days following such discovery) to the Trustee. Subject
to Section 7.01, unless such breach shall not be susceptible of cure within 90
days, the obligation of the Servicer set forth in Section 2.03(c) to cure
breaches shall constitute the sole remedy against the Servicer available to the
Certificateholders, the Depositor or the Trustee on behalf of the
Certificateholders respecting a breach of the representations, warranties and
covenants contained in this Section 2.05.

                  SECTION 2.06. Issuance of the REMIC I Regular Interests and
                                the Class R-I Interest.

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

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

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

                  SECTION 2.08. Issuance of Class R Certificates.

                  The Trustee acknowledges the assignment to it of the REMIC
Regular Interests and, concurrently therewith and in exchange therefor, pursuant
to the written request of the Depositor executed by an officer of the Depositor,
the Trustee has executed, authenticated and delivered to or

                                      -50-

<PAGE>

upon the order of the Depositor, the Class R Certificates in authorized
denominations.

                  SECTION 2.09. Conveyance of the Class M-3 Interest; Acceptance
                                of REMIC III by the Trustee.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the Class M-3 Interest for the benefit of the Holders of the Class M-3
Certificates and the Class R-III Interest, and REMIC III (as holder of the Class
M-3 Interest). The Trustee acknowledges receipt of the Class M-3 Interest and
declares that it holds and will hold the same in trust for the exclusive use and
benefit of all present and future Holders of the Class M-3 Certificates and the
Class R-X Certificates, in respect of the Class R-III Interest, and REMIC III
(as holder of the Class M-3 Certificates). The rights of the Class R-X
Certificates, in respect of the Class R-III Interest, and REMIC III (as holder
of the Class M-3 Certificates) to receive distributions from the proceeds of
REMIC III, and all ownership interests evidenced or constituted by the Class R-X
Certificates, in respect of the Class R-III Interest, and the Class M-3
Certificates shall be as set forth in this Agreement.

                  SECTION 2.10. Conveyance of the Class M-4 Interest; Acceptance
                                of REMIC IV by the Trustee.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the Class M-4 Interest for the benefit of the Holders of the Class M-4
Certificates and the Class R-IV Interest, and REMIC IV (as holder of the Class
M-4 Interest). The Trustee acknowledges receipt of the Class M-4 Interest and
declares that it holds and will hold the same in trust for the exclusive use and
benefit of all present and future Holders of the Class M-4 Certificates and the
Class R-X Certificates, in respect of the Class R-IV Interest, and REMIC IV (as
holder of the Class M-4 Certificates). The rights of the Class R-X Certificates,
in respect of the Class R-IV Interest, and REMIC IV (as holder of the Class M-4
Certificates) to receive distributions from the proceeds of REMIC IV, and all
ownership interests evidenced or constituted by the Class R-X Certificates, in
respect of the Class R-IV Interest, and the Class M-4 Certificates shall be as
set forth in this Agreement.

                  SECTION 2.11. Conveyance of the Class M-5 Interest; Acceptance
                                of REMIC V by the Trustee.

                  The Depositor, concurrently with the execution and delivery
hereof, does hereby transfer, assign, set over and otherwise convey to the
Trustee, without recourse all the right, title and interest of the Depositor in
and to the Class M-5 Interest for the benefit of the Holders of the Class M-5
Certificates and the Class R-V Interest, and REMIC V (as holder of the Class M-5
Interest). The Trustee acknowledges receipt of the Class M-5 Interest and
declares that it holds and will hold the same in trust for the exclusive use and
benefit of all present and future Holders of the Class M-5 Certificates and the
Class R-X Certificates, in respect of the Class R-V Interest, and REMIC V (as
holder of the Class M-5 Certificates). The rights of the Class R-X Certificates,
in respect of the Class R-V Interest, and REMIC V (as holder of the Class M-5
Certificates) to receive distributions

                                      -51-

<PAGE>

from the proceeds of REMIC V, and all ownership interests evidenced or
constituted by the Class R-X Certificates, in respect of the Class R-V Interest,
and the Class M-5 Certificates shall be as set forth in this Agreement.

                  SECTION 2.12. Conveyance of the Class CE Interest; Acceptance
                                of REMIC VI by the Trustee.

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

                  SECTION 2.13. Conveyance of the Class P Interest; Acceptance
                                of REMIC VII by the Trustee.

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

                  SECTION 2.14. Issuance of Class R-X Certificates.

                  The Trustee acknowledges the assignment to it of the Class
R-III Interest, the Class R-IV Interest, the Class R-V Interest, the Class R-VI
Interest and the Class R-VII Interest and, concurrently therewith and in
exchange therefor, pursuant to the written request of the Depositor executed by
an officer of the Depositor, the Trustee has executed, authenticated and
delivered to or upon the order of the Depositor, the Class R-X Certificates in
authorized denominations.

                                      -52-

<PAGE>

                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                              OF THE MORTGAGE LOANS

                  SECTION 3.01. Servicer to Act as Servicer.

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

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

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

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

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

                  To the extent consistent with the foregoing, the Servicer
shall also seek to maximize the timely and complete recovery of principal and
interest on the Mortgage Notes. Subject only to the above-described servicing
standards and the terms of this Agreement and of the respective Mortgage Loans,
the Servicer shall have full power and authority, to do or cause to be done any
and all things in connection with such servicing and administration which it may
deem necessary or desirable. Without limiting the generality of the foregoing,
the Servicer in its own name is hereby authorized and empowered by the Trustee
when the Servicer believes it appropriate in its best judgment, to execute and
deliver, on behalf of the Trust Fund, the Certificateholders and the Trustee or
any of them, and upon written notice to the Trustee, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Mortgage Loans and the
Mortgaged Properties and to institute foreclosure proceedings or obtain a
deed-in-lieu of foreclosure so as to convert the ownership of such properties,
and to hold or cause to be held title to such properties, on behalf of the
Trustee, for the benefit of the Trust Fund and the Certificateholders. The
Servicer shall service and administer the Mortgage Loans in accordance with
applicable state and federal law and shall provide to the Mortgagors any reports
required to be provided to them thereby. The Servicer shall also comply in the
performance of this Agreement with all reasonable rules and requirements of each
insurer under any standard hazard insurance policy. Subject to Section 3.17, the
Trustee shall execute, at the written request of the Servicer, and furnish to
the Servicer any special or limited powers of attorney and other documents
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties

                                      -53-

<PAGE>

hereunder and the Trustee shall not be liable for the actions of the Servicer
under such powers of attorney.

                  In accordance with the standards of the preceding paragraph,
the Servicer shall make or cause to be made Servicing Advances as necessary for
the purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which Servicing Advances shall be reimbursable in the first instance
from related collections from the Mortgagors pursuant to Section 3.09, and
further as provided in Section 3.11; provided, however, the Servicer shall only
make such Servicing Advance if the Mortgagor has made such payment as set forth
in Section 3.09 or if the Mortgagor has not made such payment, if the failure to
make such Servicing Advance would result in the loss of the Mortgaged Property
due to a tax sale or foreclosure as result of a tax lien. Any cost incurred by
the Servicer in effecting the payment of taxes and assessments on a Mortgaged
Property shall not, for the purpose of calculating the Stated Principal Balance
of a Mortgage Loan or distributions to Certificateholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit.

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

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

                  Notwithstanding anything in this Agreement to the contrary, in
the event of a Principal Prepayment in full of a Mortgage Loan, the Servicer may
not waive any Prepayment Charge or portion thereof required by the terms of the
related Mortgage Note unless (i) the Servicer determines that such waiver would
maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking into
account the value of such Prepayment Charge, (ii)(A) the enforceability thereof
is

                                      -54-

<PAGE>

limited (1) by bankruptcy, insolvency, moratorium, receivership, or other
similar law relating to creditors' rights generally or (2) due to acceleration
in connection with a foreclosure or other involuntary payment, or (B) the
enforceability is otherwise limited or prohibited by applicable law or (iii) the
Servicer has not been provided with information sufficient to enable it to
collect the Prepayment Charge. If a Prepayment Charge is waived as permitted by
meeting the standard described in clause (iii) above, then the Servicer shall
enforce the obligation of the related Originator to pay the amount of such
waived Prepayment Charge to the Servicer for deposit in the Collection Account
(to the extent paid by the related Originator) for the benefit of the Holders of
the Class P Certificates.

                  In the event of a Principal Prepayment in full with respect to
any Mortgage Loan, the Servicer shall deliver to the Trustee a certification of
a Servicing Officer substantially in the form of Exhibit J no later than the
third Business Day following the immediately succeeding Determination Date with
a copy to the Class CE Certificateholder.

                  Promptly upon the earlier of discovery by the Servicer or
receipt of notice by the Servicer of the breach of the covenant of the Servicer
set forth above which materially and adversely affects the interests of the
Holders of the Class P Certificates in any Prepayment Charge, the Servicer shall
promptly pay the amount of such waived Prepayment Charge (or such portion
thereof as had been waived), for the benefit of the holders of the Class P
Certificates by depositing such amount into the Collection Account for
distribution in accordance with the terms of this Agreement. The foregoing shall
not, however, limit any remedies available to the Certificateholders, the
Depositor or the Trustee on behalf of the Trust Fund and for the benefit of the
Certificateholders, pursuant to the Mortgage Loan Purchase Agreement, respecting
a breach of the representations, warranties and covenants of the Originator or
the Seller contained in the Mortgage Loan Purchase Agreement.

                  With respect to each Mortgage Loan which is the subject of a
Principal Prepayment in full, which prepayment is not accompanied by the payment
of a Prepayment Charge, the Trustee shall verify that such Mortgage Loan was
identified on the Mortgage Loan Schedule as not being subject to a Prepayment
Charge.

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

                  As part of its servicing activities hereunder, the Servicer,
for the benefit of the Trustee and the Certificateholders, shall enforce the
obligations of each Originator and the Seller under the Mortgage Loan Purchase
Agreements, including, without limitation, any obligation of either Originator
or the Seller to purchase a Mortgage Loan on account of missing or defective
documentation or on account of a breach of a representation, warranty or
covenant, as described in Section 2.03(a).

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

                  The Servicer may arrange for the subservicing of any Mortgage
Loan by a Sub-

                                      -55-

<PAGE>

Servicer pursuant to a Sub-Servicing Agreement; provided that such sub-servicing
arrangement and the terms of the related Sub-Servicing Agreement must provide
for the servicing of such Mortgage Loans in a manner consistent with the
servicing arrangements contemplated hereunder. Notwithstanding the provisions of
any Sub-Servicing Agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Servicer or a Sub-Servicer or reference
to actions taken through a Servicer or otherwise, the 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 Sub-Servicing Agreements or arrangements or by
virtue of indemnification from the Sub-Servicer and to the same extent and under
the same terms and conditions as if the Servicer alone were servicing and
administering the Mortgage Loans. Every Sub- Servicing Agreement entered into by
the Servicer shall contain a provision giving the successor Servicer the option
to terminate such agreement in the event a successor Servicer is appointed. All
actions of each Sub-Servicer performed pursuant to the related Sub-Servicing
Agreement shall be performed as an agent of the Servicer with the same force and
effect as if performed directly by the Servicer.

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

                  SECTION 3.03. Successor Sub-Servicers.

                  The Servicer shall be entitled to terminate any Sub-Servicing
Agreement in accordance with the terms and conditions of such Sub-Servicing
Agreement and to either itself directly service the related Mortgage Loans or
enter into a Sub-Servicing Agreement with a successor Sub-Servicer which
qualifies under Section 3.02. Any Sub-Servicing Agreement shall include the
provision that such agreement may be immediately terminated by the Trustee (if
the Trustee is acting as Servicer) without fee, in accordance with the terms of
this Agreement, in the event that the Servicer (or the Trustee, if it is then
acting as Servicer) shall, for any reason, no longer be the Servicer (including
termination due to a Servicer Event of Default).

                  SECTION 3.04. No Contractual Relationship Between
                                Sub-Servicer, Trustee or the Certificateholders.

                  Any Sub-Servicing Agreement and any other transactions or
services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed
to be between the Sub-Servicer and the Servicer alone and the Trustee and the
Certificateholders shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to any Sub-Servicer
except as set forth in Section 3.05.

                  SECTION 3.05. Assumption or Termination of Sub-Servicing
                                Agreement by Trustee.

                  In connection with the assumption of the responsibilities,
duties and liabilities and of the authority, power and rights of the Servicer
hereunder by the Trustee pursuant to Section 7.02

                                      -56-

<PAGE>

or another successor Servicer, it is understood and agreed that the Servicer's
rights and obligations under any Sub-Servicing Agreement then in force between
the Servicer and a Sub-Servicer shall be assumed simultaneously by the Trustee
or another successor Servicer without act or deed on the part of the Trustee;
provided, however, that the Trustee or any other successor Servicer may
terminate the Sub-Servicer.

                  The Servicer shall, upon the reasonable request of the
Trustee, but at the expense of the Servicer, deliver to the assuming party
documents and records relating to each Sub-Servicing Agreement and an accounting
of amounts collected and held by it and otherwise use its best reasonable
efforts to effect the orderly and efficient transfer of the Sub-Servicing
Agreements to the assuming party.

                  SECTION 3.06. [Reserved].

                  SECTION 3.07. Collection of Certain Mortgage Loan Payments.

                  The Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Mortgage Loans, and
shall, to the extent such procedures shall be consistent with this Agreement,
follow such collection procedures as it would follow with respect to mortgage
loans comparable to the Mortgage Loans and held for its own account. Consistent
with the foregoing, the Servicer may in its discretion (i) waive any late
payment charge or, if applicable, penalty interest or (ii) extend the due dates
for the Monthly Payments due on a Mortgage Note for a period of not greater than
180 days; provided that any extension pursuant to this clause shall not affect
the amortization schedule of any Mortgage Loan for purposes of any computation
hereunder. Notwithstanding the foregoing, in the event that any Mortgage Loan is
in default or, in the judgment of the Servicer, such default is reasonably
foreseeable, the Servicer, consistent with the standards set forth in Section
3.01 may waive, modify or vary any term of such Mortgage Loan (including
modifications that change the Mortgage Rate, forgive the payment of principal or
interest or extend the final maturity date of such Mortgage Loan), accept
payment from the related Mortgagor of an amount less than the Stated Principal
Balance in final satisfaction of such Mortgage Loan (such payment, a "Short
Pay-off"), or consent to the postponement of strict compliance with any such
term or otherwise grant indulgence to any Mortgagor if in the Servicer's
determination such waiver, modification, postponement or indulgence is not
materially adverse to the interests of the Certificateholders (taking into
account any estimated Realized Loss that might result absent such action).

                  SECTION 3.08. [Reserved].

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

                  To the extent the terms of a Mortgage provide for Escrow
Payments, the Servicer shall establish and maintain one or more accounts (the
"Servicing Accounts"), into which all collections from the Mortgagors (or
related advances from Sub-Servicers) for the payment of taxes, assessments,
fire, flood, and hazard insurance premiums, and comparable items for the account
of the Mortgagors ("Escrow Payments") shall be deposited and retained. Servicing
Accounts shall be

                                      -57-

<PAGE>

Eligible Accounts. The Servicer shall deposit in the Servicing Accounts on a
daily basis and in no event later than the second Business Day after receipt,
and retain therein, all Escrow Payments collected on account of the Mortgage
Loans, for the purpose of effecting the timely payment of any such items as
required under the terms of this Agreement. Withdrawals of amounts from a
Servicing Account may be made only to (i) effect timely payment of taxes,
assessments, fire, flood, and hazard insurance premiums, and comparable items;
(ii) reimburse the Servicer out of related collections for any advances made
pursuant to Section 3.01 (with respect to taxes and assessments) and Section
3.14 (with respect to fire, flood and hazard insurance); (iii) refund to
Mortgagors any sums as may be determined to be overages; (iv) pay interest, if
required and as described below, to Mortgagors on balances in the Servicing
Account; or (v) clear and terminate the Servicing Account at the termination of
the Servicer's obligations and responsibilities in respect of the Mortgage Loans
under this Agreement in accordance with Article IX. As part of its servicing
duties, the Servicer shall pay to the Mortgagors interest on funds in Servicing
Accounts, to the extent required by law and, to the extent that interest earned
on funds in the Servicing Accounts is insufficient, to pay such interest from
its or their own funds, without any reimbursement therefor. Notwithstanding the
foregoing, the Servicer shall not be obligated to collect Escrow Payments if the
related Mortgage Loan does not require such payments but the Servicer shall
nevertheless be obligated to make Servicing Advances as provided in Section
3.01. In the event the Servicer shall deposit in the Servicing Accounts any
amount not required to be deposited therein, it may at any time withdraw such
amount from the Servicing Accounts, any provision to the contrary
notwithstanding.

                  To the extent that a Mortgage does not provide for Escrow
Payments, the Servicer (i) shall determine whether any such payments are made by
the Mortgagor in a manner and at a time that is necessary to avoid the loss of
the Mortgaged Property due to a tax sale or the foreclosure as a result of a tax
lien and (ii) shall ensure that all insurance required to be maintained on the
Mortgaged Property pursuant to this Agreement is maintained. If any such payment
has not been made and the Servicer receives notice of a tax lien with respect to
the Mortgage Loan being imposed, the Servicer will, promptly and to the extent
required to avoid loss of the Mortgaged Property, advance or cause to be
advanced funds necessary to discharge such lien on the Mortgaged Property. The
Servicer assumes full responsibility for the payment of all such bills and shall
effect payments of all such bills irrespective of the Mortgagor's faithful
performance in the payment of same or the making of the Escrow Payments and
shall make Servicing Advances from its own funds to effect such payments.

                  SECTION 3.10. Collection Account, Distribution Account and
                                Initial Deposit Accounts.

                  (a) On behalf of the Trust Fund, the Servicer shall establish
and maintain one or more accounts (such account or accounts, the "Collection
Account"), held in trust for the benefit of the Trustee and the
Certificateholders. On behalf of the Trust Fund, the Servicer shall deposit or
cause to be deposited in the Collection Account on a daily basis and in no event
later than two Business Days after receipt, as and when received or as otherwise
required hereunder, the following payments and collections received or made by
it on or subsequent to the Cut-off Date:

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

                                      -58-

<PAGE>

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

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

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

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

                  (vi) any Purchase Price or Substitution Shortfall Amount
         delivered to the Servicer and all proceeds (net of amounts payable or
         reimbursable to the Servicer) of Mortgage Loans purchased in accordance
         with Section 9.01; and

                  (vii) any Prepayment Charges or amounts required to be
         deposited by the Servicer in connection with a breach of its
         obligations under Section 3.01 with respect to the waiver of Prepayment
         Charges.

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

                  (b) On behalf of the Trust Fund, the Trustee shall establish
and maintain one or more accounts (such account or accounts, the "Distribution
Account"), held in trust for the benefit of the Trustee, the Trust Fund and the
Certificateholders. On behalf of the Trust Fund, the Servicer shall deliver to
the Trustee in immediately available funds for deposit in the Distribution
Account on or before 3:00 p.m. New York time (i) on the Servicer Remittance
Date, that portion of the Available Distribution Amount (calculated without
regard to the references in clause (2) of the definition thereof to amounts that
may be withdrawn from the Distribution Account) for the related Distribution
Date then on deposit in the Collection Account and the amount of all Prepayment
Charges collected by the Servicer in connection with the Principal Prepayment of
any of the Mortgage Loans (including the amount of any payment by the Servicer
in respect of a waived Prepayment Charge, other than as permitted in Section
3.01) then on deposit in the Collection Account and the amount of any funds
reimbursable to an Advance Financing Person pursuant to Section 3.28, and (ii)
on each Business Day as of the commencement of which the balance on deposit in
the Collection Account exceeds $75,000 following any withdrawals pursuant to the
next succeeding sentence, the amount of such excess, but only if the Collection
Account constitutes an Eligible Account solely pursuant to clause (ii) of the
definition of "Eligible Account." If the balance

                                      -59-

<PAGE>

on deposit in the Collection Account exceeds $75,000 as of the commencement of
business on any Business Day and the Collection Account constitutes an Eligible
Account solely pursuant to clause (ii) of the definition of "Eligible Account,"
the Servicer shall, on or before 5:00 p.m. New York time on such Business Day,
withdraw from the Collection Account any and all amounts payable or reimbursable
to the Depositor, the Servicer, the Trustee, the Originator or the Seller
pursuant to Section 3.11 and shall pay such amounts to the Persons entitled
thereto.

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

                  (d) Funds held in the Collection Account at any time may be
delivered by the Servicer in immediately available funds to the Trustee for
deposit in the Distribution Account. In the event the Servicer shall deliver to
the Trustee for deposit in the Distribution Account any amount not required to
be deposited therein, it may at any time request that the Trustee withdraw such
amount from the Distribution Account and remit to it any such amount, any
provision herein to the contrary notwithstanding. In no event shall the Trustee
incur liability as a result of withdrawals from the Distribution Account at the
direction of the Servicer in accordance with the immediately preceding sentence.
In addition, the Servicer shall deliver to the Trustee from time to time for
deposit in the Distribution Account the amounts set forth in clauses (i) through
(iv) below:

                  (i) any Advances, as required pursuant to Section 4.03;

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

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

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

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

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

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

                  (ii) subject to Section 3.16(d), to reimburse the Servicer for
         Advances, but only

                                      -60-

<PAGE>

         to the extent of amounts received which represent Late Collections (net
         of the related Servicing Fees) of Monthly Payments on Mortgage Loans
         with respect to which such Advances were made in accordance with the
         provisions of Section 4.03;

                  (iii) subject to Section 3.16(d), to pay the Servicer any
         unpaid Servicing Fees and reimburse the Servicer any unreimbursed
         Servicing Advances with respect to each Mortgage Loan, but only to the
         extent of any Liquidation Proceeds and Insurance Proceeds received with
         respect to such Mortgage Loan;

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

                  (v) to pay to the Servicer, the related Originator or the
         Seller, as the case may be, with respect to each Mortgage Loan that has
         previously been purchased or replaced pursuant to Section 2.03 or
         Section 3.16(c) all amounts received thereon not included in the
         Purchase Price or the Substitution Shortfall Amount;

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

                  (vii) to reimburse the Servicer or the Depositor for expenses
         incurred by or reimbursable to the Servicer or the Depositor, as the
         case may be, pursuant to Section 3.01 or Section 6.03;

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

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

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

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

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

                                      -61-

<PAGE>

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

                  (ii) to pay to itself amounts to which it is entitled pursuant
         to Section 8.05 and any Extraordinary Trust Fund Expenses;

                  (iii) to reimburse itself pursuant to Section 7.02;

                  (v) to pay to an Advance Financing Person reimbursements for
         Advances and/or Servicing Advances pursuant to Section 3.28;

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

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

                  SECTION 3.12. Investment of Funds in the Investment Accounts.

                  (a) The Servicer may direct, by means of written directions
(which may be standing directions), any depository institution maintaining the
Collection Account to invest the funds in the Collection Account (for purposes
of this Section 3.12, an "Investment Account") in one or more Permitted
Investments bearing interest or sold at a discount, and maturing, unless payable
on demand, (i) no later than the Business Day immediately preceding the date on
which such funds are required to be withdrawn from such account pursuant to this
Agreement, if a Person other than the Trustee is the obligor thereon, and (ii)
no later than the date on which such funds are required to be withdrawn from
such account pursuant to this Agreement, if the Trustee is the obligor thereon.
Amounts in the Distribution Account may be held uninvested. All such Permitted
Investments shall be held to maturity, unless payable on demand. Any investment
of funds shall be made in the name of the Trustee (in its capacity as such) or
in the name of a nominee of the Trustee. The Trustee shall be entitled to sole
possession over each such investment (except with respect to investment
direction of funds held in the Collection Account) and, subject to subsection
(b) below, the income thereon, and any certificate or other instrument
evidencing any such investment shall be delivered directly to the Trustee or its
agent, together with any document of transfer necessary to transfer title to
such investment to the Trustee or its nominee. In the event amounts on deposit
in the Collection Account are at any time invested in a Permitted Investment
payable on demand, the party with investment discretion over such Investment
Account shall:

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

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

                  (b) All income and gain realized from the investment of funds
deposited in the Collection Account held by or on behalf of the Servicer or the
Trustee, shall be for the benefit of the

                                      -62-

<PAGE>

Servicer and shall be subject to its withdrawal in accordance with Section 3.11.
The Servicer shall deposit in the Collection Account the amount of any loss
incurred in respect of any such Permitted Investment made with funds in such
account immediately upon realization of such loss. All earnings and gain
realized from the investment of funds deposited in the Distribution Account
shall be for the benefit of the Trustee. The Trustee shall remit from its own
funds for deposit into the Distribution Account the amount of any loss incurred
on Permitted Investments in the Distribution Account, if amounts on deposit in
the Distribution Account are invested in Permitted Investments by the Trustee in
the absence of direction from another party.

                  (c) Except as otherwise expressly provided in this Agreement,
if any default occurs in the making of a payment due under any Permitted
Investment, or if a default occurs in any other performance required under any
Permitted Investment, the Trustee may and, subject to Section 8.01 and Section
8.02(v), shall, at the written direction of the Servicer, take such action as
may be appropriate to enforce such payment or performance, including the
institution and prosecution of appropriate proceedings.

                  (d) The Trustee or its Affiliates are permitted to receive
additional compensation that could be deemed to be in the Trustee's economic
self-interest for (i) serving as investment adviser, administrator, shareholder
servicing agent, custodian or sub-custodian with respect to certain of the
Permitted Investments, (ii) using Affiliates to effect transactions in certain
Permitted Investments and (iii) effecting transactions in certain Permitted
Investments. Such compensation shall not be considered an amount that is
reimbursable or payable to the Trustee pursuant to Section 3.11 or 3.12 or
otherwise payable in respect of Extraordinary Trust Fund Expenses.

                  SECTION 3.13. [Reserved].

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

                  (a) The terms of each Mortgage Note require the related
Mortgagor to maintain fire, flood and hazard insurance policies. To the extent
such policies are not maintained, the Servicer shall cause to be maintained for
each Mortgaged Property fire and hazard insurance with extended coverage as is
customary in the area where the Mortgaged Property is located in an amount which
is at least equal to the lesser of the current principal balance of such
Mortgage Loan and the amount necessary to fully compensate for any damage or
loss to the improvements which are a part of such property on a replacement cost
basis, in each case in an amount not less than such amount as is necessary to
avoid the application of any coinsurance clause contained in the related hazard
insurance policy. The Servicer shall also cause to be maintained fire and hazard
insurance on each REO Property with extended coverage as is customary in the
area where the Mortgaged Property is located in an amount which is at least
equal to the lesser of (i) the maximum insurable value of the improvements which
are a part of such property and (ii) the outstanding principal balance of the
related Mortgage Loan at the time it became an REO Property. The Servicer will
comply in the performance of this Agreement with all reasonable rules and
requirements of each insurer under any such hazard policies. Any amounts to be
collected by the Servicer under any such policies (other than amounts to be
applied to the restoration or repair of the property subject to the related
Mortgage or amounts to be released to the Mortgagor in accordance with the
procedures that the Servicer would

                                      -63-

<PAGE>

follow in servicing loans held for its own account, subject to the terms and
conditions of the related Mortgage and Mortgage Note) shall be deposited in the
Collection Account, subject to withdrawal pursuant to Section 3.11, if received
in respect of a Mortgage Loan, or in the REO Account, subject to withdrawal
pursuant to Section 3.23, if received in respect of an REO Property. Any cost
incurred by the Servicer in maintaining any such insurance shall not, for the
purpose of calculating distributions to Certificateholders, be added to the
unpaid principal balance of the related Mortgage Loan, notwithstanding that the
terms of such Mortgage Loan so permit. It is understood and agreed that no
earthquake or other additional insurance is to be required of any Mortgagor
other than pursuant to such applicable laws and regulations as shall at any time
be in force and as shall require such additional insurance. If the Mortgaged
Property or REO Property is at any time in an area identified in the Federal
Register by the Federal Emergency Management Agency as having special flood
hazards, the Servicer will cause to be maintained a flood insurance policy in
respect thereof. Such flood insurance shall be in an amount equal to the lesser
of (i) the unpaid principal balance of the related Mortgage Loan and (ii) the
maximum amount of such insurance available for the related Mortgaged Property
under the national flood insurance program (assuming that the area in which such
Mortgaged Property is located is participating in such program).

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

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

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

                                      -64-

<PAGE>

                  The Servicer will, to the extent it has knowledge of any
conveyance or prospective conveyance of any Mortgaged Property by any Mortgagor
(whether by absolute conveyance or by contract of sale, and whether or not the
Mortgagor remains or is to remain liable under the Mortgage Note and/or the
Mortgage), exercise its rights to accelerate the maturity of such Mortgage Loan
under the "due-on-sale" clause, if any, applicable thereto; provided, however,
that the Servicer shall not exercise any such rights if prohibited by law from
doing so. If the Servicer reasonably believes it is unable under applicable law
to enforce such "due-on-sale" clause, or if any of the other conditions set
forth in the proviso to the preceding sentence apply, the Servicer will enter
into an assumption and modification agreement from or with the person to whom
such property has been conveyed or is proposed to be conveyed, pursuant to which
such person becomes liable under the Mortgage Note and, to the extent permitted
by applicable state law, the Mortgagor remains liable thereon. The Servicer is
also authorized to enter into a substitution of liability agreement with such
person, pursuant to which the original Mortgagor is released from liability and
such person is substituted as the Mortgagor and becomes liable under the
Mortgage Note, provided that no such substitution shall be effective unless such
person satisfies the then current underwriting criteria of the Servicer for
mortgage loans similar to the Mortgage Loans. In connection with any assumption
or substitution, the Servicer shall apply such underwriting standards and follow
such practices and procedures as shall be normal and usual in its general
mortgage servicing activities and as it applies to other mortgage loans owned
solely by it. The Servicer shall not take or enter into any assumption and
modification agreement, however, unless (to the extent practicable in the
circumstances) it shall have received confirmation, in writing, of the continued
effectiveness of any applicable hazard insurance policy. Any fee collected by
the Servicer in respect of an assumption or substitution of liability agreement
will be retained by the Servicer as additional servicing compensation. In
connection with any such assumption, no material term of the Mortgage Note
(including but not limited to the related Mortgage Rate and the amount of the
Monthly Payment) may be amended or modified, except as otherwise required
pursuant to the terms thereof. The Servicer shall notify the Trustee that any
such substitution or assumption agreement has been completed by forwarding to
the Trustee the executed original of such substitution or assumption agreement,
which document shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof.

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

                  SECTION 3.16. Realization Upon Defaulted Mortgage Loans.

                  (a) The Servicer shall use its best efforts, consistent with
Accepted Servicing Practices, to foreclose upon or otherwise comparably convert
the ownership of properties securing such of the Mortgage Loans as come into and
continue in default and as to which no satisfactory arrangements can be made for
collection of delinquent payments pursuant to Section 3.07. The Servicer shall
be responsible for all costs and expenses incurred by it in any such
proceedings;

                                      -65-

<PAGE>

provided, however, that such costs and expenses will be recoverable as Servicing
Advances by the Servicer as contemplated in Sections 3.11 and 3.23. The
foregoing is subject to the provision that, in any case in which a Mortgaged
Property shall have suffered damage from an Uninsured Cause, the Servicer shall
not be required to expend its own funds toward the restoration of such property
unless it shall determine in its discretion that such restoration will increase
the proceeds of liquidation of the related Mortgage Loan after reimbursement to
itself for such expenses.

                  (b) Notwithstanding the foregoing provisions of this Section
3.16 or any other provision of this Agreement, with respect to any Mortgage Loan
as to which the Servicer has received actual notice of, or has actual knowledge
of, the presence of any toxic or hazardous substance on the related Mortgaged
Property, the Servicer shall not, on behalf of the Trust Fund, either (i) obtain
title to such Mortgaged Property as a result of or in lieu of foreclosure or
otherwise, or (ii) otherwise acquire possession of, or take any other action
with respect to, such Mortgaged Property, if, as a result of any such action,
the Trust Fund, the Trustee or the Certificateholders would be considered to
hold title to, to be a "mortgagee-in-possession" of, or to be an "owner" or
"operator" of such Mortgaged Property within the meaning of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended from
time to time, or any comparable law, unless the Servicer has also previously
determined, based on its reasonable judgment and a prudent report prepared by an
Independent Person who regularly conducts environmental audits using customary
industry standards, that:

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

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

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

                  If the Servicer determines, as described above, that it is in
the best economic interest of the Trust Fund to take such actions as are
necessary to bring any such Mortgaged Property into compliance with applicable
environmental laws, or to take such action with respect to the containment,
clean-up or remediation of hazardous substances, hazardous materials, hazardous
wastes, or petroleum-based materials affecting any such Mortgaged Property, then
the Servicer shall take such action as it deems to be in the best economic
interest of the Trust Fund. The cost of any such compliance, containment,
cleanup or remediation shall be advanced by the Servicer, subject to

                                      -66-

<PAGE>

the Servicer's right to be reimbursed therefor from the Collection Account as
provided in Sections 3.11(a)(iii) or 3.11(a)(ix), such right of reimbursement
being prior to the rights of Certificateholders to receive any amount in the
Collection Account received in respect of the affected Mortgage Loan or other
Mortgage Loans.

                  (c) The Servicer shall have the right to purchase from REMIC I
any defaulted Mortgage Loan that is 90 days or more delinquent, which the
Servicer determines in good faith will otherwise become subject to foreclosure
proceedings (evidence of such determination to be delivered in writing to the
Trustee, in form and substance satisfactory to the Servicer and the Trustee
prior to purchase), at a price equal to the Purchase Price. The Purchase Price
for any Mortgage Loan purchased hereunder shall be deposited in the Collection
Account, and the Trustee, upon receipt of written certification from the
Servicer of such deposit, shall release or cause to be released to the Servicer
the related Mortgage File and the Trustee shall execute and deliver such
instruments of transfer or assignment, in each case without recourse, as the
Servicer shall furnish and as shall be necessary to vest in the Servicer title
to any Mortgage Loan released pursuant hereto.

                  (d) Proceeds received in connection with any Final Recovery
Determination, as well as any recovery resulting from a partial collection of
Insurance Proceeds or Liquidation Proceeds, in respect of any Mortgage Loan,
will be applied in the following order of priority: first, to reimburse the
Servicer for any related unreimbursed Servicing Advances and Advances, pursuant
to Section 3.11(a)(ii) or (a)(iii); second, to accrued and unpaid interest on
the Mortgage Loan, to the date of the Final Recovery Determination, or to the
Due Date prior to the Distribution Date on which such amounts are to be
distributed if not in connection with a Final Recovery Determination; and third,
as a recovery of principal of the Mortgage Loan. If the amount of the recovery
so allocated to interest is less than the full amount of accrued and unpaid
interest due on such Mortgage Loan, the amount of such recovery will be
allocated by the Servicer as follows: first, to unpaid Servicing Fees; and
second, to the balance of the interest then due and owing. The portion of the
recovery so allocated to unpaid Servicing Fees shall be reimbursed to the
Servicer pursuant to Section 3.11(a)(iii). The portion of the recovery allocated
to interest (net of unpaid Servicing Fees) and the portion of the recovery
allocated to principal of the Mortgage Loan shall be applied as follows: first,
to reimburse the Servicer for any related unreimbursed Advances in accordance
with Section 3.11(a)(ii) and any other amounts reimbursable to the Servicer
pursuant to Section 3.11, and second, as part of the amounts to be transferred
to the Distribution Account in accordance with Section 3.10(b).

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

                  Upon the payment in full of any Mortgage Loan, or the receipt
by the Servicer of a notification that payment in full shall be escrowed in a
manner customary for such purposes, the Servicer will notify the Trustee by a
certification in the form of Exhibit E (which certification shall include a
statement to the effect that all amounts received or to be received in
connection with such payment which are required to be deposited in the
Collection Account pursuant to Section 3.10 have been or will be so deposited)
of a Servicing Officer and shall request delivery to it of the Mortgage File.
Upon receipt of such certification and request, the Trustee shall promptly
release the related Mortgage File to the Servicer and the Servicer is authorized
to cause the removal from the registration on the MERS(R) System of any such
Mortgage, if applicable, and to execute and deliver,

                                      -67-

<PAGE>

on behalf of the Trustee and the Certificateholders or any of them, any and all
instruments of satisfaction or cancellation or of partial or full release. No
expenses incurred in connection with any instrument of satisfaction or deed of
reconveyance shall be chargeable to the Collection Account or the Distribution
Account.

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

                  Upon written certification of a Servicing Officer, the Trustee
shall execute and deliver to the Servicer, any court pleadings, requests for
trustee's sale or other documents necessary to the foreclosure or trustee's sale
in respect of a Mortgaged Property or to any legal action brought to obtain
judgment against any Mortgagor on the Mortgage Note or Mortgage or to obtain a
deficiency judgment, or to enforce any other remedies or rights provided by the
Mortgage Note or Mortgage or otherwise available at law or in equity. Each such
certification shall include a request that such pleadings or documents be
executed by the Trustee and a statement as to the reason such documents or
pleadings are required and that the execution and delivery thereof by the
Trustee will not invalidate or otherwise affect the lien of the Mortgage, except
for the termination of such a lien upon completion of the foreclosure or
trustee's sale. So long as no Servicing Termination Event shall have occurred
and be continuing, the Servicer shall have the right to execute any and all such
court pleadings, requests and other documents as attorney-in-fact for, and on
behalf of the Trustee.

                  SECTION 3.18. Servicing Compensation.

                  As compensation for the activities of the Servicer, hereunder,
the Servicer shall be entitled to the Servicing Fee with respect to each
Mortgage Loan payable solely from payments of interest in respect of such
Mortgage Loan, subject to Section 3.24. In addition, the Servicer shall be
entitled to recover unpaid Servicing Fees out of Insurance Proceeds or
Liquidation Proceeds to the extent permitted by Section 3.11(a)(iii) and out of
amounts derived from the operation and sale of an REO Property to the extent
permitted by Section 3.23. Except as set forth in Section 6.04 hereof,

                                      -68-

<PAGE>

the right to receive the Servicing Fee may not be transferred in whole or in
part except in connection with the transfer of all of the Servicer's
responsibilities and obligations under this Agreement to the extent permitted
herein.

                  Additional servicing compensation in the form of assumption
fees, late payment charges and other miscellaneous fees (other than Prepayment
Charges) shall be retained by the Servicer only to the extent such fees or
charges are received by the Servicer. The Servicer shall also be entitled
pursuant to Section 3.11(a)(iv) to withdraw from the Collection Account and
pursuant to Section 3.23(b) to withdraw from any REO Account, as additional
servicing compensation, interest or other income earned on deposits therein,
subject to Section 3.12. The Servicer shall be required to pay all expenses
incurred by it in connection with its servicing activities hereunder and shall
not be entitled to reimbursement therefor except as specifically provided
herein.

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

                  Not later than fifteen days after each Distribution Date, the
Servicer shall forward to the Trustee and the Depositor a statement prepared by
the institution at which the Collection Account is maintained setting forth the
status of the Collection Account as of the close of business on such
Distribution Date and showing, for the period covered by such statement, the
aggregate amount of deposits into and withdrawals from the Collection Account of
each category of deposit specified in Section 3.10(a) and each category of
withdrawal specified in Section 3.11. Copies of such statement shall be provided
by the Trustee to any Certificateholder and to any Person identified to the
Trustee as a prospective transferee of a Certificate, upon request at the
expense of the requesting party, provided such statement is delivered by the
Servicer to the Trustee.

                  SECTION 3.20. Statement as to Compliance.

                  Not later than March 15th of each calendar year commencing in
2004, the Servicer will deliver to the Trustee and the Depositor an Officers'
Certificate (upon which the Trustee can conclusively rely in connection with its
obligations under Section 4.06) stating, as to each signatory thereof, that (i)
a review of the activities of the Servicer during the preceding year and of
performance under this Agreement has been made under such officers' supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all of its obligations under this Agreement throughout
such year, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. Copies of any such statement shall be provided by the
Trustee to any Certificateholder and to any Person identified to the Trustee as
a prospective transferee of a Certificate, upon request at the expense of the
requesting party, provided such statement is delivered by the Servicer to the
Trustee.

                  SECTION 3.21. Independent Public Accountants' Servicing
                                Report.

                  Not later than March 15th of each calendar year commencing in
2004, the Servicer, at its expense, shall cause a nationally recognized firm of
independent certified public accountants to furnish to the Servicer a report
stating that (i) it has obtained a letter of representation regarding certain
matters from the management of the Servicer which includes an assertion that the
Servicer

                                      -69-

<PAGE>

has complied with certain minimum residential mortgage loan servicing standards,
identified in the Uniform Single Attestation Program for Mortgage Bankers
established by the Mortgage Bankers Association of America, with respect to the
servicing of residential mortgage loans during the most recently completed
fiscal year and (ii) on the basis of an examination conducted by such firm in
accordance with standards established by the American Institute of Certified
Public Accountants, such representation is fairly stated in all material
respects, subject to such exceptions and other qualifications that may be
appropriate. Immediately upon receipt of such report, the Servicer shall furnish
a copy of such report to the Trustee and each Rating Agency. Copies of such
statement shall be provided by the Trustee to any Certificateholder upon request
at the Servicer's expense, provided that such statement is delivered by the
Servicer to the Trustee.

                  SECTION 3.22. Access to Certain Documentation.

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

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

                  (a) The deed or certificate of sale of any REO Property shall
be taken in the name of the Trustee, or its nominee, on behalf of the Trust Fund
and for the benefit of the Certificateholders. The Servicer, on behalf of REMIC
I, shall either sell any REO Property by the close of the third calendar year
following the calendar year in which REMIC I acquires ownership of such REO
Property for purposes of Section 860(a)(8) of the Code or request from the
Internal Revenue Service, no later than 60 days before the day on which the
three-year grace period would otherwise expire an extension of the three-year
grace period, unless the Servicer had delivered to the Trustee an Opinion of
Counsel, addressed to the Trustee and the Depositor, to the effect that the
holding by REMIC I of such REO Property subsequent to three years after its
acquisition will not result in the imposition on any Trust REMIC created
hereunder of taxes on "prohibited transactions" thereof, as defined in Section
860F of the Code, or cause any Trust REMIC hereunder to fail to qualify as a
REMIC under Federal law at any time that any Certificates are outstanding. The
Servicer shall manage, conserve, protect and operate each REO Property for the
Certificateholders solely for the purpose of its prompt disposition and sale in
a manner which does not cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code or
result in the receipt by any Trust REMIC created hereunder of any "income from
non-permitted assets" within the meaning of Section 860F(a)(2)(B) of the Code,
or any "net income from foreclosure property" which is subject to taxation under
the REMIC Provisions.

                  (b) The Servicer shall segregate and hold all funds collected
and received in connection with the operation of any REO Property separate and
apart from its own funds and

                                      -70-

<PAGE>

general assets and shall establish and maintain with respect to REO Properties
an account held in trust for the Trustee, on behalf of the Trust Fund and for
the benefit of the Certificateholders (the "REO Account"), which shall be an
Eligible Account. The Servicer shall be permitted to allow the Collection
Account to serve as the REO Account, subject to separate ledgers for each REO
Property. The Servicer shall be entitled to retain or withdraw any interest
income paid on funds deposited in the REO Account.

                  (c) The Servicer shall have full power and authority, subject
only to the specific requirements and prohibitions of this Agreement, to do any
and all things in connection with any REO Property as are consistent with the
manner in which the Servicer manages and operates similar property owned by the
Servicer or any of its Affiliates, all on such terms and for such period as the
Servicer deems to be in the best interests of Certificateholders. In connection
therewith, the Servicer shall deposit, or cause to be deposited, on a daily
basis in the REO Account all revenues received by it with respect to an REO
Property and shall withdraw therefrom funds necessary for the proper operation,
management and maintenance of such REO Property including, without limitation:

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

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

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

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

                  Subject to compliance with applicable laws and regulations as
shall at any time be in force, and notwithstanding the foregoing, the Servicer
shall not:

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

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

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

                                      -71-

<PAGE>

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

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

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

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

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

                  (iii) none of the provisions of this Section 3.23(c) relating
         to any such contract or to actions taken through any such Independent
         Contractor shall be deemed to relieve the Servicer of any of its duties
         and obligations to the Trustee on behalf of the Trust Fund and for the
         benefit of the Certificateholders with respect to the operation and
         management of any such REO Property; and

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

                  The Servicer shall be entitled to enter into any agreement
with any Independent Contractor performing services for it related to its duties
and obligations hereunder for indemnification of the Servicer by such
Independent Contractor, and nothing in this Agreement shall be deemed to limit
or modify such indemnification. The Servicer shall be solely liable for all fees
owed by it to any such Independent Contractor, irrespective of whether the
Servicer's compensation pursuant to Section 3.18 is sufficient to pay such fees.

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

                                      -72-

<PAGE>

withdrawals made pursuant to Section 3.23(c) or this Section 3.23(d).

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

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

                  (g) The Servicer shall file information returns (and shall
provide a certification of a Servicing Officer to the Trustee that such filings
have been made) with respect to the receipt of mortgage interest received in a
trade or business, reports of foreclosures and abandonments of any Mortgaged
Property and cancellation of indebtedness income with respect to any Mortgaged
Property as required by Sections 6050H, 6050J and 6050P of the Code,
respectively. Such reports shall be in form and substance sufficient to meet the
reporting requirements imposed by such Sections 6050H, 6050J and 6050P of the
Code.

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

                  The Servicer shall deliver to the Trustee for deposit into the
Distribution Account on or before 5:00 p.m. New York time on the Servicer
Remittance Date from its own funds an amount equal to the lesser of (i) the
aggregate of the Prepayment Interest Shortfalls attributable to prepayments in
full for the related Distribution Date resulting solely from Principal
Prepayments received by the Servicer during the related Prepayment Period and
(ii) 50% of its aggregate Servicing Fee for the most recently ended Prepayment
Period. The Servicer shall not have the right to reimbursement for any amounts
remitted to the Trustee in respect of this Section 3.24. The Servicer shall not
be obligated to pay the amounts set forth in this Section 3.24 with respect to
Relief Act Interest Shortfalls.

                  SECTION 3.25. [Reserved].

                  SECTION 3.26. Obligations of the Servicer in Respect of
                                Mortgage Rates and Monthly Payments.

                  In the event that a shortfall in any collection on or
liability with respect to any Mortgage Loan results from or is attributable to
adjustments to Mortgage Rates, Monthly Payments or Stated Principal Balances
that were made by the Servicer in a manner not consistent with the terms of the
related Mortgage Note and this Agreement, the Servicer, upon discovery or
receipt of notice thereof, immediately shall deliver to the Trustee for deposit
in the Distribution Account from

                                      -73-

<PAGE>

its own funds the amount of any such shortfall and shall indemnify and hold
harmless the Trust Fund, the Trustee, the Depositor and any successor Servicer
in respect of any such liability. Such indemnities shall survive the termination
or discharge of this Agreement.

                  SECTION 3.27. Net WAC Rate Carryover Reserve Account.

                  (a) No later than the Closing Date, the Trustee shall
establish and maintain with itself, as agent for the Trustee, a separate,
segregated trust account titled, "Net WAC Rate Carryover Reserve Account,
Deutsche Bank National Trust Company, as Trustee, in trust for the registered
holders of Salomon Brothers Mortgage Securities VII, Inc., Citigroup Home Equity
Loan Trust, Series 2003-HE1, Asset Backed Pass-Through Certificates." On the
Closing Date, the Depositor will deposit, or cause to be deposited, into the Net
WAC Rate Carryover Reserve Account, $1,000.

                  (b) On each Distribution Date as to which there is a Net WAC
Rate Carryover Amount payable to the Class A Certificates or the Mezzanine
Certificates, the Trustee has been directed by the Class CE Certificateholders
to, and therefore will, deposit into the Net WAC Rate Carryover Reserve Account
the amounts described in Section 4.01(a)(4)(xiii), rather than distributing such
amounts to the Class CE Certificateholders. On each such Distribution Date, the
Trustee shall hold all such amounts for the benefit of the Holders of the Class
A Certificates and the Mezzanine Certificates, and will distribute such amounts
to the Holders of the Class A Certificates and the Mezzanine Certificates in the
amounts and priorities set forth in Section 4.01(a). If no Net WAC Rate
Carryover Amounts are payable on a Distribution Date, the Trustee shall deposit
into the Net WAC Rate Carryover Reserve Account on behalf of the Class CE
Certificateholders, from amounts otherwise distributable to the Class CE
Certificateholders, an amount such that when added to other amounts already on
deposit in the Net WAC Rate Carryover Reserve Account, the aggregate amount on
deposit therein is equal to $1,000.

                  (c) For federal and state income tax purposes, the Class CE
Certificateholders will be deemed to be the owners of the Net WAC Rate Carryover
Reserve Account and all amounts deposited into the Net WAC Rate Carryover
Reserve Account (other than the initial deposit therein of $1,000) shall be
treated as amounts distributed by REMIC II to the Holders of the Class CE
Certificates. Upon the termination of the Trust Fund, or the payment in full of
the Class A Certificates and the Mezzanine Certificates, all amounts remaining
on deposit in the Net WAC Rate Carryover Reserve Account will be released by the
Trust Fund and distributed to the Class CE Certificateholders or their
designees. The Net WAC Rate Carryover Reserve Account will be part of the Trust
Fund but not part of any Trust REMIC and any payments to the Holders of the
Class A Certificates or the Mezzanine Certificates of Net WAC Rate Carryover
Amounts will not be payments with respect to a "regular interest" in a REMIC
within the meaning of Code Section 860(G)(a)(1).

                  (d) By accepting a Class CE Certificate, each Class CE
Certificateholder hereby agrees to direct the Trustee, and the Trustee hereby is
directed to deposit into the Net WAC Rate Carryover Reserve Account the amounts
described above on each Distribution Date as to which there is any Net WAC Rate
Carryover Amount rather than distributing such amounts to the Class CE
Certificateholders. By accepting a Class CE Certificate, each Class CE
Certificateholder further agrees that such direction is given for good and
valuable consideration, the receipt and sufficiency

                                      -74-

<PAGE>

of which is acknowledged by such acceptance.

                  (e) At the written direction of the Holders of a majority in
Percentage Interest in the Class CE Certificates, the Trustee shall direct any
depository institution maintaining the Net WAC Rate Carryover Reserve Account to
invest the funds in such account in one or more Permitted Investments bearing
interest or sold at a discount, and maturing, unless payable on demand, (i) no
later than the Business Day immediately preceding the date on which such funds
are required to be withdrawn from such account pursuant to this Agreement, if a
Person other than the Trustee or an Affiliate manages or advises such
investment, and (ii) no later than the date on which such funds are required to
be withdrawn from such account pursuant to this Agreement, if the Trustee or an
Affiliate manages or advises such investment. If no investment direction of the
Holders of a majority in Percentage Interest in the Class CE Certificates with
respect to the Net WAC Rate Carryover Reserve Account is received by the
Trustee, the Trustee shall invest the funds in Deutsche Cash Management Fund 541
so long as it is a Permitted Investment or as otherwise directed in writing by
the Depositor on behalf of the Holders of a majority Percentage Interest in the
Class CE Certificates. All income and gain earned upon such investment shall be
deposited into the Net WAC Rate Carryover Reserve Account.

                  (f) For federal tax return and information reporting, the
right of the Class A Certificateholders and the Mezzanine Certificateholders to
receive payments from the Net WAC Rate Carryover Reserve Account in respect of
any Net WAC Rate Carryover Amount shall be assigned a value of zero.

                  SECTION 3.28. Advance Facility.

                  (a) The Servicer is hereby authorized to enter into a
financing or other facility (any such arrangement, an "Advance Facility"), the
documentation for which complies with Section 3.28(e) below, under which (1) the
Servicer assigns or pledges its rights under this Agreement to be reimbursed for
any or all Advances and/or Servicing Advances to (i) a Person, which may be a
special-purpose bankruptcy-remote entity (an "SPV"), (ii) a Person, which may
simultaneously assign or pledge such rights to an SPV or (iii) a lender (a
"Lender"), which, in the case of any Person or SPV of the type described in
either of the preceding clauses (i) or (ii), may directly or through other
assignees and/or pledgees, assign or pledge such rights to a Person, which may
include a trustee acting on behalf of holders of debt instruments (any such
Person or any such Lender, an "Advance Financing Person"), and/or (2) an Advance
Financing Person agrees to fund all the Advances and/or Servicing Advances
required to be made by the Servicer pursuant to this Agreement. No consent of
the Trustee, Certificateholders or any other party shall be required before the
Servicer may enter into an Advance Facility nor shall the Trustee or the
Certificateholders be a third party beneficiary of any obligation of an Advance
Financing Person to the Servicer. Notwithstanding the existence of any Advance
Facility under which an Advance Financing Person agrees to fund Advances and/or
Servicing Advances, (A) the Servicer (i) shall remain obligated pursuant to this
Agreement to make Advances and/or Servicing Advances pursuant to and as required
by this Agreement and (ii) shall not be relieved of such obligations by virtue
of such Advance Facility and (B) neither the Advance Financing Person nor any
Servicer's Assignee (as hereinafter defined) shall have any right to proceed
against or otherwise contact any Mortgagor for the purpose of collecting any
payment that may be due with respect to any related Mortgage Loan or enforcing
any covenant of such Mortgagor under

                                      -75-

<PAGE>

the related Mortgage Loan documents.

                  (b) If the Servicer enters into an Advance Facility, the
Servicer and the related Advance Financing Person shall deliver to the Trustee
at the address set forth in Section 11.05 hereof a written notice (an "Advance
Facility Notice"), stating (a) the identity of the Advance Financing Person and
(b) the identity of the Person (the "Servicer's Assignee") that will, subject to
Section 3.28(c) hereof, have the right to receive amounts available from the
Collection Account pursuant to Section 3.11(a) hereof to reimburse previously
unreimbursed Advances and/or Servicing Advances ("Advance Reimbursement
Amounts"). Advance Reimbursement Amounts (i) shall consist solely of amounts in
respect of Advances and/or Servicing Advances for which the Servicer would be
permitted to reimburse itself in accordance with Section 3.11(a) hereof,
assuming the Servicer had made the related Advance(s) and/or Servicing
Advance(s) and (ii) shall not consist of amounts payable to a successor Servicer
in accordance with Section 3.11(a) hereof to the extent permitted under Section
3.28(e) below.

                  (c) Notwithstanding the existence of an Advance Facility, the
Servicer, on behalf of the Advance Financing Person, shall be entitled to
receive reimbursements of Advances and/or Servicing Advances in accordance with
Section 3.11(a) hereof, which entitlement may be terminated by the Advance
Financing Person pursuant to a written notice to the Trustee in the manner set
forth in Section 11.05 hereof. Upon receipt of such written notice, the Servicer
shall no longer be entitled to receive reimbursement for any Advance
Reimbursement Amounts and the Servicer's Assignee shall immediately have the
right to receive from the Collection Account all Advance Reimbursement Amounts.
Notwithstanding the foregoing, an Advance Financing Person shall only be
entitled to reimbursement of Advance Reimbursement Amounts hereunder pursuant to
Section 3.11(a) of this Agreement and shall not otherwise be entitled to receive
amounts designated for distribution to Certificateholders. None of the Trustee
or the Certificateholders shall have any right to, or otherwise be entitled to,
receive any amounts which constitute Advance Reimbursement Amounts. An Advance
Facility may be terminated by the joint written direction of the Servicer and
the related Advance Financing Person. Written notice of such termination shall
be delivered to the Trustee in the manner set forth in Section 11.05 hereof.
None of the Depositor or the Trustee shall, as a result of the existence of any
Advance Facility, have any additional duty or liability with respect to the
calculation or payment of any Advance Reimbursement Amount, nor, as a result of
the existence of any Advance Facility, shall the Depositor or the Trustee have
any additional responsibility to track or monitor the administration of the
Advance Facility or the payment of Advance Reimbursement Amounts to the
Servicer's Assignee. The Servicer shall indemnify the Depositor, the Trustee,
any successor Servicer and the Trust Fund resulting from any claim by the
related Advance Financing Person. The Servicer shall maintain and provide to any
successor Servicer and, upon request, the Trustee a detailed accounting on a
loan-by-loan basis as to amounts advanced by, pledged or assigned to, and
reimbursed to any Advance Financing Person. The successor Servicer shall be
entitled to rely on any such information provided by the predecessor Servicer,
and the successor Servicer shall not be liable for any errors in such
information.

                  (d) [Reserved].

                  (e) As between a predecessor Servicer and its Advance
Financing Person, on the one hand, and a successor Servicer and its Advance
Financing Person, if any, on the other hand,

                                      -76-

<PAGE>

Advance Reimbursement Amounts on a loan-by-loan basis with respect to each
Mortgage Loan as to which an Advance and/or Servicing Advance shall have been
made and be outstanding shall be allocated on a "first-in, first out" basis. In
the event the Servicer's Assignee shall have received some or all of an Advance
Reimbursement Amount related to Advances and/or Servicing Advances that were
made by a Person other than such predecessor Servicer or its related Advance
Financing Person in error, then such Servicer's Assignee shall be required to
remit any portion of such Advance Reimbursement Amount to each Person entitled
to such portion of such Advance Reimbursement Amount. Without limiting the
generality of the foregoing, the Servicer shall remain entitled to be reimbursed
by the Advance Financing Person for all Advances and/or Servicing Advances
funded by the Servicer to the extent the related Advance Reimbursement Amounts
have not been assigned or pledged to such Advance Financing Person or Servicer's
Assignee.

                  (f) For purposes of any Officer's Certificate of the Servicer
made pursuant to Section 4.03(d), any Nonrecoverable Advance or Nonrecoverable
Servicing Advance referred to therein may have been made by such Servicer or any
predecessor Servicer. In making its determination that any Advance or Servicing
Advance theretofore made has become a Nonrecoverable Advance or Nonrecoverable
Servicing Advance, as applicable, the Servicer shall apply the same criteria in
making such determination regardless of whether such Advance or Servicing
Advance shall have been made by the Servicer or any predecessor Servicer.

                  (g) Any amendment to this Section 3.28 or to any other
provision of this Agreement that may be necessary or appropriate to effect the
terms of an Advance Facility as described generally in this Section 3.28, may be
entered into by the Trustee, the Depositor and the Servicer without the consent
of any Certificateholder, provided such amendment complies with Section 11.01
hereof. All reasonable costs and expenses (including attorneys' fees) of each
party hereto of any such amendment shall be borne solely by the Servicer without
reimbursement from the Trust Fund. The parties hereto hereby acknowledge and
agree that: (a) the Advances and/or Servicing Advances financed by and/or
pledged to an Advance Financing Person under any Advance Facility are
obligations owed to the Servicer payable only from the cash flows and proceeds
received under this Agreement for reimbursement of Advances and/or Servicing
Advances only to the extent provided herein, and the Trustee and the Trust are
not, as a result of the existence of any Advance Facility, obligated or liable
to repay any Advances and/or Servicing Advances financed by the Advance
Financing Person; (b) the Servicer will be responsible for remitting to the
Advance Financing Person the applicable amounts collected by it as reimbursement
for Advances and/or Servicing Advances funded by the Advance Financing Person,
subject to the provisions of this Agreement; and (c) the Trustee shall not have
any responsibility to track or monitor the administration of the financing
arrangement between the Servicer and any Advance Financing Person.

                                      -77-

<PAGE>

                                   ARTICLE IV

                         PAYMENTS TO CERTIFICATEHOLDERS

                  SECTION 4.01. Distributions.

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

                  (i) first, to Holders of REMIC I Regular Interest I-LTAA,
         REMIC I Regular Interest I-LTA, REMIC I Regular Interest I-LTM1, REMIC
         I Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I
         Regular Interest I-LTM4, REMIC I Regular Interest I-LTM5 and REMIC I
         Regular Interest I-LTZZ, in an amount equal to (A) the Uncertificated
         Interest for such Distribution Date, plus (B) any amounts in respect
         thereof remaining unpaid from previous Distribution Dates. Amounts
         payable as Uncertificated Interest in respect of REMIC I Regular
         Interest I-LTZZ shall be reduced when the sum of the REMIC I
         Overcollateralized Amount is less than the REMIC I Required
         Overcollateralized Amount, by the lesser of (x) the amount of such
         difference and (y) the Maximum I-LTZZ Uncertificated Interest Deferral
         Amount and such amounts will be payable to the Holders of REMIC I
         Regular Interest I-LTA, REMIC I Regular Interest I-LTM1, REMIC I
         Regular Interest I-LTM2, REMIC I Regular Interest I-LTM3, REMIC I
         Regular Interest I-LTM4 and REMIC I Regular Interest I-LTM5 in the same
         proportion as the Overcollateralization Increase Amount is allocated to
         the Corresponding Certificates;

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

                           (a) to the Holders of REMIC I Regular Interest
                  I-LTAA, 98.00% of such remainder (less the amount payable in
                  clause (d) below), until the Uncertificated Balance of such
                  REMIC I Regular Interest is reduced to zero;

                           (b) to the Holders of REMIC I Regular Interest I-LTA,
                  REMIC I Regular Interest I-LTM1, REMIC I Regular Interest
                  I-LTM2, REMIC I Regular Interest I- LTM3, REMIC I Regular
                  Interest I-LTM4 and REMIC I Regular Interest I-LTM5, 1.00% of
                  such remainder (less the amount payable in clause (d) below),
                  in the same proportion as principal payments are allocated to
                  the Corresponding Certificates, until the Uncertificated
                  Balances of such REMIC I Regular Interests are reduced to
                  zero;

                           (c) to the Holders of REMIC I Regular Interest
                  I-LTZZ, 1.00% of such remainder (less the amount payable in
                  clause (d) below), until the Uncertificated Balance of such
                  REMIC I Regular Interest is reduced to zero; then

                                      -78-

<PAGE>

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

                           (e) any remaining amount to the Holders of the Class
                  R Certificates (as Holder of the Class R-I Interest);

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

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

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

                  (ii) to the Holders of the Class M-1 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class M-1
         Certificates;

                  (iii) to the Holders of the Class M-2 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class M-2
         Certificates;

                  (iv) to the Holders of the Class M-3 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class M-3
         Certificates;

                  (v) to the Holders of the Class M-4 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class M-4
         Certificates; and

                  (vi) to the Holders of the Class M-5 Certificates, an amount
         equal to the Interest Distribution Amount allocable to the Class M-5
         Certificates.

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

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

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

                  (ii) to the Holders of the Class M-1 Certificates, until the
         Certificate Principal

                                      -79-

<PAGE>

         Balance of such Class has been reduced to zero;

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

                  (iv) to the Holders of the Class M-3 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;

                  (v) to the Holders of the Class M-4 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;
         and

                  (vi) to the Holders of the Class M-5 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero.

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

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

                  (ii) the Class M-1 Principal Distribution Amount shall be
         distributed to the Holders of the Class M-1 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;

                  (iii) the Class M-2 Principal Distribution Amount shall be
         distributed to the Holders of the Class M-2 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;

                  (iv) the Class M-3 Principal Distribution Amount shall be
         distributed to the Holders of the Class M-3 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;

                  (v) the Class M-4 Principal Distribution Amount shall be
         distributed to the Holders of the Class M-4 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero;
         and

                  (vi) the Class M-5 Principal Distribution Amount shall be
         distributed to the Holders of the Class M-5 Certificates, until the
         Certificate Principal Balance of such Class has been reduced to zero.

                  (4) On each Distribution Date, the Net Monthly Excess Cashflow
shall be distributed by the Trustee as follows:

                  (i) to the Holders of the Class or Classes of Certificates
         then entitled to receive

                                      -80-

<PAGE>

         distributions in respect of principal, as part of the Principal
         Distribution Amount in an amount equal to the Overcollateralization
         Increase Amount for the Certificates, applied to reduce the Certificate
         Principal Balance of such Certificates until the aggregate Certificate
         Principal Balance of such Certificates is reduced to zero;

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

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

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

                  (v) to the Holders of the Class M-4 Certificates, in an amount
         equal to the Interest Carry Forward Amount allocable to such Class of
         Certificates;

                  (vi) to the Holders of the Class M-5 Certificates, in an
         amount equal to the Interest Carry Forward Amount allocable to such
         Class of Certificates;

                  (vii) to the Holders of the Class A Certificates, in an amount
         equal to the aggregate of any Prepayment Interest Shortfalls and any
         Relief Act Interest Shortfall on the Mortgage Loans allocated to such
         Certificates;

                  (viii) to the Holders of the Class M-1 Certificates, in an
         amount equal to the aggregate of any Prepayment Interest Shortfalls and
         any Relief Act Interest Shortfall on the Mortgage Loans allocated to
         such Certificates;

                  (ix) to the Holders of the Class M-2 Certificates, in an
         amount equal to the aggregate of any Prepayment Interest Shortfalls and
         any Relief Act Interest Shortfall on the Mortgage Loans allocated to
         such Certificates;

                  (x) to the Holders of the Class M-3 Certificates, in an amount
         equal to the aggregate of any Prepayment Interest Shortfalls and any
         Relief Act Interest Shortfall on the Mortgage Loans allocated to such
         Certificates;

                  (xi) to the Holders of the Class M-4 Certificates, in an
         amount equal to the aggregate of any Prepayment Interest Shortfalls and
         any Relief Act Interest Shortfall on the Mortgage Loans allocated to
         such Certificates;

                  (xii) to the Holders of the Class M-5 Certificates, in an
         amount equal to the aggregate of any Prepayment Interest Shortfalls and
         any Relief Act Interest Shortfall on the Mortgage Loans allocated to
         such Certificates;

                  (xiii) to the Net WAC Rate Carryover Reserve Account, the
         amount required by Section 3.27(b);

                                      -81-

<PAGE>

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

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

                  On each Distribution Date, after making the distributions of
the Available Distribution Amount as set forth above, the Trustee will FIRST,
withdraw from the Net WAC Rate Carryover Reserve Account all income from the
investment of funds in the Net WAC Rate Carryover Reserve Account and distribute
such amount to the Class CE Certificates, and SECOND, withdraw from the Net WAC
Rate Carryover Reserve Account, to the extent of amounts remaining on deposit
therein, the amount of any Net WAC Rate Carryover Amount with respect to the
Class A Certificates and the Mezzanine Certificates for such Distribution Date
and distribute such amount first, to the Class A Certificates; second, to the
Class M-1 Certificates, third, to the Class M-2 Certificates, fourth, to the
Class M-3 Certificates, fifth, to the Class M-4 Certificates and sixth, to the
Class M-5 Certificates, in each case to the extent such Net WAC Carryover Amount
is allocable to each such Class.

                  With respect to any distributions to be made on the Class M-3
Certificates, the Class M-4 Certificates, the Class M-5 Certificates, the Class
CE Certificates or the Class P Certificates pursuant to Section 4.01(a)(2), (3)
or (4) such distributions will be made first, on the Class M-3 Interest, the
Class M-4 Interest, the Class M-5 Interest, the Class CE Interest or the Class P
Interest, as applicable, and then, on the related Class of Certificates.

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

                  (c) All distributions made with respect to each Class of
Certificates on each Distribution Date shall be allocated PRO RATA among the
outstanding Certificates in such Class based on their respective Percentage
Interests. Payments in respect of each Class of Certificates on each
Distribution Date shall be made to the Holders of the respective Class of record
on the related Record Date (except as otherwise provided in Section 4.01(e) or
Section 9.01 respecting the final distribution on such Class), based on the
aggregate Percentage Interest represented by their respective Certificates, and
shall be made by wire transfer of immediately available funds to the account of
any such Holder at a bank or other entity having appropriate facilities
therefor, if such Holder shall have so notified the Trustee in writing at least
five Business Days prior to the Record Date immediately prior to such
Distribution Date, or otherwise by check mailed by first class mail

                                      -82-

<PAGE>

to the address of such Holder appearing in the Certificate Register. The final
distribution on each Certificate shall be made in like manner, but only upon
presentment and surrender of such Certificate at the office of the Trustee
maintained for such purpose pursuant to Section 8.12 or such other location
specified in the notice to Certificateholders of such final distribution.

                  Each distribution with respect to a Book-Entry Certificate
shall be paid to the Depository, as Holder thereof, and the Depository shall be
responsible for crediting the amount of such distribution to the accounts of its
Depository Participants in accordance with its normal procedures. Each
Depository Participant shall be responsible for disbursing such distribution to
the Certificate Owners that it represents and to each indirect participating
brokerage firm (a "brokerage firm" or "indirect participating firm") for which
it acts as agent. Each brokerage firm shall be responsible for disbursing funds
to the Certificate Owners that it represents. None of the Trustee, the Depositor
or the Servicer shall have any responsibility therefor except as otherwise
provided by this Agreement or applicable law.

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

                  (e) Except as otherwise provided in Section 9.01, whenever the
Trustee expects that the final distribution with respect to any Class of
Certificates will be made on the next Distribution Date, the Trustee shall, no
later than three (3) days before the related Distribution Date (to the extent
that an accurate Remittance Report is received in a timely manner by the
Trustee), mail to each Holder on such date of such Class of Certificates a
notice to the effect that:

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

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

                  Any funds not distributed to any Holder or Holders of
Certificates of such Class on such Distribution Date because of the failure of
such Holder or Holders to tender their Certificates shall, on such date, be set
aside and held in trust by the Trustee and credited to the account of the
appropriate non-tendering Holder or Holders. If any Certificates as to which
notice has been given pursuant to this Section 4.01(e) shall not have been
surrendered for cancellation within six months after the time specified in such
notice, the Trustee shall mail a second notice to the remaining non- tendering
Certificateholders to surrender their Certificates for cancellation in order to
receive the final distribution with respect thereto. If within one year after
the second notice all such Certificates shall not have been surrendered for
cancellation, the Trustee shall, directly or through an agent, mail a final
notice to the remaining non-tendering Certificateholders concerning surrender of
their Certificates but shall continue to hold any remaining funds for the
benefit of non-tendering Certificateholders. The costs and expenses of
maintaining the funds in trust and of contacting such

                                      -83-

<PAGE>

Certificateholders shall be paid out of the assets held in trust for such
Certificateholders. If within one year after the final notice any such
Certificates shall not have been surrendered for cancellation, the Trustee shall
pay to Citigroup Global Markets Inc., in accordance with its wiring
instructions, all such amounts, and all rights of non-tendering
Certificateholders in or to such amounts shall thereupon cease. No interest
shall accrue or be payable to any Certificateholder on any amount held in trust
by the Trustee as a result of such Certificateholder's failure to surrender its
Certificate(s) for final payment thereof in accordance with this Section
4.01(e). Any such amounts held in trust by the Trustee shall be held in an
Eligible Account and shall be held uninvested.

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

                  SECTION 4.02. Statements to Certificateholders.

                  On each Distribution Date, the Trustee shall prepare and make
available via its website to each Holder of the Regular Certificates, a
statement as to the distributions made on such Distribution Date setting forth:

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

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

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

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

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

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

                                      -84-

<PAGE>

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

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

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

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

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

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

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

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

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

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

                                      -85-

<PAGE>

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

                  (xviii) the Overcollateralization Target Amount and the Credit
         Enhancement Percentage for such Distribution Date;

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

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

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

                  (xxii) the Net WAC Rate Carryover Amount for the Class A
         Certificates and the Mezzanine Certificates, if any, for such
         Distribution Date and the amount remaining unpaid after reimbursements
         therefor on such Distribution Date; and

                  (xxiii) whether a Trigger Event is in effect.

                  The Trustee shall make such statement (and, at its option, any
additional files containing the same information in an alternative format)
available each month to Certificateholders, the Servicer and the Rating Agencies
via the Trustee's internet website. The Trustee's internet website shall
initially be located at https://www.corporatetrust.db.com/invr and assistance in
using the website can be obtained by calling the Trustee's customer service desk
at 1-800-735-7777. Parties that are unable to use the above distribution options
are entitled to have a paper copy mailed to them via first class mail by calling
the customer service desk and indicating such. The Trustee shall have the right
to change the way such statements are distributed in order to make such
distribution more convenient and/or more accessible to the above parties and the
Trustee shall provide timely and adequate notification to all above parties
regarding any such changes.

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

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

                  Within a reasonable period of time after the end of each
calendar year, the Trustee shall furnish to each Person who at any time during
the calendar year was a Holder of a Residual

                                      -86-

<PAGE>

Certificate a statement setting forth the amount, if any, actually distributed
with respect to the Residual Certificates, as appropriate, aggregated for such
calendar year or applicable portion thereof during which such Person was a
Certificateholder.

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

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

                  SECTION 4.03. Remittance Reports; Advances.

                  (a) On the Business Day following each Determination Date, the
Servicer shall deliver to the Trustee by telecopy (or by such other means as the
Servicer and the Trustee may agree from time to time) a Remittance Report with
respect to the related Distribution Date. On the same date, the Servicer shall
forward to the Trustee by overnight mail a computer readable magnetic tape or
electronically transmit (in a format acceptable to the Trustee) on the day
thereafter, a data file containing the information set forth in such Remittance
Report with respect to the related Distribution Date. Such Remittance Report
will include (i) the amount of Advances to be made by the Servicer in respect of
the related Distribution Date, the aggregate amount of Advances outstanding
after giving effect to such Advances, and the aggregate amount of Nonrecoverable
Advances in respect of such Distribution Date and (ii) such other information
with respect to the Mortgage Loans as the Trustee may reasonably require to
perform the calculations necessary to make the distributions contemplated by
Section 4.01 and to prepare the statements to Certificateholders contemplated by
Section 4.02. The Trustee shall not be responsible to recompute, recalculate or
verify any information provided to it by the Servicer.

                  (b) The amount of Advances to be made by the Servicer for any
Distribution Date shall equal, subject to Section 4.03(d), (i) the aggregate
amount of Monthly Payments (net of the related Servicing Fee), due during the
related Collection Period in respect of the Mortgage Loans, which Monthly
Payments were delinquent on a contractual basis as of the close of business on
the related Determination Date and (ii) with respect to each REO Property, which
REO Property was acquired during or prior to the related Prepayment Period and
as to which such REO Property an REO Disposition did not occur during the
related Prepayment Period, an amount equal to the excess, if any, of only the
interest portion of the Monthly Payments (net of the related Servicing Fee) that
would have been due on the related Due Date in respect of the related Mortgage
Loans, over the net income from such REO Property deposited in the Collection
Account pursuant to Section 3.23 for distribution on such Distribution Date. For
purposes of the preceding sentence, the Monthly Payment on each Balloon Mortgage
Loan with a delinquent Balloon Payment is equal to the assumed monthly payment
that would have been due on the related Due Date based on the original principal

                                      -87-

<PAGE>

amortization schedule for such Balloon Mortgage Loan.

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

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

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

                  SECTION 4.04. Allocation of Realized Losses.

                  (a) Prior to each Determination Date, the Servicer shall
determine as to each Mortgage Loan and REO Property: (i) the total amount of
Realized Losses, if any, incurred in connection with any Final Recovery
Determinations made during the related Prepayment Period; (ii) whether and the
extent to which such Realized Losses constituted Bankruptcy Losses; and (iii)
the respective portions of such Realized Losses allocable to interest and
allocable to principal. Prior to each Determination Date, the Servicer shall
also determine as to each Mortgage Loan: (i) the total amount of Realized
Losses, if any, incurred in connection with any Deficient Valuations made during

                                      -88-

<PAGE>

the related Prepayment Period; and (ii) the total amount of Realized Losses, if
any, incurred in connection with Debt Service Reductions in respect of Monthly
Payments due during the related Due Period. The information described in the two
preceding sentences that is to be supplied by the Servicer shall be evidenced by
an Officers' Certificate delivered to the Trustee by the Servicer prior to the
Determination Date immediately following the end of (i) in the case of
Bankruptcy Losses allocable to interest, the Due Period during which any such
Realized Loss was incurred, and (ii) in the case of all other Realized Losses,
the Prepayment Period during which any such Realized Loss was incurred.

                  (b) All Realized Losses on the Mortgage Loans shall be
allocated by the Trustee on each Distribution Date as follows: first, to the
Accrued Certificate Interest for the Class CE Certificates for the related
Interest Accrual Period; second, to the Class CE Interest, until the Certificate
Principal Balance thereof has been reduced to zero; third, to the Class M-5
Interest until the Certificate Principal Balance thereof has been reduced to
zero; fourth, to the Class M-4 Interest, until the Certificate Principal Balance
thereof has been reduced to zero; fifth, to the Class M-3 Interest, until the
Certificate Principal Balance thereof has been reduced to zero; sixth, to the
Class M-2 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero and seventh, to the Class M-1 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero.

                  All Realized Losses to be allocated to the Certificate
Principal Balances of all Classes on any Distribution Date shall be so allocated
after the actual distributions to be made on such date as provided above. All
references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class
immediately prior to the relevant Distribution Date, before reduction thereof by
any Realized Losses, in each case to be allocated to such Class of Certificates,
on such Distribution Date.

                  Any allocation of Realized Losses to a Mezzanine Certificate
on any Distribution Date shall be made by reducing the Certificate Principal
Balance thereof by the amount so allocated and any allocation of Realized Losses
to a Class CE Interest shall be made by reducing the amount otherwise payable in
respect thereof pursuant to Section 4.01(a)(4)(xiv). No allocations of any
Realized Losses shall be made to the Certificate Principal Balances of the Class
A Certificates or the Class P Interest.

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

                  (c) All Realized Losses on the Mortgage Loans shall be
allocated by the Trustee on each Distribution Date to the following REMIC I
Regular Interests in the specified percentages, as follows: first, to
Uncertificated Interest payable to the REMIC I Regular Interest I-LTAA and REMIC
I Regular Interest I-LTZZ up to an aggregate amount equal to the REMIC I
Interest Loss

                                      -89-

<PAGE>

Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Balances of the REMIC I Regular Interest I-LTAA and REMIC I Regular Interest
I-LTZZ up to an aggregate amount equal to the REMIC I Principal Loss Allocation
Amount, 98% and 2%, respectively; third, to the Uncertificated Balances of REMIC
I Regular Interest I-LTAA, REMIC I Regular Interest I-LTM5 and REMIC I Regular
Interest I-LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated Balance
of REMIC I Regular Interest I-LTM5 has been reduced to zero; fourth, to the
Uncertificated Balances of REMIC I Regular Interest I-LTAA, REMIC I Regular
Interest I-LTM4 and REMIC I Regular Interest I-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC I Regular Interest
I-LTM4 has been reduced to zero; fifth to the Uncertificated Balances of REMIC I
Regular Interest I-LTAA, REMIC I Regular Interest I-LTM3 and REMIC I Regular
Interest I- LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated Balance
of REMIC I Regular Interest I-LTM3 has been reduced to zero; sixth to the
Uncertificated Balances of REMIC I Regular Interest I-LTAA, REMIC I Regular
Interest I-LTM2 and REMIC I Regular Interest I-LTZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Balance of REMIC I Regular Interest
I-LTM2 has been reduced to zero; and seventh to the Uncertificated Balances of
REMIC I Regular Interest I-LTAA, REMIC I Regular Interest I-LTM1 and REMIC I
Regular Interest I-LTZZ, 98%, 1% and 1%, respectively, until the Uncertificated
Balance of REMIC I Regular Interest I-LTM1 has been reduced to zero.

                  SECTION 4.05. Compliance with Withholding Requirements

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

                  SECTION 4.06. Exchange Commission; Additional Information.

                  (a) The Trustee and the Servicer shall reasonably cooperate
with the Depositor in connection with satisfying the reporting requirements
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Trustee shall prepare on behalf of the Trust Fund any Forms 8-K and 10-K
customary for similar securities as required by the Exchange Act and the Rules
and Regulations of the Securities and Exchange Commission thereunder, and the
Depositor shall sign (or shall cause another entity acceptable to the Securities
and Exchange Commission to sign) and the Trustee shall file (via the Securities
and Exchange Commission's Electronic Data Gathering and Retrieval System) such
forms on behalf of the Depositor (or such other entity). The Depositor hereby
grants to the Trustee a limited power of attorney to execute each Form 8-K and
file such Forms 8-K and 10-K on behalf of the Depositor. Such power of attorney
shall continue until the earlier of (i) receipt by the Trustee from the
Depositor of written termination of such power of attorney and (ii) the
termination of the Trust Fund. Notwithstanding anything herein to the contrary,
the Depositor, and not the Trustee, shall be responsible for executing each Form
10-K filed on behalf of the Trust.

                                      -90-

<PAGE>

                  (b) Each Form 8-K shall be filed by the Trustee within 15 days
after each Distribution Date, with a copy of the statement to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
March 30th of each year (or such earlier date as may be required by the Exchange
Act and the Rules and Regulations of the Securities and Exchange Commission),
the Trustee shall file a Form 10-K, in substance as required by applicable law
or applicable Security and Exchange Commission staff's interpretations. Such
Form 10-K shall include as exhibits the Servicer's annual statement of
compliance described under Section 3.20 and the accountant's report described
under Section 3.21, in each case to the extent they have been timely delivered
to the Trustee. If they are not so timely delivered, the Trustee shall file an
amended Form 10-K including such documents as exhibits reasonably promptly after
they are delivered to the Trustee. The Trustee shall have no liability with
respect to any failure to properly prepare or file such periodic reports
resulting from or relating to the Trustee's inability or failure to obtain any
information not resulting from its own negligence or willful misconduct. The
Form 10-K shall also include a certification in the form attached hereto as
Exhibit L-1 (the "Certification"), which shall be signed by the senior officer
of the Depositor in charge of securitization.

                  (c) In addition, the Trustee shall sign a certification (in
the form attached hereto as Exhibit L-2) for the benefit of the Depositor and
its officers, directors and Affiliates regarding certain aspects of the
Certification (the "Trustee Certification") (provided, however, that the Trustee
shall not undertake an analysis of the accountant's report attached as an
exhibit to the Form 10-K), and the Servicer shall sign a certification in the
form attached hereto as Exhibit L-3) for the benefit of the Depositor, the
Trustee and their officers, directors and Affiliates regarding certain aspects
of items of the Certification (the "Servicer Certification"). The Servicer's
certification shall be delivered to the Depositor by no later than March 18th of
each year (or if such day is not a Business Day, the immediately preceding
Business Day), the Trustee's certification shall be delivered to the Depositor
by no later than March 19th of each year and the Depositor shall deliver the
Certification to the Trustee for filing no later than March 20th of each year
(or if such day is not a Business Day, the immediately preceding Business Day).

                  In addition, (i) the Trustee shall indemnify and hold harmless
the Depositor and its officers, directors and Affiliates from and against any
actual losses, damages, penalties, fines, forfeitures, reasonable and necessary
legal fees and related costs, judgments and other costs and expenses arising out
of or based upon (a) the failure of the Trustee to timely deliver the Trustee
Certification or (b) any material misstatement in the Trustee Certification and
(ii) the Servicer shall indemnify and hold harmless the Depositor, the Trustee
and their respective officers, directors and Affiliates from and against any
actual losses, damages, penalties, fines, forfeitures, reasonable and necessary
legal fees and related costs, judgments and other costs and expenses arising out
of or based upon (a) the failure of the Servicer to timely deliver the Servicer
Certification or (b) any material misstatement in the Servicer Certification and
(iii) the Depositor shall indemnify and hold harmless the Trustee and the
Servicer and its officers, directors and Affiliates from and against any losses,
damages, penalties, fines, forfeitures, reasonable and necessary legal fees and
related costs, judgments and other costs and expenses arising out of or based
upon a breach of the Depositor's obligations under this Section 4.06 or the
Depositor's negligence, bad faith or willful misconduct in connection therewith.
If the indemnification provided for herein is unavailable or insufficient to
hold harmless the Depositor, the Trustee or the Servicer, as applicable, then
the Depositor (in connection with a breach of its obligations under this Section
4.06 or its negligence, bad faith or

                                      -91-

<PAGE>

willful misconduct in connection therewith) or the Trustee or the Servicer (in
connection with a breach of its respective obligations under this Section
4.06(c)), agrees that it shall contribute to the amount paid or payable by the
other party as a result of the losses, claims, damages or liabilities of the
other party in such proportion as is appropriate to reflect the relative fault
and the relative benefit of the Depositor, the Trustee and the Servicer.

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

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

                  (f) To the extent that, following the Closing Date, the
Depositor certifies that reports and certifications differing from those
required under this Section 4.06 comply with the reporting requirements under
the Exchange Act, the Trustee and the Servicer hereby agree that they will
reasonably cooperate to amend the provisions of this Section 4.06 in order to
comply with such amended reporting requirements and such amendment of this
Section 4.06. Any such amendment may result in the reduction of the reports
filed by the Depositor under the Exchange Act. Notwithstanding the foregoing,
the Trustee shall not be obligated to enter into any amendment pursuant to this
Section that adversely affects its obligations and immunities under this
Agreement.

                                      -92-

<PAGE>

                                    ARTICLE V

                                THE CERTIFICATES

                  SECTION 5.01. The Certificates.

                  (a) The Certificates in the aggregate will represent the
entire beneficial ownership interest in the Mortgage Loans and all other assets
included in REMIC I.

                  The Certificates will be substantially in the forms annexed
hereto as Exhibits A-1 through A-10. The Certificates of each Class will be
issuable in registered form only, in denominations of authorized Percentage
Interests as described in the definition thereof. Each Certificate will share
ratably in all rights of the related Class.

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

                  (b) The Class A Certificates and the Mezzanine Certificates
shall initially be issued as one or more Certificates held by the Book-Entry
Custodian or, if appointed to hold such Certificates as provided below, the
Depository and registered in the name of the Depository or its nominee and,
except as provided below, registration of such Certificates may not be
transferred by the Trustee except to another Depository that agrees to hold such
Certificates for the respective Certificate Owners with Ownership Interests
therein. The Certificate Owners shall hold their respective Ownership Interests
in and to such Certificates through the book-entry facilities of the Depository
and, except as provided below, shall not be entitled to definitive, fully
registered Certificates ("Definitive Certificates") in respect of such Ownership
Interests. All transfers by Certificate Owners of their respective Ownership
Interests in the Book-Entry Certificates shall be made in accordance with the
procedures established by the Depository Participant or brokerage firm
representing such Certificate Owner. Each Depository Participant shall only
transfer the Ownership Interests in the Book-Entry Certificates of Certificate
Owners it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures. The Trustee is hereby
initially appointed as the Book-Entry Custodian and hereby agrees to act as such
in accordance herewith and in accordance with the agreement that it has with the
Depository authorizing it to act as such. The Book-Entry Custodian may, and, if
it is no longer qualified to act as such, the Book- Entry Custodian shall,
appoint, by a written instrument delivered to the Depositor, the Servicer, the
Trustee and, if the Trustee is not the Book-Entry Custodian, the Trustee, any
other transfer agent

                                      -93-

<PAGE>

(including the Depository or any successor Depository) to act as Book-Entry
Custodian under such conditions as the predecessor Book-Entry Custodian and the
Depository or any successor Depository may prescribe, provided that the
predecessor Book-Entry Custodian shall not be relieved of any of its duties or
responsibilities by reason of any such appointment of other than the Depository.
If the Trustee resigns or is removed in accordance with the terms hereof, the
successor Trustee or, if it so elects, the Depository shall immediately succeed
to its predecessor's duties as Book-Entry Custodian. The Depositor shall have
the right to inspect, and to obtain copies of, any Certificates held as Book-
Entry Certificates by the Book-Entry Custodian.

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

                  If (i)(A) the Depositor advises the Trustee in writing that
the Depository is no longer willing or able to properly discharge its
responsibilities as Depository, and (B) the Depositor is unable to locate a
qualified successor, (ii) the Depositor at its option, and with the consent of
the Trustee (such consent not to be unreasonably withheld), advises the Trustee
in writing that it elects to terminate the book-entry system through the
Depository or (iii) after the occurrence of a Servicer Event of Default,
Certificate Owners representing in the aggregate not less than 51% of the
Ownership Interests of the Book-Entry Certificates advise the Trustee through
the Depository, in writing, that the continuation of a book-entry system through
the Depository is no longer in the best interests of the Certificate Owners, the
Trustee shall notify all Certificate Owners, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Owners requesting the same. Upon surrender to the Trustee of the
Book-Entry Certificates by the Book-Entry Custodian or the Depository, as
applicable, accompanied by registration instructions from the Depository for
registration of transfer, the Trustee shall cause the Definitive Certificates to
be issued. Such Definitive Certificates will be issued in minimum denominations
of $100,000, except that any beneficial ownership that was represented by a
Book- Entry Certificate in an amount less than $100,000 immediately prior to the
issuance of a Definitive Certificate shall be issued in a minimum denomination
equal to the amount represented by such Book-Entry Certificate. None of the
Depositor, the Servicer or the Trustee shall be liable for any delay in the
delivery of such instructions and may conclusively rely on, and shall be
protected in relying on, such instructions. Upon the issuance of Definitive
Certificates all references herein to obligations imposed upon or to be
performed by the Depository shall be deemed to be imposed upon and performed by
the Trustee, to the extent applicable with respect to such Definitive
Certificates, and the Trustee shall recognize the Holders of the Definitive
Certificates as Certificateholders hereunder.

                                      -94-

<PAGE>

                  SECTION 5.02. Registration of Transfer and Exchange of
                                Certificates.

                  (a) The Trustee shall cause to be kept at one of the offices
or agencies to be appointed by the Trustee in accordance with the provisions of
Section 8.11, a Certificate Register for the Certificates in which, subject to
such reasonable regulations as it may prescribe, the Trustee shall provide for
the registration of Certificates and of transfers and exchanges of Certificates
as herein provided.

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

                  Notwithstanding the foregoing, no certification or Opinion of
Counsel described in this Section 5.02(b) will be required in connection with
the transfer, on the Closing Date, of any Class R Certificate or Class R-X
Certificate by the Depositor to an "accredited investor" within the meaning of
Rule 501(d) of the 1933 Act.

                  (c) No transfer of a Private Certificate or any interest
therein shall be made to any Plan subject to ERISA or Section 4975 of the Code,
any Person acting, directly or indirectly, on behalf of any such Plan or any
Person acquiring such Certificates with "Plan Assets" of a Plan within the
meaning of the Department of Labor regulation promulgated at 29 C. F. R. ss.
2510.3-101 ("Plan Assets") unless the Trustee is provided with an Opinion of
Counsel on which the Depositor, the Trustee and the Servicer may rely, to the
effect that the purchase of such Certificates is permissible under applicable
law, will not constitute or result in any non-exempt prohibited transaction
under ERISA or Section 4975 of the Code and will not subject the Depositor, the
Servicer, the Trustee or the Trust Fund to any obligation or liability
(including obligations or liabilities under ERISA or Section 4975 of the Code)
in addition to those undertaken in this Agreement, which Opinion of

                                      -95-

<PAGE>

Counsel shall not be an expense of the Depositor, the Servicer, the Trustee or
the Trust Fund. Any prospective Transferee of such Certificates not providing
the above Opinion of Counsel must provide a certification in the form of Exhibit
G to this Agreement (or other form acceptable to the Depositor, the Trustee and
the Servicer), which the Trustee may rely upon without further inquiry or
investigation. Neither an Opinion of Counsel nor any certification will be
required in connection with the initial transfer of any such Certificate by the
Depositor to an Affiliate of the Depositor (in which case, the Depositor or any
Affiliate thereof shall have deemed to have represented that such Affiliate is
not a Plan or a Person investing Plan Assets) and the Trustee shall be entitled
to conclusively rely upon a representation (which, upon the request of the
Trustee, shall be a written representation) from the Depositor of the status of
such transferee as an affiliate of the Depositor.

                  Each beneficial owner of a Mezzanine Certificates or any
interest therein shall be deemed to have represented, by virtue of its
acquisition or holding of that certificate or interest therein, that either (i)
it is not a Plan investor, (ii) it has acquired and is holding such Mezzanine
Certificates in reliance on the Underwriters' Exemption, and that it understands
that there are certain conditions to the availability of the Underwriters'
Exemption, including that the Mezzanine Certificates must be rated, at the time
of purchase, not lower than "BBB-" (or its equivalent) by Fitch Ratings, S&P or
Moody's or (iii) (1) it is an insurance company, (2) the source of funds used to
acquire or hold the certificate or interest therein is an "insurance company
general account," as such term is defined in PTCE 95-60, and (3) the conditions
in Sections I and III of PTCE 95-60 have been satisfied.

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

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

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

                           (B) In connection with any proposed Transfer of any
                  Ownership Interest in a Residual Certificate, the Trustee
                  shall require delivery to it, and shall not register

                                      -96-

<PAGE>

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

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

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

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

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

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

                                      -97-

<PAGE>

         payments due on such Certificate to the holder thereof or for taking
         any other action with respect to such holder under the provisions of
         this Agreement.

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

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

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

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

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

                                      -98-

<PAGE>

                  other than the prospective transferee to be subject to a
                  REMIC-tax caused by the Transfer of a Residual Certificate to
                  a Person that is not a Permitted Transferee.

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

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

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

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

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

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

                  SECTION 5.04. Persons Deemed Owners.

                  The Depositor, the Servicer, the Trustee and any agent of any
of them may treat the

                                      -99-

<PAGE>

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

                  SECTION 5.05.             Certain Available Information.

                  On or prior to the date of the first sale of any Private
Certificate to an Independent third party, the Depositor shall provide to the
Trustee ten copies of any private placement memorandum or other disclosure
document used by the Depositor in connection with the offer and sale of such
Certificates. In addition, if any such private placement memorandum or
disclosure document is revised, amended or supplemented at any time following
the delivery thereof to the Trustee, the Depositor promptly shall inform the
Trustee of such event and shall deliver to the Trustee ten copies of the private
placement memorandum or disclosure document, as revised, amended or
supplemented. The Trustee shall maintain at its Corporate Trust Office and shall
make available free of charge during normal business hours for review by any
Holder of a Certificate or any Person identified to the Trustee as a prospective
transferee of a Certificate, originals or copies of the following items: (i) in
the case of a Holder or prospective transferee of a Private Certificate, the
related private placement memorandum or other disclosure document relating to
such Class of Certificates, in the form most recently provided to the Trustee;
and (ii) in all cases, (A) this Agreement and any amendments hereof entered into
pursuant to Section 11.01, (B) all monthly statements required to be delivered
to Certificateholders of the relevant Class pursuant to Section 4.02 since the
Closing Date, and all other notices, reports, statements and written
communications delivered to the Certificateholders of the relevant Class
pursuant to this Agreement since the Closing Date, (C) all certifications
delivered by a Responsible Officer of the Trustee since the Closing Date
pursuant to Section 10.01(h), (D) any and all Officers' Certificates delivered
to the Trustee by the Servicer since the Closing Date to evidence the Servicer's
determination that any Advance or Servicing Advance was, or if made, would be a
Nonrecoverable Advance or Nonrecoverable Servicing Advance, respectively, and
(E) any and all Officers' Certificates delivered to the Trustee by the Servicer
since the Closing Date pursuant to Section 4.04(a). Copies and mailing of any
and all of the foregoing items will be available from the Trustee upon request
at the expense of the Person requesting the same.

                                      -100-

<PAGE>

                                   ARTICLE VI

                         THE DEPOSITOR AND THE SERVICER

                  SECTION 6.01. Liability of the Depositor and the Servicer.

                  The Depositor and the Servicer each shall be liable in
accordance herewith only to the extent of the obligations specifically imposed
by this Agreement upon them in their respective capacities as Depositor and
Servicer and undertaken hereunder by the Depositor and the Servicer herein.

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

                  Subject to the following paragraph, the Depositor will keep in
full effect its existence, rights and franchises as a corporation under the laws
of the jurisdiction of its incorporation. Subject to the following paragraph,
the Servicer will keep in full effect its existence, rights and franchises as a
limited partnership under the laws of the jurisdiction of its formation. The
Depositor and the Servicer each will obtain and preserve its qualification to do
business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Certificates or any of the Mortgage Loans
and to perform its respective duties under this Agreement.

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

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

                  None of the Depositor, the Servicer or any of the directors,
officers, employees or agents of the Depositor or the Servicer shall be under
any liability to the Trust Fund or the Certificateholders for any action taken
or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment; provided, however, that this provision
shall not protect the Depositor, the Servicer or any such person against any
breach of warranties, representations or covenants made herein, or against any
specific liability imposed on the Servicer pursuant hereto, or against any
liability which would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Depositor, the Servicer and
any director, officer,

                                                       -101-

<PAGE>

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

                  SECTION 6.04. Limitation on Resignation of the Servicer.

                  (a) The Servicer shall not resign from the obligations and
duties hereby imposed on it except upon determination that its duties hereunder
are no longer permissible under applicable law or as provided in Section 6.04(c)
.. Any such determination pursuant to the preceding sentence permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect obtained at the expense of the Servicer and delivered to the Trustee. No
resignation of the Servicer shall become effective until the Trustee or a
successor servicer shall have assumed the Servicer's responsibilities, duties,
liabilities (other than those liabilities arising prior to the appointment of
such successor) and obligations under this Agreement.

                  (b) Except as expressly provided herein, the Servicer shall
not assign or transfer any of its rights, benefits or privileges hereunder to
any other Person, or delegate to or subcontract with, or authorize or appoint
any other Person to perform any of the duties, covenants or obligations to be
performed by the Servicer hereunder. The foregoing prohibition on assignment
shall not prohibit the Servicer from designating a Sub-Servicer as payee of any
indemnification amount payable to the Servicer hereunder; provided, however,
that as provided in Section 3.02 hereof, no Sub-Servicer shall be a third-party
beneficiary hereunder and the parties hereto shall not be required to recognize
any Subservicer as an indemnitee under this Agreement.

                  (c) The Trustee and the Depositor hereby specifically (i)
consent to the pledge

                                      -102-

<PAGE>

and assignment by the Servicer of all of the Servicer's right, title and
interest in, to and under this Agreement to the Servicing Rights Pledgee, for
the benefit of certain lenders and (ii) provided that no Servicer Event of
Default exists, agree that upon delivery to the Trustee by the Servicing Rights
Pledgee of a letter signed by the Servicer whereunder the Servicer shall resign
as Servicer under this Agreement, the Trustee shall appoint the Servicing Rights
Pledgee or its designee as successor Servicer, provided that at the time of such
appointment, the Servicing Rights Pledgee or such designee meets the
requirements of a successor Servicer pursuant to Section 7.02(a) hereof and
agrees to be subject to the terms of this Agreement. If, pursuant to any
provision hereof, the duties of the Servicer are transferred to a successor
servicer, the entire amount of the Servicing Fee and other compensation payable
to the Servicer pursuant hereto shall thereafter be payable to such successor
servicer.

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

                  The Servicer shall afford (and any Sub-Servicing Agreement
shall provide that each Sub-Servicer shall afford) the Depositor and the
Trustee, upon reasonable notice, during normal business hours, access to all
records maintained by the Servicer (and any such Sub-Servicer) in respect of the
Servicer's rights and obligations hereunder and access to officers of the
Servicer (and those of any such Sub-Servicer) responsible for such obligations.
Upon request, the Servicer shall furnish to the Depositor and the Trustee its
(and any such Sub-Servicer's) most recent financial statements and such other
information relating to the Servicer's capacity to perform its obligations under
this Agreement as it possesses (and that any such Sub-Servicer possesses). To
the extent such information is not otherwise available to the public, the
Depositor and the Trustee shall not disseminate any information obtained
pursuant to the preceding two sentences without the Servicer's written consent,
except as required pursuant to this Agreement or to the extent that it is
appropriate to do so (i) in working with legal counsel, auditors, taxing
authorities or other governmental agencies, (ii) pursuant to any law, rule,
regulation, order, judgment, writ, injunction or decree of any court or
governmental authority having jurisdiction over the Depositor and the Trustee or
the Trust Fund, and in any case, the Depositor or the Trustee, (iii) disclosure
of any and all information that is or becomes publicly known, or information
obtained by the Trustee from sources other than the Depositor or the Servicer,
(iv) disclosure as required pursuant to this Agreement or (v) disclosure of any
and all information(A) in any preliminary or final offering circular,
registration statement or contract or other document pertaining to the
transactions contemplated by the Agreement approved in advance by the Depositor
or the Servicer or (B) to any affiliate, independent or internal auditor, agent,
employee or attorney of the Trustee having a need to know the same, provided
that the Trustee advises such recipient of the confidential nature of the
information being disclosed, shall use its best efforts to assure the
confidentiality of any such disseminated non-public information. The Depositor
may, but is not obligated to, enforce the obligations of the Servicer under this
Agreement and may, but is not obligated to, perform, or cause a designee to
perform, any defaulted obligation of the Servicer under this Agreement or
exercise the rights of the Servicer under this Agreement; provided that the
Servicer shall not be relieved of any of its obligations under this Agreement by
virtue of such performance by the Depositor or its designee. The Depositor shall
not have any responsibility or liability for any action or failure to act by the
Servicer and is not obligated to supervise the performance of the Servicer under
this Agreement or otherwise.

                                      -103-

<PAGE>

                                   ARTICLE VII

                                     DEFAULT

                  SECTION 7.01. Servicer Events of Default.

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

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

                  (ii) any failure on the part of the Servicer duly to observe
         or perform in any material respect any other of the covenants or
         agreements on the part of the Servicer contained in this Agreement, or
         the breach by the Servicer of any representation and warranty contained
         in Section 2.05, which continues unremedied for a period of 30 days (or
         if such failure or breach cannot be remedied within 30 days, then such
         remedy shall have been commenced within 30 days and diligently pursued
         thereafter; provided, however, that in no event shall such failure or
         breach be allowed to exist for a period of greater than 90 days) after
         the earlier of (i) the date on which written notice of such failure,
         requiring the same to be remedied, shall have been given to the
         Servicer by the Depositor or the Trustee, or to the Servicer, the
         Depositor and the Trustee by the Holders of Certificates entitled to at
         least 25% of the Voting Rights and (ii) actual knowledge of such
         failure by a Servicing Officer; or

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

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

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

                                      -104-

<PAGE>

         suspend payment of its obligations; or

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

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

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

                  SECTION 7.02. Trustee to Act; Appointment of Successor.

                                      -105-

<PAGE>

                  (a)(1) On and after the time the Servicer receives a notice of
termination, the Trustee shall separately assume and become the successor in all
respects to the Servicer in its capacity as Servicer under this Agreement and
the transactions set forth or provided for herein, and all the responsibilities,
duties and liabilities relating thereto and arising thereafter shall be assumed
by the Trustee (except for any representations or warranties of the Servicer
under this Agreement, the responsibilities, duties and liabilities contained in
Section 2.05 and the obligation to deposit amounts in respect of losses pursuant
to Section 3.12) by the terms and provisions hereof including, without
limitation, the Servicer's obligations to make Advances pursuant to Section
4.03; provided, however, that if the Trustee is prohibited by law or regulation
from obligating itself to make advances regarding delinquent mortgage loans,
then the Trustee shall not be obligated to make Advances pursuant to Section
4.03; and provided further, that any failure to perform such duties or
responsibilities caused by the Servicer's failure to provide information
required by Section 7.01 shall not be considered a default by the Trustee as
successor to the Servicer hereunder. As compensation therefor, the Trustee shall
be entitled to the Servicing Fee and all funds relating to the Mortgage Loans to
which the Servicer would have been entitled if it had continued to act
hereunder. Notwithstanding the above and subject to Section 7.02(a)(2) below,
the Trustee may, if it shall be unwilling to so act, or shall, if it is unable
to so act or if it is prohibited by law from making advances regarding
delinquent mortgage loans or if the Holders of Certificates entitled to at least
51% of the Voting Rights so request in writing to the Trustee promptly appoint
or petition a court of competent jurisdiction to appoint, an established
mortgage loan servicing institution acceptable to each Rating Agency without
qualification, withdrawal or downgrading of the ratings then assigned to any of
the Certificates and having a net worth of not less than $15,000,000, as the
successor to the Servicer under this Agreement in the assumption of all or any
part of the responsibilities, duties or liabilities of the Servicer under this
Agreement.

                  All Servicing Transfer Costs shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs (provided,
that if the Trustee is the predecessor Servicer by reason of this Section 7.02,
such costs shall be paid by the Servicer preceding the Trustee as successor
servicer), and if such predecessor or initial Servicer, as applicable, defaults
in its obligation to pay such costs, such costs shall be paid by the successor
Servicer or the Trustee (in which case the successor Servicer or the Trustee, as
applicable, shall be entitled to reimbursement therefor from the assets of the
Trust Fund).

                  (2) No appointment of a successor to the Servicer under this
Agreement shall be effective until the assumption by the successor of all of the
Servicer's responsibilities, duties and liabilities hereunder. In connection
with such appointment and assumption described herein, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided, however, that no such
compensation shall be in excess of that permitted the Servicer as such
hereunder. The Depositor, the Trustee and such successor shall take such action,
consistent with this Agreement, as shall be necessary to effectuate any such
succession. Pending appointment of a successor to the Servicer under this
Agreement, the Trustee shall act in such capacity as hereinabove provided.

                  (b) In the event of a Servicer Event of Default,
notwithstanding anything to the contrary above, the Trustee and the Depositor
hereby agree that upon delivery to the Trustee by the Servicing Rights Pledgee
of a letter signed by the Servicer within ten Business Days of when

                                      -106-

<PAGE>

notification of such event shall have been provided to the Trustee, whereunder
the Servicer shall resign as Servicer under this Agreement, the Trustee shall
appoint the Servicing Rights Pledgee or its designee as successor Servicer,
provided that at the time of such appointment, the Servicing Rights Pledgee or
such designee meets the requirements of a successor Servicer set forth above and
the Servicing Rights Pledgee or such designee agrees to be subject to the terms
of this Agreement.

                  (c) In connection with the termination or resignation of the
Servicer hereunder, either (i) the successor servicer, including the Trustee if
the Trustee is acting as successor Servicer, shall represent and warrant that it
is a member of MERS in good standing and shall agree to comply in all material
respects with the rules and procedures of MERS in connection with the servicing
of the Mortgage Loans that are registered with MERS, in which case the
predecessor Servicer shall cooperate with the successor Servicer in causing MERS
to revise its records to reflect the transfer of servicing to the successor
Servicer as necessary under MERS' rules and regulations, or (ii) the predecessor
Servicer shall cooperate with the successor Servicer in causing MERS to execute
and deliver an assignment of Mortgage in recordable form to transfer the
Mortgage from MERS to the Trustee and to execute and deliver such other notices,
documents and other instruments as may be necessary or desirable to effect a
transfer of such Mortgage Loan or servicing of such Mortgage Loan on the MERS(R)
System to the successor Servicer. The predecessor Servicer shall file or cause
to be filed any such assignment in the appropriate recording office. The
predecessor Servicer shall bear any and all fees of MERS, costs of preparing any
assignments of Mortgage, and fees and costs of filing any assignments of
Mortgage that may be required under this Section 7.02(c).

                  SECTION 7.03. Notification to Certificateholders.

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

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

                  SECTION 7.04. Waiver of Servicer Events of Default.

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

                                      -107-

<PAGE>

                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

                  SECTION 8.01. Duties of Trustee.

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

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

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

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

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

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

                                      -108-

<PAGE>

                  SECTION 8.02. Certain Matters Affecting the Trustee.

                  (a) Except as otherwise provided in Section 8.01:

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

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

                  (iii) The Trustee shall not be under any obligation to
         exercise any of the trusts or powers vested in it by this Agreement or
         to institute, conduct or defend any litigation hereunder or in relation
         hereto at the request, order or direction of any of the
         Certificateholders, pursuant to the provisions of this Agreement,
         unless such Certificateholders shall have offered to the Trustee
         security or indemnity reasonably satisfactory to it against the costs,
         expenses and liabilities which may be incurred therein or thereby;
         nothing contained herein shall, however, relieve the Trustee of the
         obligation, upon the occurrence of a Servicer Event of Default (which
         has not been cured or waived), to exercise such of the rights and
         powers vested in it by this Agreement, and to use the same degree of
         care and skill in their exercise as a prudent person would exercise or
         use under the circumstances in the conduct of such person's own
         affairs;

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

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

                  (vi) The Trustee may execute any of the trusts or powers
         hereunder or perform any duties hereunder either directly or by or
         through agents, accountants or attorneys, and the Trustee shall not be
         responsible for any misconduct or negligence on the part of any agents,
         accountants or attorneys appointed with due care by it hereunder; and

                                      -109-

<PAGE>

                  (vii) The Trustee shall have no obligation to invest and
         reinvest any cash held in the absence of timely and specific written
         investment direction from the Servicer or the Depositor. In no event
         shall the Trustee be liable for the selection of investments or for
         investment losses incurred thereon. The Trustee shall have no liability
         in respect of losses incurred as a result of the liquidation of any
         investment incurred as a result of the liquidation of any investment
         prior to its stated maturity or the failure of the Servicer or the
         Depositor to provide timely written investment direction.

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

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

                  The recitals contained herein and in the Certificates (other
than the signature of the Trustee, the authentication of the Certificate
Registrar on the Certificates, the acknowledgments of the Trustee contained in
Article II and the representations and warranties of the Trustee in Section
8.13) shall be taken as the statements of the Depositor and the Trustee assumes
no responsibility for their correctness. The Trustee makes no representations or
warranties as to the validity or sufficiency of this Agreement (other than as
specifically set forth with respect to such party in Section 8.13) or of the
Certificates (other than the signature of the Trustee and authentication of the
Certificate Registrar on the Certificates) or of any Mortgage Loan or related
document or of MERS or the MERS(R) System. The Trustee shall not be accountable
for the use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor or the Servicer in respect of the Mortgage Loans or deposited
in or withdrawn from the Collection Account by the Servicer, other than any
funds held by or on behalf of the Trustee in accordance with Section 3.10,
subject to Section 8.01.

                  SECTION 8.04. Trustee May Own Certificates.

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

                  SECTION 8.05. Trustee's Fees and Expenses.

                  (a) The Trustee shall withdraw from the Distribution Account
on each Distribution Date and pay to itself the Trustee Fee. The Trustee, or any
director, officer, employee or agent of the Trustee shall be indemnified by the
Trust Fund and held harmless against any loss, liability or expense (not
including expenses, disbursements and advances incurred or made by the Trustee
including the compensation and the expenses and disbursements of its agents and
counsel, in the ordinary course of the Trustee's performance in accordance with
the provisions of this Agreement) incurred by the Trustee in connection with any
Servicer Event of Default (not including expenses, disbursements and advances
incurred or made by the Trustee in its capacity as successor Servicer), default,
claim or legal action or any pending or threatened claim or legal action arising
out

                                      -110-

<PAGE>

of or in connection with the acceptance or administration of its obligations and
duties under this Agreement, other than any loss, liability or expense (i)
resulting from a breach of the Servicer's obligations and duties under this
Agreement and the Mortgage Loans (for which the Servicer shall indemnify
pursuant to Section 8.05(b)), (ii) for the expenses of preparing and filing Tax
Returns pursuant to Section 10.01(d) or (iii) any loss, liability or expense
incurred by reason of its willful misfeasance, bad faith or negligence in the
performance of its duties hereunder or by reason of reckless disregard of its
respective obligations and duties hereunder. Any amounts payable to the Trustee,
or any director, officer, employee or agent of the Trustee in respect of the
indemnification provided by this paragraph (a), or pursuant to any other right
of reimbursement from the Trust Fund that the Trustee, or any director, officer,
employee or agent of the Trustee, may have hereunder in its capacity as such,
may be withdrawn by the Trustee from the Distribution Account at any time.

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

                  The provisions of this Section 8.05 shall survive the
termination of this Agreement or the earlier resignation or removal of the
Trustee.

                  SECTION 8.06. Eligibility Requirements for Trustee.

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

                  SECTION 8.07. Resignation and Removal of the Trustee.

                  The Trustee may at any time resign and be discharged from the
trust hereby created by giving written notice thereof to the Depositor, the
Servicer and the Certificateholders. Upon receiving such notice of resignation
of the Trustee, the Depositor shall promptly appoint a successor trustee by
written instrument, in duplicate, which instrument shall be delivered to the
resigning Trustee and to the successor trustee. A copy of such instrument shall
be delivered to the Certificateholders, the Trustee and the Servicer by the
Depositor. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation or removal, the Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

                                      -111-

<PAGE>

                  If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.06 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Trustee shall
become incapable of acting, or shall be adjudged bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then the
Depositor may remove the Trustee and appoint a successor trustee by written
instrument, in duplicate, which instrument shall be delivered to the Trustee so
removed and to the successor trustee. A copy of such instrument shall be
delivered to the Certificateholders and the Servicer by the Depositor.

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

                  Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor trustee as
provided in Section 8.08.

                  SECTION 8.08. Successor Trustee.

                  Any successor trustee appointed as provided in Section 8.07
shall execute, acknowledge and deliver to the Depositor and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee without any further act, deed or conveyance, shall become
fully vested with all the rights, powers, duties and obligations of its
predecessor hereunder, with the like effect as if originally named as Trustee
herein. The predecessor trustee shall deliver to the successor trustee all
Mortgage Files and related documents and statements, as well as all moneys, held
by it hereunder (other than any Mortgage Files at the time held by a custodian,
which custodian shall become the agent of any successor trustee hereunder), and
the Depositor and the predecessor trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for more
fully and certainly vesting and confirming in the successor trustee all such
rights, powers, duties and obligations.

                  No successor trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 8.06 and the appointment of such
successor trustee shall not result in a downgrading of any Class of Certificates
by either Rating Agency, as evidenced by a letter from each Rating Agency.

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

                                      -112-

<PAGE>

                  SECTION 8.09. Merger or Consolidation of Trustee.

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

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

                  Notwithstanding any other provisions hereof, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of REMIC I or property securing the same may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee or co-trustees, jointly with the Trustee, or
separate trustee or separate trustees, of all or any part of REMIC I, and to
vest in such Person or Persons, in such capacity, such title to REMIC I, or any
part thereof, and, subject to the other provisions of this Section 8.10, such
powers, duties, obligations, rights and trusts as the Servicer and the Trustee
may consider necessary or desirable. Any such co-trustee or separate trustee
shall be subject to the written approval of the Servicer. If the Servicer shall
not have joined in such appointment within 15 days after the receipt by it of a
request so to do, or in case a Servicer Event of Default shall have occurred and
be continuing, the Trustee alone shall have the power to make such appointment.
No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 8.06 hereunder and no notice
to Holders of Certificates of the appointment of co- trustee(s) or separate
trustee(s) shall be required under Section 8.08 hereof. The Servicer shall be
responsible for the fees of any co-trustee or separate trustee appointed under
this Section 8.10.

                  In the case of any appointment of a co-trustee or separate
trustee pursuant to this Section 8.10, all rights, powers, duties and
obligations conferred or imposed upon the Trustee shall be conferred or imposed
upon and exercised or performed by the Trustee and such separate trustee or
co-trustee jointly, except to the extent that under any law of any jurisdiction
in which any particular act or acts are to be performed by the Trustee (whether
as Trustee hereunder or as successor to the Servicer hereunder), the Trustee
shall be incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of title to
REMIC I or any portion thereof in any such jurisdiction) shall be exercised and
performed by such separate trustee or co-trustee at the direction of the
Trustee.

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

                                      -113-

<PAGE>

of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Depositor and the Servicer.

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

                  SECTION 8.11. Reserved.

                  SECTION 8.12. Appointment of Office or Agency.

                  The Trustee will designate an office or agency in the City of
New York where the Certificates may be surrendered for registration of transfer
or exchange, and presented for final distribution, and where notices and demands
to or upon the Trustee in respect of the Certificates and this Agreement may be
delivered. As of the Closing Date, the Trustee designates the office of its
agent located c/o DTC Transfer Agent Services, 55 Water Street, Jeanette Park
Entrance, New York, NY 10041 for such purposes.

                  SECTION 8.13. Representations and Warranties of the Trustee.

                  The Trustee hereby represents and warrants, solely as to
itself, to the Servicer and the Depositor, as of the Closing Date, that:

                  (i) It is a national banking association duly organized,
         validly existing and in good standing under the laws of the United
         States.

                  (ii) The execution and delivery of this Agreement by it, and
         the performance and compliance with the terms of this Agreement by it,
         will not violate its charter or bylaws.

                  (iii) It has the full power and authority to enter into and
         consummate all transactions contemplated by this Agreement, has duly
         authorized the execution, delivery and performance of this Agreement,
         and has duly executed and delivered this Agreement.

                  (iv) This Agreement, assuming due authorization, execution and
         delivery by the other parties hereto, constitutes a valid, legal and
         binding obligation of it, enforceable against it in accordance with the
         terms hereof, subject to (A) applicable bankruptcy, insolvency,
         receivership, reorganization, moratorium and other laws affecting the
         enforcement of creditors' rights generally, and (B) general principles
         of equity, regardless of whether such enforcement is considered in a
         proceeding in equity or at law.

                                      -114-

<PAGE>

                                   ARTICLE IX

                                   TERMINATION

                  SECTION 9.01 Termination Upon Repurchase or Liquidation of All
                               Mortgage Loans.

                  (a) Subject to Section 9.02, the respective obligations and
responsibilities under this Agreement of the Depositor, the Servicer and the
Trustee (other than the obligations of the Servicer to the Trustee pursuant to
Section 8.05 and of the Servicer to provide for and the Trustee to make payments
in respect of the REMIC I Regular Interests and the Classes of Certificates as
hereinafter set forth) shall terminate upon payment to the Certificateholders
and the deposit of all amounts held by or on behalf of the Trustee and required
hereunder to be so paid or deposited on the Distribution Date coinciding with or
following the earlier to occur of (i) the purchase by the Terminator (as defined
below) of all Mortgage Loans and each REO Property remaining in REMIC I and (ii)
the final payment or other liquidation (or any advance with respect thereto) of
the last Mortgage Loan or REO Property remaining in REMIC I; provided, however,
that in no event shall the trust created hereby continue beyond the expiration
of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James,
living on the date hereof. Subject to Section 3.10 hereof, the purchase by the
Terminator of all Mortgage Loans and each REO Property remaining in REMIC I
shall be at a price (the "Termination Price") equal to the greater of:

                  (A) the aggregate Purchase Price of all the Mortgage Loans
included in REMIC I, plus the appraised value of each REO Property, if any,
included in REMIC I, such appraisal to be conducted by an Independent appraiser
selected by (i) the Terminator and (ii) if the Class A Certificates or a Class
of Mezzanine Certificates will not receive all amounts owed to it as a result of
the termination, an Independent appraiser mutually agreed upon by the Terminator
and the Trustee on behalf of the Certificateholders and

                  (B) the aggregate fair market value of all of the assets of
REMIC I (as determined as of the close of business on the third Business Day
next preceding the date upon which notice of any such termination is furnished
to the Certificateholders pursuant to Section 9.01(c) by (i) the Terminator and
(ii) if the Class A Certificates or a Class of Mezzanine Certificates will not
receive all amounts owed to it as a result of the termination, an Independent
appraiser mutually agreed upon by the Terminator and the Trustee on behalf of
the Certificateholders).

                  However, this option may only be exercised if the Termination
Price is sufficient to pay all interest accrued on, as well as amounts necessary
to retire the principal balance of, any net interest margin securities backed by
the Class CE Certificates and Class P Certificates. If the determination of the
appraised value of each REO Property pursuant to (A) above or the fair market
value of the Mortgage Loans and REO Properties pursuant to (B) above shall be
required to be made by the Terminator and an Independent appraiser as provided
above, (i) such appraisal shall be obtained at no expense to the Trustee and
(ii) the Trustee may conclusively rely on, and shall be protected in relying on,
such appraisal.

                                      -115-

<PAGE>

                  (b) The Servicer (or an Affiliate of the Servicer) shall have
the right (the party exercising such right, the "Terminator"), to purchase all
of the Mortgage Loans and each REO Property remaining in REMIC I pursuant to
clause (i) of the preceding paragraph no later than the Determination Date in
the month immediately preceding the Distribution Date on which the Certificates
will be retired; provided, however, that the Terminator may elect to purchase
all of the Mortgage Loans and each REO Property remaining in REMIC I pursuant to
clause (i) above only if the aggregate Stated Principal Balance of the Mortgage
Loans and each REO Property remaining in the Trust Fund at the time of such
election is reduced to less than 10% of the aggregate Stated Principal Balance
of the Mortgage Loans as of the Cut-off Date. By acceptance of a Residual
Certificate, the Holders of the Residual Certificates agree, in connection with
any termination hereunder, to assign and transfer any amounts in excess of par,
and to the extent received in respect of such termination, to pay any such
amounts to the Holders of the Class CE Certificates.

                  (c) Notice of the liquidation of the Certificates shall be
given promptly by the Trustee by letter to Certificateholders mailed (a) in the
event such notice is given in connection with the purchase of the Mortgage Loans
and each REO Property by the Terminator, not earlier than the 10th day and not
later than the 20th day of the month next preceding the month of the final
distribution on the related Certificates or (b) otherwise during the month of
such final distribution on or before the Determination Date in such month, in
each case specifying (i) the Distribution Date upon which the Trust Fund will
terminate and the final payment in respect of the REMIC I Regular Interests, as
applicable and the related Certificates will be made upon presentation and
surrender of the related Certificates at the office of the Trustee therein
designated, (ii) the amount of any such final payment, (iii) that no interest
shall accrue in respect of the REMIC I Regular Interests or the related
Certificates from and after the Interest Accrual Period relating to the final
Distribution Date therefor and (iv) that the Record Date otherwise applicable to
such Distribution Date is not applicable, payments being made only upon
presentation and surrender of the related Certificates at the office of the
Trustee. In the event such notice is given in connection with the purchase of
all of the Mortgage Loans and each REO Property remaining in REMIC I by the
Terminator, the Terminator shall deliver to the Trustee for deposit in the
Distribution Account not later than the last Business Day of the month next
preceding the month of the final distribution on the related Certificates an
amount in immediately available funds equal to the above-described purchase
price. The Trustee shall remit to the Servicer from such funds deposited in the
Distribution Account (i) any amounts which the Servicer would be permitted to
withdraw and retain from the Collection Account pursuant to Section 3.11 and
(ii) any other amounts otherwise payable by the Trustee to the Servicer from
amounts on deposit in the Distribution Account pursuant to the terms of this
Agreement, in each case prior to making any final distributions pursuant to
Section 10.01(d) below. Upon certification to the Trustee by a Servicing Officer
of the making of such final deposit, the Trustee shall promptly release to the
Terminator the Mortgage Files for the remaining Mortgage Loans, and the Trustee
shall execute all assignments, endorsements and other instruments necessary to
effectuate such transfer.

                  Immediately following the deposit of funds in trust hereunder
in respect of the Certificates, the Trust Fund shall terminate.

                  SECTION 9.02 Additional Termination Requirements.

                  (a) In the event that the Terminator purchases all the
Mortgage Loans and each

                                      -116-

<PAGE>

REO Property or the final payment on or other liquidation of the last Mortgage
Loan or REO Property remaining in REMIC I pursuant to Section 9.01, the Trust
Fund (or the applicable Trust REMIC) shall be terminated in accordance with the
following additional requirements:

                  (i) The Trustee shall specify the first day in the 90-day
         liquidation period in a statement attached to each Trust REMIC's final
         Tax Return pursuant to Treasury regulation Section 1.860F-1 and shall
         satisfy all requirements of a qualified liquidation under Section 860F
         of the Code and any regulations thereunder, as evidenced by an Opinion
         of Counsel obtained at the expense of the Terminator;

                  (ii) During such 90-day liquidation period and, at or prior to
         the time of making of the final payment on the Certificates, the
         Trustee shall sell all of the assets of REMIC I to the Terminator for
         cash; and

                  (iii) At the time of the making of the final payment on the
         Certificates, the Trustee shall distribute or credit, or cause to be
         distributed or credited, to the Holders of the Residual Certificates in
         respect of the Class R-I Interest all cash on hand in the Trust Fund
         (other than cash retained to meet claims), and the Trust Fund shall
         terminate at that time.

                  (b) At the expense of the requesting Terminator (or, if the
Trust Fund is being terminated as a result of the occurrence of the event
described in clause (ii) of the first paragraph of Section 9.01, at the expense
of the Depositor without the right of reimbursement from the Trust Fund), the
Terminator shall prepare or cause to be prepared the documentation required in
connection with the adoption of a plan of liquidation of each Trust REMIC
pursuant to this Section 9.02.

                  (c) By their acceptance of Certificates, the Holders thereof
hereby agree to authorize the Trustee to specify the 90-day liquidation period
for each Trust REMIC, which authorization shall be binding upon all successor
Certificateholders.

                                      -117-

<PAGE>

                                    ARTICLE X

                                REMIC PROVISIONS

                  SECTION 10.01. REMIC Administration.

                  (a) The Trustee shall elect to treat each Trust REMIC as a
REMIC under the Code and, if necessary, under applicable state law. Each such
election will be made by the Trustee on Form 1066 or other appropriate federal
tax or information return or any appropriate state return for the taxable year
ending on the last day of the calendar year in which the Certificates are
issued. For the purposes of the REMIC election in respect of REMIC I, the REMIC
I Regular Interests shall be designated as the Regular Interests in REMIC I and
the Class R-I Interest shall be designated as the Residual Interest in REMIC I.
The Class A Certificates, the Class M-1 Certificates and the Class M-2
Certificates shall be designated as the Regular Interests in REMIC II and the
Class R-II Interest shall be designated as the Residual Interest in REMIC II.
The Class M-3 Certificates shall be designated as Regular Interests in REMIC III
and the Class R-III Interest shall be designated as the Residual Interest in
REMIC III. The Class M-4 Certificates shall be designated as Regular Interests
in REMIC IV and the Class R-IV Interest shall be designated as the Residual
Interest in REMIC IV. The Class M-5 Certificates shall be designated as Regular
Interests in REMIC V and the Class R-V Interest shall be designated as the
Residual Interest in REMIC V. The Class CE Certificates shall be designated as
Regular Interests in REMIC VI and the Class R-VI Interest shall be designated as
the Residual Interest in REMIC VI. The Class P Certificates shall be designated
as Regular Interests in REMIC VII and the Class R-VII Interest shall be
designated as the Residual Interest in REMIC VII. The Trustee shall not permit
the creation of any "interests" in any Trust REMIC (within the meaning of
Section 860G of the Code) other than the REMIC I Regular Interests and the
interests represented by the Certificates.

                  (b) The Closing Date is hereby designated as the "Startup Day"
of each Trust REMIC within the meaning of Section 860G(a)(9) of the Code.

                  (c) The Trustee shall be reimbursed for any and all expenses
relating to any tax audit of the Trust Fund (including, but not limited to, any
professional fees or any administrative or judicial proceedings with respect to
each Trust REMIC that involve the Internal Revenue Service or state tax
authorities), including the expense of obtaining any tax related Opinion of
Counsel required to be obtained hereunder. The Trustee, as agent for each Trust
REMIC's tax matters person shall (i) act on behalf of the Trust Fund in relation
to any tax matter or controversy involving any Trust REMIC and (ii) represent
the Trust Fund in any administrative or judicial proceeding relating to an
examination or audit by any governmental taxing authority with respect thereto.
The holder of the largest Percentage Interest of Residual Certificates shall be
designated, in the manner provided under Treasury regulations section
1.860F-4(d) and Treasury regulations section 301.6231(a)(7)-1, as the tax
matters person of each Trust REMIC created hereunder. By their acceptance
thereof, the holder of the largest Percentage Interest of the Residual
Certificates hereby agrees to irrevocably appoint the Trustee or an Affiliate as
its agent to perform all of the duties of the tax matters person for the Trust
Fund.

                  (d) The Trustee shall prepare, sign and file all of the Tax
Returns (including Form

                                      -118-

<PAGE>

8811, which must be filed within 30 days following the Closing Date) in respect
of each Trust REMIC created hereunder. The expenses of preparing and filing such
returns shall be borne by the Trustee without any right of reimbursement
therefor.

                  (e) The Trustee shall perform on behalf of each Trust REMIC
all reporting and other tax compliance duties that are the responsibility of
such REMIC under the Code, the REMIC Provisions or other compliance guidance
issued by the Internal Revenue Service or any state or local taxing authority.
Among its other duties, as required by the Code, the REMIC Provisions or other
such compliance guidance, the Trustee shall provide (i) to any Transferor of a
Residual Certificate such information as is necessary for the application of any
tax relating to the transfer of a Residual Certificate to any Person who is not
a Permitted Transferee, (ii) to the Certificateholders such information or
reports as are required by the Code or the REMIC Provisions including reports
relating to interest, original issue discount and market discount or premium
(using the Prepayment Assumption as required) and (iii) to the Internal Revenue
Service the name, title, address and telephone number of the person who will
serve as the representative of each Trust REMIC. The Depositor shall provide or
cause to be provided to the Trustee, within ten (10) days after the Closing
Date, all information or data that the Trustee reasonably determines to be
relevant for tax purposes as to the valuations and issue prices of the
Certificates, including, without limitation, the price, yield, prepayment
assumption and projected cash flow of the Certificates.

                  (f) The Trustee shall take such action and shall cause each
Trust REMIC created hereunder to take such action as shall be necessary to
create or maintain the status thereof as a REMIC under the REMIC Provisions. The
Trustee shall not take any action or cause the Trust Fund to take any action or
fail to take (or fail to cause to be taken) any action that, under the REMIC
Provisions, if taken or not taken, as the case may be, could (i) endanger the
status of each Trust REMIC as a REMIC or (ii) result in the imposition of a tax
upon the Trust Fund (including but not limited to the tax on prohibited
transactions as defined in Section 860F(a)(2) of the Code and the tax on
contributions to a REMIC set forth in Section 860G(d) of the Code) (either such
event, an "Adverse REMIC Event") unless the Trustee has received an Opinion of
Counsel, addressed to the Trustee (at the expense of the party seeking to take
such action but in no event at the expense of the Trustee) to the effect that
the contemplated action will not, with respect to any Trust REMIC, endanger such
status or result in the imposition of such a tax, nor shall the Servicer take or
fail to take any action (whether or not authorized hereunder) as to which the
Trustee has advised it in writing that it has received an Opinion of Counsel to
the effect that an Adverse REMIC Event could occur with respect to such action;
provided that the Servicer may conclusively rely on such Opinion of Counsel and
shall incur no liability for its action or failure to act in accordance with
such Opinion of Counsel. In addition, prior to taking any action with respect to
any Trust REMIC or the respective assets of each, or causing any Trust REMIC to
take any action, which is not contemplated under the terms of this Agreement,
the Servicer will consult with the Trustee or its designee, in writing, with
respect to whether such action could cause an Adverse REMIC Event to occur with
respect to any Trust REMIC and the Servicer shall not take any such action or
cause any Trust REMIC to take any such action as to which the Trustee has
advised it in writing that an Adverse REMIC Event could occur; provided that the
Servicer may conclusively rely on such writing and shall incur no liability for
its action or failure to act in accordance with such writing. The Trustee may
consult with counsel to make such written advice, and the cost of same shall be
borne by the party seeking to take the action not permitted by this Agreement,
but in no event shall such cost be an expense of the Trustee.

                                      -119-

<PAGE>

At all times as may be required by the Code, the Trustee will ensure that
substantially all of the assets of REMIC I will consist of "qualified mortgages"
as defined in Section 860G(a)(3) of the Code and "permitted investments" as
defined in Section 860G(a)(5) of the Code, to the extent such obligations are
within the Trustee's control and not otherwise inconsistent with the terms of
this Agreement.

                  (g) In the event that any tax is imposed on "prohibited
transactions" of any Trust REMIC created hereunder as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of such
REMIC as defined in Section 860G(c) of the Code, on any contributions to any
such REMIC after the Startup Day therefor pursuant to Section 860G(d) of the
Code, or any other tax is imposed by the Code or any applicable provisions of
state or local tax laws, such tax shall be charged (i) to the Trustee pursuant
to Section 10.03 hereof, if such tax arises out of or results from a breach by
the Trustee of any of its obligations under this Article X, (ii) to the Servicer
pursuant to Section 10.03 hereof, if such tax arises out of or results from a
breach by the Servicer of any of its obligations under Article III or this
Article X, or (iii) in all other cases, against amounts on deposit in the
Distribution Account and shall be paid by withdrawal therefrom.

                  (h) On or before April 15 of each calendar year, commencing
April 15, 2004, the Trustee shall deliver to each Rating Agency an Officer's
Certificate of the Trustee stating the Trustee's compliance with this Article X.

                  (i) The Trustee shall, for federal income tax purposes,
maintain books and records with respect to each Trust REMIC on a calendar year
and on an accrual basis.

                  (j) Following the Startup Day, neither the Servicer nor the
Trustee shall accept any contributions of assets to any Trust REMIC other than
in connection with any Qualified Substitute Mortgage Loan delivered in
accordance with Section 2.03 unless it shall have received an Opinion of Counsel
to the effect that the inclusion of such assets in the Trust Fund will not cause
any Trust REMIC to fail to qualify as a REMIC at any time that any Certificates
are outstanding or subject any Trust REMIC to any tax under the REMIC Provisions
or other applicable provisions of federal, state and local law or ordinances.

                  (k) Neither the Trustee nor the Servicer shall enter into any
arrangement by which any Trust REMIC will receive a fee or other compensation
for services nor knowingly permit any Trust REMIC to receive any income from
assets other than "qualified mortgages" as defined in Section 860G(a)(3) of the
Code or "permitted investments" as defined in Section 860G(a)(5) of the Code.

                  SECTION 10.02. Prohibited Transactions and Activities.

                  None of the Depositor, the Servicer or the Trustee shall sell,
dispose of or substitute for any of the Mortgage Loans (except in connection
with (i) the foreclosure of a Mortgage Loan, including but not limited to, the
acquisition or sale of a Mortgaged Property acquired by deed in lieu of
foreclosure, (ii) the bankruptcy of REMIC I, (iii) the termination of REMIC I
pursuant to Article IX of this Agreement, (iv) a substitution pursuant to
Article II of this Agreement or (v) a purchase of Mortgage Loans pursuant to
Article II or III of this Agreement), nor acquire any assets for any

                                      -120-

<PAGE>

Trust REMIC (other than REO Property acquired in respect of a defaulted Mortgage
Loan), nor sell or dispose of any investments in the Collection Account or the
Distribution Account for gain, nor accept any contributions to any Trust REMIC
after the Closing Date (other than a Qualified Substitute Mortgage Loan
delivered in accordance with Section 2.03), unless it has received an Opinion of
Counsel, addressed to the Trustee (at the expense of the party seeking to cause
such sale, disposition, substitution, acquisition or contribution but in no
event at the expense of the Trustee) that such sale, disposition, substitution,
acquisition or contribution will not (a) affect adversely the status of any
Trust REMIC as a REMIC or (b) cause any Trust REMIC to be subject to a tax on
"prohibited transactions" or "contributions" pursuant to the REMIC Provisions.

                  SECTION 10.03. Servicer and Trustee Indemnification.

                  (a) The Trustee agrees to indemnify the Trust Fund, the
Depositor and the Servicer for any taxes and costs including, without
limitation, any reasonable attorneys' fees imposed on or incurred by the Trust
Fund, the Depositor or the Servicer as a result of a breach of the Trustee's
covenants set forth in this Article X.

                  (b) The Servicer agrees to indemnify the Trust Fund, the
Depositor and the Trustee for any taxes and costs including, without limitation,
any reasonable attorneys' fees imposed on or incurred by the Trust Fund, the
Depositor or the Trustee, as a result of a breach of the Servicer's covenants
set forth in Article III or this Article X.

                                      -121-

<PAGE>

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

                  SECTION 11.01. Amendment.

                  This Agreement may be amended from time to time by the
Depositor, the Servicer and the Trustee without the consent of any of the
Certificateholders, (i) to cure any ambiguity or defect, (ii) to correct, modify
or supplement any provisions herein (including to give effect to the
expectations of Certificateholders), (iii) to amend the provisions of Section
4.06 or (iii) to make any other provisions with respect to matters or questions
arising under this Agreement which shall not be inconsistent with the provisions
of this Agreement, provided that such action shall not, as evidenced by either
(a) an Opinion of Counsel delivered to the Trustee adversely affect in any
material respect the interests of any Certificateholder or (b) written notice to
the Depositor, the Servicer and the Trustee from the Rating Agencies that such
action will not result in the reduction or withdrawal of the rating of any
outstanding Class of Certificates with respect to which it is a Rating Agency).
No amendment shall be deemed to adversely affect in any material respect the
interests of any Certificateholder who shall have consented thereto, and no
Opinion of Counsel or Rating Agency confirmation shall be required to address
the effect of any such amendment on any such consenting Certificateholder.
Notwithstanding the foregoing, neither an Opinion of Counsel nor written notice
to the Depositor, the Servicer and the Trustee from the Rating Agencies will be
required in connection with an amendment to the provisions of Section 4.06.

                  This Agreement may also be amended from time to time by the
Depositor, the Servicer and the Trustee with the consent of the Holders of
Certificates entitled to at least 66% of the Voting Rights for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Holders of Certificates; provided, however, that no such amendment shall (i)
reduce in any manner the amount of, or delay the timing of, payments received on
Mortgage Loans which are required to be distributed on any Certificate without
the consent of the Holder of such Certificate, (ii) adversely affect in any
material respect the interests of the Holders of any Class of Certificates (as
evidenced by either (i) an Opinion of Counsel delivered to the Trustee or (ii)
written notice to the Depositor, the Servicer and the Trustee from the Rating
Agencies that such action will not result in the reduction or withdrawal of the
rating of any outstanding Class of Certificates with respect to which it is a
Rating Agency) in a manner, other than as described in (i) or (iii) modify the
consents required by the immediately preceding clauses (i) and (ii) without the
consent of the Holders of all Certificates then outstanding. Notwithstanding any
other provision of this Agreement, for purposes of the giving or withholding of
consents pursuant to this Section 11.01, Certificates registered in the name of
the Depositor or the Servicer or any Affiliate thereof shall be entitled to
Voting Rights with respect to matters affecting such Certificates.

                  Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel to the effect that such amendment (i)
will not result in the imposition of any tax on any Trust REMIC pursuant to the
REMIC Provisions or cause any Trust REMIC to fail to qualify as a REMIC at any
time that any Certificates are outstanding and (ii) is authorized or permitted

                                      -122-

<PAGE>

hereunder.

                  Promptly after the execution of any such amendment the Trustee
shall furnish a copy of such amendment to each Certificateholder.

                  It shall not be necessary for the consent of
Certificateholders under this Section 11.01 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall approve
the substance thereof. The manner of obtaining such consents and of evidencing
the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable regulations as the Trustee may prescribe.

                  The cost of any Opinion of Counsel to be delivered pursuant to
this Section 11.01 shall be borne by the Person seeking the related amendment,
but in no event shall such Opinion of Counsel be an expense of the Trustee.

                  The Trustee may, but shall not be obligated to enter into any
amendment pursuant to this Section that affects its rights, duties and
immunities under this Agreement or otherwise.

                  SECTION 11.02. Recordation of Agreement; Counterparts.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer at the expense of the Certificateholders, but only upon
direction of the Certificateholders accompanied by an Opinion of Counsel to the
effect that such recordation materially and beneficially affects the interests
of the Certificateholders.

                  For the purpose of facilitating the recordation of this
Agreement as herein provided and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and such counterparts shall
constitute but one and the same instrument.

                  SECTION 11.03. Limitation on Rights of Certificateholders.

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

                  No Certificateholder shall have any right to vote (except as
expressly provided for herein) or in any manner otherwise control the operation
and management of the Trust Fund, or the obligations of the parties hereto, nor
shall anything herein set forth, or contained in the terms of any of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association; nor shall any
Certificateholder be under any liability to any

                                      -123-

<PAGE>

third person by reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.

                  No Certificateholder shall have any right by virtue of any
provision of this Agreement to institute any suit, action or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as hereinbefore provided, and unless also the
Holders of Certificates entitled to at least 25% of the Voting Rights shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee, for 15 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding. It is
understood and intended, and expressly covenanted by each Certificateholder with
every other Certificateholder and the Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatsoever by virtue of any
provision of this Agreement to affect, disturb or prejudice the rights of the
Holders of any other of such Certificates, or to obtain or seek to obtain
priority over or preference to any other such Holder, or to enforce any right
under this Agreement, except in the manner herein provided and for the equal,
ratable and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section, each and every Certificateholder,
the Trustee shall be entitled to such relief as can be given either at law or in
equity.

                  SECTION 11.04. Governing Law.

                  This Agreement shall be construed in accordance with the laws
of the State of New York, without regard to the conflicts of laws provisions
thereof, and the obligations, rights and remedies of the parties hereunder shall
be determined in accordance with such laws, without regard to the conflicts of
laws provisions thereof.

                  SECTION 11.05. Notices.

                  All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when received if personally
delivered at or mailed by first class mail, postage prepaid, or by express
delivery service or delivered in any other manner specified herein, to (a) in
the case of the Depositor, 390 Greenwich Street, 4th Floor, New York, New York
10013, Attention: Mortgage Finance (telecopy number (212) 723-8604), or such
other address or telecopy number as may hereafter be furnished to the Servicer
and the Trustee in writing by the Depositor, (b) in the case of the Servicer,
4828 Loop Central Drive, Houston, Texas 77081, Attention: Janice McClure
(telecopy number: (713) 960-0539), or such other address or telecopy number as
may hereafter be furnished to the Trustee and the Depositor in writing by the
Servicer and (c) in the case of the Trustee, Deutsche Bank National Trust
Company, 1761 East St. Andrew Place, Santa Ana, California 92705-4934,
Attention: Trust Administration-SB0301 (telecopy number: (714) 247-6329), or
such other address or telecopy number as may hereafter be furnished to the
Servicer, the and the Depositor in writing by the Trustee. Any notice required
or permitted to be given to a Certificateholder shall be given by first class
mail, postage prepaid, at the address of such Holder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement

                                      -124-

<PAGE>

shall be conclusively presumed to have been duly given when mailed, whether or
not the Certificateholder receives such notice. A copy of any notice required to
be telecopied hereunder also shall be mailed to the appropriate party in the
manner set forth above.

                  SECTION 11.06. Severability of Provisions.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

                  SECTION 11.07. Notice to Rating Agencies.

                  The Trustee shall use its best efforts promptly to provide
notice to the Rating Agencies with respect to each of the following of which it
has actual knowledge:

                  1. Any material change or amendment to this Agreement;

                  2. The occurrence of any Servicer Event of Default that has
         not been cured or waived;

                  3. The resignation or termination of the Servicer or the
         Trustee;

                  4. The repurchase or substitution of Mortgage Loans pursuant
         to or as contemplated by Section 2.03;

                  5. The final payment to the Holders of any Class of
         Certificates;

                  6. Any change in the location of the Collection Account or the
         Distribution Account; and

                  7. Any event that would result in the inability of the
         Trustee, as successor servicer, to make advances regarding delinquent
         Mortgage Loans.

                  In addition, the Trustee shall make available to each Rating
Agency copies of each report to Certificateholders described in Section 4.02 and
the Servicer shall promptly furnish to each Rating Agency copies of the
following:

                  1. Each annual statement as to compliance described in Section
         3.20; and

                  2. Each annual independent public accountants' servicing
         report described in Section 3.21.

                  Any such notice pursuant to this Section 11.07 shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by first class mail, postage prepaid, or

                                      -125-

<PAGE>

by express delivery service to Fitch Ratings, One State Street Plaza, New, York,
New York 10004, facsimile number: (212) 344-1986 and to Standard & Poor's
Ratings Services, a division of the McGraw-Hill Companies, Inc., 55 Water
Street, New York, New York 10007 or such other addresses as the Rating Agencies
may designate in writing to the parties hereto.

                  SECTION 11.08. Article and Section References.

                  All article and section references used in this Agreement,
unless otherwise provided, are to articles and sections in this Agreement.

                  SECTION 11.09. Grant of Security Interest.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Loans by the Depositor to the Trustee, be, and be
construed as, a sale of the Mortgage Loans by the Depositor and not a pledge of
the Mortgage Loans to secure a debt or other obligation of the Depositor.
However, in the event that, notwithstanding the aforementioned intent of the
parties, the Mortgage Loans are held to be property of the Depositor, then, (a)
it is the express intent of the parties that such conveyance be deemed a pledge
of the Mortgage Loans by the Depositor to the Trustee to secure a debt or other
obligation of the Depositor and (b)(1) this Agreement shall also be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Uniform
Commercial Code as in effect from time to time in the State of New York; (2) the
conveyance provided for in Section 2.01 hereof shall be deemed to be a grant by
the Depositor to the Trustee of a security interest in all of the Depositor's
right, title and interest in and to the Mortgage Loans and all amounts payable
to the holders of the Mortgage Loans in accordance with the terms thereof and
all proceeds of the conversion, voluntary or involuntary, of the foregoing into
cash, instruments, securities or other property, including without limitation
all amounts, other than investment earnings, from time to time held or invested
in the Collection Account and the Distribution Account, whether in the form of
cash, instruments, securities or other property; (3) the obligations secured by
such security agreement shall be deemed to be all of the Depositor's obligations
under this Agreement, including the obligation to provide to the
Certificateholders the benefits of this Agreement relating to the Mortgage Loans
and the Trust Fund; and (4) notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such property,
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the Trustee
for the purpose of perfecting such security interest under applicable law.
Accordingly, the Depositor hereby grants to the Trustee a security interest in
the Mortgage Loans and all other property described in clause (2) of the
preceding sentence, for the purpose of securing to the Trustee the performance
by the Depositor of the obligations described in clause (3) of the preceding
sentence. Notwithstanding the foregoing, the parties hereto intend the
conveyance pursuant to Section 2.01 to be a true, absolute and unconditional
sale of the Mortgage Loans and assets constituting the Trust Fund by the
Depositor to the Trustee.

                                      -126-

<PAGE>

                  IN WITNESS WHEREOF, the Depositor, the Servicer and the
Trustee have caused their names to be signed hereto by their respective officers
thereunto duly authorized, in each case as of the day and year first above
written.

                                           SALOMON BROTHERS MORTGAGE
                                           SECURITIES VII, INC., as Depositor

                                           By:_______________________________
                                           Name:
                                           Title:

                                           LITTON LOAN SERVICING LP, as Servicer

                                           By:_______________________________
                                           Name:
                                           Title:

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_______________________________
                                           Name:
                                           Title:

                                           By:_______________________________
                                           Name:
                                           Title:

<PAGE>

STATE OF _____________  )
                        ) ss.:
COUNTY OF ___________   )

                  On the day of April 2003, before me, a notary public in and
for said State, personally appeared ________________, known to me to be an
Assistant Vice President of Salomon Brothers Mortgage Securities VII, Inc., one
of the corporations that executed the within instrument, and also known to me to
be the person who executed it on behalf of said corporation, and acknowledged to
me that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                        ________________________
                                                              Notary Public

[Notarial Seal]

<PAGE>

STATE OF ______________ )
                        ) ss.:
COUNTY OF ____________  )

                  On the ____ day of April 2003, before me, a notary public in
and for said State, personally appeared _____________________, known to me to be
__________________ of Litton Loan Servicing LP, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                        ________________________
                                                              Notary Public

[Notarial Seal]

<PAGE>

STATE OF ______________ )
                        )ss.:
COUNTY OF ____________  )

                  On the ____ day of April 2003, before me, a notary public in
and for said State, personally appeared _______________, known to me to be a
______________ of Deutsche Bank National Trust Company, one of the corporations
that executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                        ________________________
                                                              Notary Public

[Notarial Seal]

<PAGE>

                               EXHIBIT A-1

                       FORM OF CLASS A CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class A Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $188,622,000.00

Cut-off Date and date of Pooling and       Denomination: $188,622,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XH 7

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                  A-1-1

<PAGE>

                  ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien mortgage loans (the
"Mortgage Loans") formed and sold by

              SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class A Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class A Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class A Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                                      A-1-2

<PAGE>

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the related Formula Rate for such
Distribution Date and (ii) the related Net WAC Pass-Through Rate for such
Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee, and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

                                      A-1-3

<PAGE>

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-1-4

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                  Authorized Signatory

                                      A-1-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: _________________________________________
_______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _______________________________
                                           Signature Guaranteed

                                      A-1-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-1-7

<PAGE>

                                   EXHIBIT A-2
                                   -----------

                          FORM OF CLASS M-1 CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES TO THE
     EXTENT DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO
     HEREIN.

                                      A-2-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class M-1 Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $15,043,000.00

Cut-off Date and date of Pooling and       Denomination: $15,043,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XJ 3

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-2-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class M-1 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class M-1 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-1 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the

                                      A-2-3

<PAGE>

related Formula Rate for such Distribution Date and (ii) the related Net WAC
Pass-Through Rate for such Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof

                                      A-2-4

<PAGE>

for all purposes, and none of the Depositor, the Servicer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-2-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April__, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                   Authorized Signatory

                                      A-2-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-2-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-2-8

<PAGE>

                                   EXHIBIT A-3
                                   -----------

                          FORM OF CLASS M-2 CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES AND THE
     CLASS M-1 CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND
     SERVICING AGREEMENT REFERRED TO HEREIN.

                                      A-3-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class M-2 Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $11,572,000.00

Cut-off Date and date of Pooling and       Denomination: $11,572,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XK 0

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-3-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class M-2 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class M-2 Certificates in REMIC II created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-2 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the

                                      A-3-3

<PAGE>

related Formula Rate for such Distribution Date and (ii) the related Net WAC
Pass-Through Rate for such Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof

                                      A-3-4

<PAGE>

for all purposes, and none of the Depositor, the Servicer, the Trustee nor any
such agent shall be affected by notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-3-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                     Authorized Signatory

                                      A-3-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                          _____________________________________
                                          Signature by or on behalf of assignor

                                          _____________________________________
                                                  Signature Guaranteed

                                      A-3-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-3-8

<PAGE>

                                   EXHIBIT A-4
                                   -----------

                          FORM OF CLASS M-3 CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
     CLASS M-1 CERTIFICATES AND THE CLASS M-2 CERTIFICATES TO THE EXTENT
     DESCRIBED IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

                                      A-4-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class M-3 Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $6,365,000.00

Cut-off Date and date of Pooling and       Denomination: $6,365,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XL 8

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-4-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class M-3 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class M-3 Certificates in REMIC III created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-3 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the

                                      A-4-3

<PAGE>

related Formula Rate for such Distribution Date and (ii) the related Net WAC
Pass-Through Rate for such Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require

                                      A-4-4

<PAGE>

payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-4-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                    Authorized Signatory

                                      A-4-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-4-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-4-8

<PAGE>

                                   EXHIBIT A-5
                                   -----------

                          FORM OF CLASS M-4 CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
     CLASS M-1 CERTIFICATES, THE CLASS M-2 CERTIFICATES AND THE CLASS M-3
     CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING
     AGREEMENT REFERRED TO HEREIN.

                                      A-5-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class M-4 Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $2,893,000.00

Cut-off Date and date of Pooling and       Denomination: $2,893,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XM 6

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-5-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class M-4 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class M-4 Certificates in REMIC IV created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-4 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the

                                      A-5-3

<PAGE>

related Formula Rate for such Distribution Date and (ii) the related Net WAC
Pass-Through Rate for such Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require

                                      A-5-4

<PAGE>

payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-5-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                   Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                                   Authorized Signatory

                                      A-5-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-5-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-5-8

<PAGE>

                                   EXHIBIT A-6
                                   -----------

                          FORM OF CLASS M-5 CERTIFICATE

     UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
     OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
     THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
     PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
     CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
     REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
     SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
     DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
     OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
     OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
     CLASS M-1 CERTIFICATES, THE CLASS M-2 CERTIFICATES, THE CLASS M-3
     CERTIFICATES AND THE CLASS M-4 CERTIFICATES TO THE EXTENT DESCRIBED
     IN THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

                                      A-6-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class M-5 Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $2,893,000.00

Cut-off Date and date of Pooling and       Denomination: $2,893,000.00
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

                                           Issue Date: April 25, 2003

                                           CUSIP: 79549A XN 4

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF AT
     ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE DENOMINATION
     OF THIS CERTIFICATE.

                                      A-6-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Cede & Co. is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class M-5 Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class M-5 Certificates in REMIC V created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class M-5 Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          The Pass-Through Rate applicable to the calculation of interest
payable with respect to this Certificate on any Distribution Date shall equal a
rate per annum equal to the lesser of (i) the

                                      A-6-3

<PAGE>

related Formula Rate for such Distribution Date and (ii) the related Net WAC
Pass-Through Rate for such Distribution Date.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require

                                      A-6-4

<PAGE>

payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-6-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April__, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_______________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_______________________________
                                                    Authorized Signatory

                                      A-6-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-6-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-6-8

<PAGE>

                                   EXHIBIT A-7
                                   -----------

                          FORM OF CLASS CE CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE IS SUBORDINATE TO THE CLASS A CERTIFICATES, THE
     CLASS M-1 CERTIFICATES, THE CLASS M-2 CERTIFICATES, THE CLASS M-3
     CERTIFICATES, THE CLASS M-4 CERTIFICATES AND THE CLASS M-5
     CERTIFICATES TO THE EXTENT DESCRIBED IN THE POOLING AND SERVICING
     AGREEMENT REFERRED TO HEREIN.

     THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
     PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
     TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
     THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
     INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
     REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
     HEREIN.

                                      A-7-1

<PAGE>

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class CE Certificates
                                           as of the Issue Date:
Pass-Through Rate: Variable                $4,050,702.64

Cut-off Date and date of Pooling and       Denomination: $4,050,702.64
Servicing Agreement: April 1, 2003
                                           Servicer: Litton Loan Servicing LP
First Distribution Date: May 26, 2003
                                           Trustee: Deutsche Bank National Trust
No. 1                                      Company

Aggregate Notional Amount of the Class     Issue Date: April 25, 2003
CE Certificates as of the Issue Date:
$231,438,602.64

Notional Amount: $231,438,602.64

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

                                      A-7-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Deutsche Bank National Trust Company, as Indenture
Trustee under the Indenture, dated as of April 25, 2003, relating to SB Finance
NIM Trust 2003-1 Notes, Series 2003-1, is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class CE Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class CE Certificates in REMIC VI created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class CE Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                                      A-7-3

<PAGE>

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. None of the Depositor or the Trustee is obligated to
register or qualify the Class of

                                      A-7-4

<PAGE>

Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Servicer
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-7-5

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April__, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:________________________________
                                                   Authorized Signatory

                                      A-7-6

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-7-7

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-7-8

<PAGE>

                                   EXHIBIT A-8
                                   -----------

                           FORM OF CLASS P CERTIFICATE

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT,"
     AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
     OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
     PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
     TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
     THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
     INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
     REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
     HEREIN.

Series 2003-HE1                            Aggregate Certificate Principal
                                           Balance of the Class P Certificates
                                           as of the Issue Date:
Cut-off Date and date of Pooling and       $100.00
Servicing Agreement: April 1, 2003
                                           Denomination: $100.00
First Distribution Date: May 26, 2003
                                           Servicer: Litton Loan Servicing LP
No. 1
                                           Trustee: Deutsche Bank National Trust
                                           Company

                                           Issue Date: April 25, 2003

     DISTRIBUTIONS IN REDUCTION OF THE CERTIFICATE PRINCIPAL BALANCE OF
     THIS CERTIFICATE MAY BE MADE MONTHLY AS SET FORTH HEREIN.
     ACCORDINGLY, THE OUTSTANDING CERTIFICATE PRINCIPAL BALANCE HEREOF
     AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE AS THE
     DENOMINATION OF THIS CERTIFICATE.

                                      A-8-1

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that Deutsche Bank National Trust Company, as Indenture
Trustee under the Indenture, dated as of April 25, 2003, relating to SB Finance
NIM Trust 2003-1 Notes, Series 2003-1, is the registered owner of a Percentage
Interest (obtained by dividing the denomination of this Certificate by the
aggregate Certificate Principal Balance of the Class P Certificates as of the
Issue Date) in that certain beneficial ownership interest evidenced by all the
Class P Certificates in REMIC VII created pursuant to a Pooling and Servicing
Agreement, dated as specified above (the "Agreement"), among Salomon Brothers
Mortgage Securities VII, Inc. (hereinafter called the "Depositor," which term
includes any successor entity under the Agreement), the Servicer and the
Trustee, a summary of certain of the pertinent provisions of which is set forth
hereafter. To the extent not defined herein, the capitalized terms used herein
have the meanings assigned in the Agreement. This Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Certificate by virtue of the acceptance
hereof assents and by which such Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class P Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

                                      A-8-2

<PAGE>

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the "Certificates") and representing a Percentage
Interest in the Class of Certificates specified on the face hereof equal to the
denomination specified on the face hereof divided by the aggregate Certificate
Principal Balance of the Class of Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer, the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. None of the Depositor or the Trustee is obligated to
register or qualify the Class of

                                      A-8-3

<PAGE>

Certificates specified on the face hereof under the 1933 Act or any other
securities law or to take any action not otherwise required under the Agreement
to permit the transfer of such Certificates without registration or
qualification. Any Holder desiring to effect a transfer of this Certificate
shall be required to indemnify the Trustee, the Depositor and the Servicer
against any liability that may result if the transfer is not so exempt or is not
made in accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other liquidation (or any
advance with respect thereto) of the last Mortgage Loan and REO Property
remaining in REMIC I and (ii) the purchase by the party designated in the
Agreement at a price determined as provided in the Agreement from REMIC I of all
the Mortgage Loans and all property acquired in respect of such Mortgage Loans.
The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assume no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-8-4

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                    Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                   Authorized Signatory

                                      A-8-5

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                      A-8-6

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-8-7

<PAGE>

                                   EXHIBIT A-9

                           FORM OF CLASS R CERTIFICATE

     THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
     PERSON.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
     ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
     THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

     THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
     PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
     TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
     THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
     INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
     REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
     HEREIN.

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT
     TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED
     STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
     SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
     ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
     FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED
     IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX IMPOSED BY
     CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE
     TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY ORGANIZATION
     DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
     DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR

                                      A-9-1

<PAGE>

     (3) SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
     ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION AND
     (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
     COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
     ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
     PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
     CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF
     THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
     DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
     OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
     DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
     INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
     CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF
     SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
     PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE POOLING AND
     SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
     DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
     OWNERSHIP OF THIS CERTIFICATE.

Series 2003-HE1                               Aggregate Percentage Interest of
                                              the Class R Certificates as of
                                              the Issue Date: 100.00%
Cut-off Date and date of Pooling and
Servicing Agreement: April 1, 2003            Servicer: Litton Loan Servicing LP

First Distribution Date: May 26, 2003         Trustee: Deutsche Bank National
                                              Trust Company
No.1
                                              Issue Date: April 25, 2003

                                      A-9-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that [_____________] is the registered owner of a
Percentage Interest (as specified above) in that certain beneficial ownership
interest evidenced by all the Certificates of the Class to which this
Certificate belongs created pursuant to a Pooling and Servicing Agreement, dated
as specified above (the "Agreement"), among Salomon Brothers Mortgage Securities
VII, Inc. (hereinafter called the "Depositor," which term includes any successor
entity under the Agreement), the Servicer and the Trustee, a summary of certain
of the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the

                                      A-9-3

<PAGE>

"Certificates") and representing a Percentage Interest in the Class of
Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer and the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. None of the Depositor or the Trustee is obligated to
register or qualify the Class of Certificates specified on the face hereof under
the 1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be

                                      A-9-4

<PAGE>

required to indemnify the Trustee, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other

                                      A-9-5

<PAGE>

liquidation (or any advance with respect thereto) of the last Mortgage Loan and
REO Property remaining in REMIC I and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from REMIC I
of all the Mortgage Loans and all property acquired in respect of such Mortgage
Loans. The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                      A-9-6

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:________________________________
                                                     Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:________________________________
                                                    Authorized Signatory

                                      A-9-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           ____________________________________
                                           Signature Guaranteed

                                      A-9-8

<PAGE>

                           DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                      A-9-9

<PAGE>

                                  EXHIBIT A-10
                                  ------------

                              CLASS R-X CERTIFICATE

     THIS CERTIFICATE MAY NOT BE TRANSFERRED TO A NON-UNITED STATES
     PERSON.

     SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE IS A
     "RESIDUAL INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
     ("REMIC"), AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS
     860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986 (THE "CODE").

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 5.02 OF
     THE POOLING AND SERVICING AGREEMENT REFERRED TO HEREIN.

     THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
     SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
     STATE AND MAY NOT BE RESOLD OR TRANSFERRED UNLESS IT IS REGISTERED
     PURSUANT TO SUCH ACT AND LAWS OR IS SOLD OR TRANSFERRED IN
     TRANSACTIONS THAT ARE EXEMPT FROM REGISTRATION UNDER SUCH ACT AND
     UNDER APPLICABLE STATE LAW AND IS TRANSFERRED IN ACCORDANCE WITH
     THE PROVISIONS OF SECTION 5.02 OF THE AGREEMENT.

     NO TRANSFER OF THIS CERTIFICATE TO AN EMPLOYEE BENEFIT PLAN OR
     OTHER RETIREMENT ARRANGEMENT SUBJECT TO THE EMPLOYEE RETIREMENT
     INCOME SECURITY ACT OF 1974, AS AMENDED, OR THE CODE WILL BE
     REGISTERED EXCEPT IN COMPLIANCE WITH THE PROCEDURES DESCRIBED
     HEREIN.

     ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY
     BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES (I) AN AFFIDAVIT
     TO THE TRUSTEE THAT (A) SUCH TRANSFEREE IS NOT (1) THE UNITED
     STATES OR ANY POSSESSION THEREOF, ANY STATE OR POLITICAL
     SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL
     ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
     FOREGOING, (2) ANY ORGANIZATION (OTHER THAN A COOPERATIVE DESCRIBED
     IN SECTION 521 OF THE CODE) THAT IS EXEMPT FROM THE TAX IMPOSED BY
     CHAPTER 1 OF THE CODE UNLESS SUCH ORGANIZATION IS SUBJECT TO THE
     TAX IMPOSED BY SECTION 511 OF THE CODE, (3) ANY ORGANIZATION
     DESCRIBED IN SECTION 1381(A)(2)(C) OF THE CODE (ANY SUCH PERSON
     DESCRIBED IN THE FOREGOING CLAUSES (1), (2) OR

                                     A-10-1

<PAGE>

     (3) SHALL HEREINAFTER BE REFERRED TO AS A "DISQUALIFIED
     ORGANIZATION") OR (4) AN AGENT OF A DISQUALIFIED ORGANIZATION AND
     (B) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR
     COLLECTION OF TAX, AND (II) SUCH TRANSFEREE SATISFIES CERTAIN
     ADDITIONAL CONDITIONS RELATING TO THE FINANCIAL CONDITION OF THE
     PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION IN THE
     CERTIFICATE REGISTER OF ANY TRANSFER, SALE OR OTHER DISPOSITION OF
     THIS CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A
     DISQUALIFIED ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE
     OF NO LEGAL FORCE OR EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE
     DEEMED TO BE A CERTIFICATEHOLDER FOR ANY PURPOSE HEREUNDER,
     INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS
     CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE HEREOF
     SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
     PARAGRAPH AND THE PROVISIONS OF SECTION 5.02(D) OF THE POOLING AND
     SERVICING AGREEMENT REFERRED TO HEREIN. ANY PERSON THAT IS A
     DISQUALIFIED ORGANIZATION IS PROHIBITED FROM ACQUIRING BENEFICIAL
     OWNERSHIP OF THIS CERTIFICATE.

Series 2003-HE1                            Aggregate Percentage Interest of the
                                           Class R-X Certificates as of the
                                           Issue Date: 100.00%
Cut-off Date and date of Pooling and
Servicing Agreement: April 1, 2003         Servicer: Litton Loan Servicing LP

First Distribution Date: May 26, 2003      Trustee: Deutsche Bank National Trust
                                           Company
No. 1
                                           Issue Date: April 25, 2003

                                     A-10-2

<PAGE>

                      ASSET BACKED PASS-THROUGH CERTIFICATE

evidencing a beneficial ownership interest in a portion of a Trust Fund (the
"Trust Fund") consisting primarily of a pool of conventional one- to
four-family, fixed-rate and adjustable-rate, first lien and second lien mortgage
loans (the "Mortgage Loans") formed and sold by

                 SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.

     THIS CERTIFICATE DOES NOT REPRESENT AN OBLIGATION OF OR INTEREST IN
     SALOMON BROTHERS MORTGAGE SECURITIES VII, INC., THE SERVICER, THE
     TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES. NEITHER THIS
     CERTIFICATE NOR THE UNDERLYING MORTGAGE LOANS ARE GUARANTEED BY ANY
     AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

          This certifies that [__________] is the registered owner of a
Percentage Interest (as specified above) in that certain beneficial ownership
interest evidenced by all the Certificates of the Class to which this
Certificate belongs created pursuant to a Pooling and Servicing Agreement, dated
as specified above (the "Agreement"), among Salomon Brothers Mortgage Securities
VII, Inc. (hereinafter called the "Depositor," which term includes any successor
entity under the Agreement), the Servicer and the Trustee, a summary of certain
of the pertinent provisions of which is set forth hereafter. To the extent not
defined herein, the capitalized terms used herein have the meanings assigned in
the Agreement. This Certificate is issued under and is subject to the terms,
provisions and conditions of the Agreement, to which Agreement the Holder of
this Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound.

          Pursuant to the terms of the Agreement, distributions will be made on
the 25th day of each month or, if such 25th day is not a Business Day, the
Business Day immediately following (a "Distribution Date"), commencing on the
First Distribution Date specified above, to the Person in whose name this
Certificate is registered on the Record Date, in an amount equal to the product
of the Percentage Interest evidenced by this Certificate and the amount required
to be distributed to the Holders of Class R-X Certificates on such Distribution
Date pursuant to the Agreement.

          All distributions to the Holder of this Certificate under the
Agreement will be made or caused to be made by the Trustee by wire transfer in
immediately available funds to the account of the Person entitled thereto if
such Person shall have so notified the Trustee in writing at least five Business
Days prior to the Record Date immediately prior to such Distribution Date or
otherwise by check mailed by first class mail to the address of the Person
entitled thereto, as such name and address shall appear on the Certificate
Register. Notwithstanding the above, the final distribution on this Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Certificate at the
office or agency appointed by the Trustee for that purpose as provided in the
Agreement.

          This Certificate is one of a duly authorized issue of Certificates
designated as Asset Backed Pass-Through Certificates of the Series specified on
the face hereof (herein called the

                                     A-10-3

<PAGE>

"Certificates") and representing a Percentage Interest in the Class of
Certificates specified on the face hereof.

          The Certificates are limited in right of payment to certain
collections and recoveries respecting the Mortgage Loans, all as more
specifically set forth herein and in the Agreement. As provided in the
Agreement, withdrawals from the Collection Account and the Distribution Account
may be made from time to time for purposes other than distributions to
Certificateholders, such purposes including reimbursement of advances made, or
certain expenses incurred, with respect to the Mortgage Loans.

          The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Depositor, the Servicer and the Trustee and the rights of the Certificateholders
under the Agreement at any time by the Depositor, the Servicer and the Trustee
with the consent of the Holders of Certificates entitled to at least 66% of the
Voting Rights. Any such consent by the Holder of this Certificate shall be
conclusive and binding on such Holder and upon all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

          As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies appointed by the Trustee as provided in the
Agreement, duly endorsed by, or accompanied by an assignment in the form below
or other written instrument of transfer in form satisfactory to the Trustee duly
executed by, the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of the same Class in
authorized denominations evidencing the same aggregate Percentage Interest will
be issued to the designated transferee or transferees.

          No transfer of this Certificate shall be made unless the transfer is
made pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), and an effective registration or
qualification under applicable state securities laws, or is made in a
transaction that does not require such registration or qualification. In the
event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit F-1, and (ii) in
all other cases, an Opinion of Counsel satisfactory to it that such transfer may
be made without such registration or qualification (which Opinion of Counsel
shall not be an expense of the Trust Fund or of the Depositor, the Trustee or
the Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. None of the Depositor or the Trustee is obligated to
register or qualify the Class of Certificates specified on the face hereof under
the 1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be

                                     A-10-4

<PAGE>

required to indemnify the Trustee, the Depositor and the Servicer against any
liability that may result if the transfer is not so exempt or is not made in
accordance with such federal and state laws.

          No transfer of this Certificate to a Plan subject to ERISA or Section
4975 of the Code, any Person acting, directly or indirectly, on behalf of any
such Plan or any Person using "Plan Assets" to acquire this Certificate shall be
made except in accordance with Section 5.02(c) of the Agreement.

          The Certificates are issuable in fully registered form only without
coupons in Classes and denominations representing Percentage Interests specified
in the Agreement. As provided in the Agreement and subject to certain
limitations therein set forth, the Certificates are exchangeable for new
Certificates of the same Class in authorized denominations evidencing the same
aggregate Percentage Interest, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or exchange
of Certificates, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any transfer or exchange of Certificates.

          Prior to registration of any transfer, sale or other disposition of
this Certificate, the proposed transferee shall provide to the Trustee (i) an
affidavit to the effect that such transferee is any Person other than a
Disqualified Organization or the agent (including a broker, nominee or
middleman) of a Disqualified Organization, and (ii) a certificate that
acknowledges that (A) the Class R-X Certificates have been designated as a
residual interest in a REMIC, (B) it will include in its income a PRO RATA share
of the net income of the Trust Fund and that such income may be an "excess
inclusion," as defined in the Code, that, with certain exceptions, cannot be
offset by other losses or benefits from any tax exemption, and (C) it expects to
have the financial means to satisfy all of its tax obligations including those
relating to holding the Class R-X Certificates. Notwithstanding the registration
in the Certificate Register of any transfer, sale or other disposition of this
Certificate to a Disqualified Organization or an agent (including a broker,
nominee or middleman) of a Disqualified Organization, such registration shall be
deemed to be of no legal force or effect whatsoever and such Person shall not be
deemed to be a Certificateholder for any purpose, including, but not limited to,
the receipt of distributions in respect of this Certificate.

          The Holder of this Certificate, by its acceptance hereof, shall be
deemed to have consented to the provisions of Section 5.02 of the Agreement and
to any amendment of the Agreement deemed necessary by counsel of the Depositor
to ensure that the transfer of this Certificate to any Person other than a
Permitted Transferee or any other Person will not cause the Trust Fund to cease
to qualify as a REMIC or cause the imposition of a tax upon the REMIC.

          The Depositor, the Servicer, the Trustee and any agent of the
Depositor, the Servicer or the Trustee may treat the Person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the
Depositor, the Servicer, the Trustee nor any such agent shall be affected by
notice to the contrary.

          The obligations created by the Agreement and the Trust Fund created
thereby shall terminate upon payment to the Certificateholders of all amounts
held by the Trustee and required to be paid to them pursuant to the Agreement
following the earlier of (i) the final payment or other

                                     A-10-5

<PAGE>

liquidation (or any advance with respect thereto) of the last Mortgage Loan and
REO Property remaining in REMIC I and (ii) the purchase by the party designated
in the Agreement at a price determined as provided in the Agreement from REMIC I
of all the Mortgage Loans and all property acquired in respect of such Mortgage
Loans. The Agreement permits, but does not require, the party designated in the
Agreement to purchase from REMIC I all the Mortgage Loans and all property
acquired in respect of any Mortgage Loan at a price determined as provided in
the Agreement. The exercise of such right will effect early retirement of the
Certificates; however, such right to purchase is subject to the aggregate Stated
Principal Balance of the Mortgage Loans at the time of purchase being less than
10% of the aggregate principal balance of the Mortgage Loans as of the Cut-off
Date.

          The recitals contained herein shall be taken as statements of the
Depositor and the Trustee assumes no responsibility for their correctness.

          Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.

                                     A-10-6

<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: April __, 2003

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:________________________________
                                                      Authorized Officer

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:_________________________________
                                                    Authorized Signatory

                                     A-10-7

<PAGE>

                                  ABBREVIATIONS
                                  -------------

The following abbreviations, when used in the inscription on the face of this
instrument, shall be construed as though they were written out in full according
to applicable laws or regulations:

TEN COM - as tenants in common            UNIF GIFT MIN ACT - CUSTODIAN
                                                              ---------
TEN ENT - as tenants by the entireties                      (Cust) (Minor) under
                                                            Uniform Gifts
JT TEN - as joint tenants with right                        to Minors Act
         if survivorship and not as                         _______________
          tenants in common                                     (State)

     Additional abbreviations may also be used though not in the above list.

                                   ASSIGNMENT
                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto _____________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print or typewrite name, address including postal zip code, and Taxpayer
Identification Number of assignee) a Percentage Interest equal to ____%
evidenced by the within Asset Backed Pass-Through Certificates and hereby
authorize(s) the registration of transfer of such interest to assignee on the
Certificate Register of the Trust Fund.

     I (we) further direct the Trustee to issue a new Certificate of a like
Percentage Interest and Class to the above named assignee and deliver such
Certificate to the following address: ________________________________________
______________________________________________________________________________.

Dated:

                                           _____________________________________
                                           Signature by or on behalf of assignor

                                           _____________________________________
                                           Signature Guaranteed

                                     A-10-8

<PAGE>

                            DISTRIBUTION INSTRUCTIONS

     The assignee should include the following for purposes of distribution:

     Distributions shall be made, by wire transfer or otherwise, in immediately
available funds to ____________________________________________________________
_______________________________________________________________ for the account
of _______________________________, account number ____________________________,
or, if mailed by check, to ____________________________________________________
_______________________________________________________________________________.
Applicable statements should be mailed to______________________________________
_______________________________________________________________________________.
This information is provided by ___________________________________________, the
assignee named above, or ________________________________________, as its agent.

                                     A-10-9

<PAGE>

                                    EXHIBIT B
                                    ---------

                                   [Reserved]

                                       B-1

<PAGE>

                                   EXHIBIT C-1
                                   -----------

                     FORM OF TRUSTEE'S INITIAL CERTIFICATION

                                                     April 25, 2003

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Litton Loan Servicing LP
5373 West Alabama
Houston, Texas 77056

          Re:  Pooling and Servicing Agreement, dated as of April 1, 2003, among
               Salomon Brothers Mortgage Securities VII, Inc., Litton Loan
               Servicing LP, Deutsche Bank National Trust Company as Trustee,
               Asset Backed Pass-Through Certificates, Series 2003-HE1
               -----------------------------------------------------------------

Ladies and Gentlemen:

          Attached is the Trustee's preliminary exceptions in accordance with
Section 2.02 of the referenced Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"). Capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Pooling and Servicing Agreement.

          As to each Mortgage Loan listed in the Mortgage Loan Schedule (other
than any Mortgage Loan paid in full or any Mortgage Loan specifically identified
in the exception report annexed thereto as not being covered by such
certification), (i) all documents constituting part of such Mortgage File (other
than such documents described in Section 2.01(v) of the Pooling and Servicing
Agreement) required to be delivered to it pursuant to the Pooling and Servicing
Agreement are in its possession, (ii) such documents have been reviewed by it
and appear regular on their face and relate to such Mortgage Loan and (iii)
based on its examination and only as to the foregoing, the information set forth
in the Mortgage Loan Schedule that corresponds to items (i), (iii), (xi), (xii)
and (xv) of the definition of "Mortgage Loan Schedule" accurately reflects
information set forth in the Mortgage File.

          The Trustee is under no duty or obligation (i) to inspect, review or
examine any such documents, instruments, certificates or other papers to
determine whether they are genuine, enforceable, valid, legally binding,
effective or appropriate for the represented purpose or whether they have
actually been recorded or are in recordable form or that they are other than
what they purport to be on their face, (ii) to determine whether any Mortgage
File should include any of the documents specified in clause (v) of Section 2.01
of the Pooling and Servicing Agreement or (iii) to determine the perfection or
priority of any security interest in any such documents or instruments.

                                      C-1-1

<PAGE>

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:______________________________
                                           Name:
                                           Title:

                                      C-1-2

<PAGE>

                                   EXHIBIT C-2
                                   -----------

                      FORM OF TRUSTEE'S FINAL CERTIFICATION

                                                    [Date]

Salomon Brothers Mortgage Securities VII, Inc.
390 Greenwich Street, 4th Floor
New York, NY 10013

Litton Loan Servicing LP
5373 West Alabama
Houston, Texas 77056

          Re:  Pooling and Servicing Agreement, dated as of April 1, 2003, among
               Salomon Brothers Mortgage Securities VII, Inc., Litton Loan
               Servicing LP, Deutsche Bank National Trust Company as Trustee,
               Asset Backed Pass-Through Certificates, Series 2003-HE1
               -----------------------------------------------------------------

Ladies and Gentlemen:

          In accordance with Section 2.01 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attachment hereto), it or a Custodian on its
behalf has received:

          (i) the original Mortgage, noting the presence of the MIN of the
     Mortgage Loan and language indicating that the Mortgage Loan is a MOM Loan
     if the Mortgage Loan is a MOM Loan, with evidence of recording thereon, and
     the original recorded power of attorney, if the Mortgage was executed
     pursuant to a power of attorney, with evidence of recording thereon;

          (ii) unless the Mortgage Loan is registered on the MERS(R)System, an
     original Assignment in blank;

          (iii) the original lender's title insurance policy, together with all
     endorsements or riders that were issued with or subsequent to the issuance
     of such policy, insuring the Mortgage on the Mortgaged Property represented
     therein as a fee interest vested in the Mortgagor or in the event such
     original title policy is unavailable, a written commitment or uniform
     binder or preliminary report of title issued by the title insurance or
     escrow company.

          The Trustee has made no independent examination of any documents
contained in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee is under no duty
or obligation (i) to inspect, review or examine

                                      C-2-1

<PAGE>

any such documents, instruments, certificates or other papers to determine
whether they are genuine, enforceable, valid, legally binding, effective or
appropriate for the represented purpose or whether they have actually been
recorded or are in recordable form or that they are other than what they purport
to be on their face, (ii) to determine whether any Mortgage File should include
any of the documents specified in clause (v) of Section 2.01 of the Pooling and
Servicing Agreement or (iii) to determine the perfection or priority of any
security interest in any such documents or instruments.

          Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:________________________________
                                           Name:
                                           Title:

                                      C-2-2

<PAGE>

                                   EXHIBIT D-1
                                   -----------

               FORM OF ACCREDITED MORTGAGE LOAN PURCHASE AGREEMENT

                                       D-1

<PAGE>
                        MORTGAGE LOAN PURCHASE AGREEMENT

          This is a Mortgage Loan Purchase Agreement (this "Agreement"), dated
April 22, 2003, among Accredited Home Lenders, Inc., a California corporation
(the "Originator"), Citigroup Global Markets Realty Corp., a New York
corporation (the "Seller") and Salomon Brothers Mortgage Securities VII, Inc., a
Delaware corporation (the "Purchaser").

                              Preliminary Statement
                              ---------------------

          The Seller intends to sell the Mortgage Loans (as hereinafter
identified) to the Purchaser on the terms and subject to the conditions set
forth in this Agreement. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the Trust Fund. The Trust Fund will be evidenced
by a single series of mortgage pass-through certificates designated as Series
2003-HE1 (the "Certificates"). The Certificates will consist of ten classes of
certificates and will be issued pursuant to a Pooling and Servicing Agreement,
dated as of April 1, 2003 (the "Pooling and Servicing Agreement"), among the
Depositor as depositor, Litton Loan Servicing LP as servicer (the "Servicer")
and Deutsche Bank National Trust Company as trustee (the "Trustee"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement.

          The parties hereto agree as follows:

          SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell and the
Purchaser agrees to purchase, on or before April 25, 2003 (the "Closing Date"),
certain fixed-rate and adjustable-rate conventional, one- to four-family, first
lien, residential mortgage loans purchased by the Seller from the Originator
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on April 1, 2003, (the "Cut-off Date") of $124,107,047.24 (the "Closing
Balance"), after giving effect to all payments due on the Mortgage Loans on or
before the Cut-off Date, whether or not received including the right to any
Prepayment Charges payable by the related Mortgagors in connection with any
Principal Prepayments on the Mortgage Loans.

          SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the Seller have
agreed upon which of the mortgage loans owned by the Seller and purchased from
the Originator are to be purchased by the Purchaser pursuant to this Agreement
and the Seller will prepare or cause to be prepared on or prior to the Closing
Date a final schedule (the "Closing Schedule") that shall describe such Mortgage
Loans and set forth all of the Mortgage Loans to be purchased under this
Agreement, including the Prepayment Charges. The Closing Schedule will conform
to the requirements set forth in this Agreement and, with respect to the
Mortgage Loans subject to this Agreement, to the definition of "Mortgage Loan
Schedule" under the Pooling and Servicing Agreement. The Closing Schedule shall
be used as part of the Mortgage Loan Schedule under the Pooling and Servicing
Agreement and shall be based on information provided by the Originator.

          SECTION 3. CONSIDERATION.

<PAGE>

          (a) In consideration for the Mortgage Loans to be purchased hereunder,
the Purchaser shall, as described in Section 8, pay to or upon the order of the
Seller in immediately available funds an amount (the "Purchase Price") equal to
the net sale proceeds of the Certificates.

          (b) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.

          (c) Pursuant to the Pooling and Servicing Agreement, the Purchaser
will assign all of its right, title and interest in and to the Mortgage Loans,
together with its rights under this Agreement, to the Trustee for the benefit of
the Certificateholders.

          SECTION 4. TRANSFER OF THE MORTGAGE LOANS.

          (a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell, and in
connection therewith hereby assigns, to the Purchaser, effective as of the
Closing Date, without recourse but subject to the terms of this Agreement, all
of its right, title and interest in, to and under the Mortgage Loans, including
the related Prepayment Charges. The contents of each Mortgage File not delivered
to the Purchaser or to any assignee, transferee or designee of the Purchaser on
or prior to the Closing Date are and shall be held in trust by the Seller for
the benefit of the Purchaser or any assignee, transferee or designee of the
Purchaser. Upon the sale of the Mortgage Loans, the ownership of each Mortgage
Note, the related Mortgage and the other contents of the related Mortgage File
is vested in the Purchaser and the ownership of all records and documents with
respect to the related Mortgage Loan prepared by or that come into the
possession of the Seller on or after the Closing Date shall immediately vest in
the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.

          (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on or prior
to the Closing Date, deliver or cause to be delivered to the Purchaser or any
assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:

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

          (ii) the original Mortgage, noting the presence of the MIN of the
     Mortgage Loan and language indicating that the Mortgage Loan is a MOM Loan
     if the Mortgage Loan is a MOM Loan, with evidence of recording thereon, and
     the original recorded power of attorney, if the Mortgage was executed
     pursuant to a power of attorney, with evidence of recording thereon;

                                       -2-

<PAGE>

          (iii) unless the Mortgage Loan is registered on the MERS(R)System, an
     original Assignment in blank;

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

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

          (vi) the original lender's title insurance policy, together with all
     endorsements or riders that were issued with or subsequent to the issuance
     of such policy, insuring the priority of the Mortgage as a first lien on
     the Mortgaged Property represented therein as a fee interest vested in the
     Mortgagor, or in the event such original title policy is unavailable, a
     written commitment or uniform binder or preliminary report of title issued
     by the title insurance or escrow company.

          Except with respect to any Mortgage Loan for which MERS is identified
on the Mortgage or on a properly recorded assignment of the Mortgage as the
mortgagee of record, the Seller (at the expense of the Originator) promptly
shall (within sixty days following the later of the Closing Date and the date of
the receipt by the Originator of the recording information for a Mortgage but in
no event later than ninety days following the Closing Date) submit or cause to
be submitted for recording, at no expense to the Purchaser (or the Trust Fund or
the Trustee under the Pooling and Servicing Agreement), in the appropriate
public office for real property records, each Assignment referred to in clauses
(b)(iii) and (b)(iv) of this Section 4 and shall execute or cause to be executed
each original Assignment in the following form: "Deutsche Bank National Trust
Company, as Trustee under the applicable agreement." In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Seller (at the expense of the Originator) promptly shall prepare or cause to be
prepared a substitute Assignment or cure such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.

          With respect to a maximum of approximately 2.0% of the Mortgage Loans,
by outstanding principal balance of the Mortgage Loans as of the Cut-off Date,
if any original Mortgage Note referred to in Section 4(b)(i) above cannot be
located, the obligations of the Seller to deliver such documents shall be deemed
to be satisfied upon delivery to the Purchaser of a photocopy of such Mortgage
Note, if available, with a lost note affidavit substantially in the form of
Exhibit K to the Pooling and Servicing Agreement. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser is
subsequently located, such original Mortgage Note shall be delivered to the
Purchaser within three Business Days.

          If any of the documents referred to in Sections 4(b)(ii), (iii) or
(iv) above has, as of the Closing Date, been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Seller to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Purchaser of a copy of each such
document certified by the Originator or its agent in the case of (x) above or
the applicable public recording office in the

                                       -3-

<PAGE>

case of (y) above to be a true and complete copy of the original that was
submitted for recording and (2) if such copy is certified by the Originator,
delivery to the Purchaser promptly upon receipt thereof of either the original
or a copy of such document certified by the applicable public recording office
to be a true and complete copy of the original. Notice shall be provided to the
Trustee and the Rating Agencies by the Seller if delivery pursuant to clause (2)
above will be made more than 180 days after the Closing Date. If the original
lender's title insurance policy was not delivered pursuant to Section 4(b)(vi)
above, the Seller shall deliver or cause to be delivered to the Purchaser,
promptly after receipt thereof, the original lender's title insurance policy.
The Seller shall deliver or cause to be delivered to the Purchaser promptly upon
receipt thereof any other original documents constituting a part of a Mortgage
File received with respect to any Mortgage Loan, including, but not limited to,
any original documents evidencing an assumption or modification of any Mortgage
Loan.

          In connection with the assignment of any Mortgage Loan registered on
the MERS(R) System, the Seller further agrees that it will cause (at the expense
of the Originator), within 30 Business Days after the Closing Date, the MERS(R)
System to indicate that such Mortgage Loans have been assigned by the Purchaser
to the Trustee in accordance with the Pooling and Servicing Agreement for the
benefit of the Certificateholders by including in such computer files (a) the
code in the field which identifies the specific Trustee and (b) the code in the
field "Pool Field" which identifies the series of the Certificates issued in
connection with such Mortgage Loans. Notwithstanding the foregoing, the
Originator shall not be responsible for the expense of more than one transfer on
the MERS(R) System at the direction of the Seller or the Purchaser.

          Each original document relating to a Mortgage Loan which is not
delivered to the Purchaser or its assignee, transferee or designee, if held by
the Seller, shall be so held for the benefit of the Purchaser, its assignee,
transferee or designee.

          (c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered pursuant to
Section 4(b) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and with respect to each document permitted to be delivered after the
Closing Date, within seven days of its delivery) to ascertain that all required
documents have been executed and received and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule.

          (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the right to
assign its interest under this Agreement, in whole or in part, to the Trustee,
as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller or the Originator, and the assignee
shall succeed to the rights and obligations hereunder of the Purchaser. Any
expense reasonably incurred by or on behalf of the Purchaser or the Trustee in
connection with enforcing any obligations of the Seller or the Originator under
this Agreement will be promptly reimbursed by the Seller or the Originator, as
applicable.

          (e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date, the
Seller shall either (i) deliver in escrow to the Purchaser, or to any assignee,
transferee or designee of the Purchaser for examination, the Mortgage File
pertaining to each Mortgage Loan or (ii) make such Mortgage Files available to
the Purchaser or to any assignee, transferee or designee of the Purchaser for
examination. Such examination may be made by the Purchaser or the Trustee, and
their

                                       -4-

<PAGE>

respective designees, upon reasonable notice to the Seller during normal
business hours before the Closing Date and within 60 days after the Closing
Date. If any such person makes such examination prior to the Closing Date and
identifies any Mortgage Loans that do not conform to the requirements of the
Purchaser as described in this Agreement, such Mortgage Loans shall be deleted
from the Closing Schedule. The Purchaser may, at its option and without notice
to the Seller, purchase all or part of the Mortgage Loans without conducting any
partial or complete examination. The fact that the Purchaser or any person has
conducted or has failed to conduct any partial or complete examination of the
Mortgage Files shall not affect the rights of the Purchaser or any assignee,
transferee or designee of the Purchaser to demand repurchase or other relief as
provided herein or under the Pooling and Servicing Agreement.

          SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ORIGINATOR
                     AND THE SELLER.

          (a) The Originator hereby represents and warrants to the Seller and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

          (i) The Originator is duly organized, validly existing and in good
     standing under the laws of the State of California and has all licenses
     necessary to carry on its business as now being conducted. It is licensed
     in, qualified to transact business in and is in good standing under the
     laws of the state in which any Mortgaged Property (as defined herein) is
     located except where the failure to be so licensed and qualified would not
     have a material adverse effect on its business or operations. No licenses
     or approvals obtained by Originator have been suspended or revoked by any
     court, administrative agency, arbitrator or governmental body and no
     proceedings are pending which might result in such suspension or
     revocation;

          (ii) The Originator has the full power and authority to execute,
     deliver and perform, and to enter into and consummate, all transactions
     contemplated by this Agreement. The Originator has duly authorized the
     execution, delivery and performance of this Agreement, has duly executed
     and delivered this Agreement, and this Agreement, assuming due
     authorization, execution and delivery by the Seller and the Purchaser,
     constitutes a legal, valid and binding obligation of the Originator,
     enforceable against it in accordance with its terms except as the
     enforceability thereof may be limited by bankruptcy, insolvency or
     reorganization;

          (iii) The execution and delivery of this Agreement by the Originator
     and the performance of and compliance with the terms of this Agreement
     which are applicable to the Originator will not violate the Originator's
     articles of incorporation or by-laws or constitute a default under or
     result in a breach or acceleration of, any material contract, agreement or
     other instrument to which the Originator is a party or which may be
     applicable to the Originator or its assets;

                                       -5-

<PAGE>

          (iv) The Originator is not in violation of, and the execution and
     delivery of this Agreement by the Originator and its performance and
     compliance with the terms of this Agreement will not constitute a violation
     with respect to, any order or decree of any court or any order or
     regulation of any federal, state, municipal or governmental agency having
     jurisdiction over the Originator or its assets, which violation might have
     consequences that would materially and adversely affect the condition
     (financial or otherwise) or the operation of the Originator or its assets
     or might have consequences that would materially and adversely affect the
     enforceability of the Mortgage Loans or this Agreement or the performance
     of its obligations and duties hereunder;

          (v) The Originator is a HUD approved mortgagee pursuant to Section 203
     of the National Housing Act. No event has occurred, including but not
     limited to a change in insurance coverage, which would make the Originator
     unable to comply with HUD eligibility requirements or which would require
     notification to HUD;

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

          (vii) [Reserved];

          (viii) There are no actions or proceedings against, or investigations
     of, the Originator before any court, administrative or other tribunal (A)
     that might prohibit its entering into this Agreement, (B) seeking to
     prevent the consummation of the transactions contemplated by this Agreement
     or (C) except as disclosed to the Seller and the Purchaser in writing prior
     to the Closing Date, that might prohibit or materially and adversely affect
     the performance by the Originator of its obligations under, or the validity
     or enforceability of, this Agreement

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

          (x) The consummation of the transactions contemplated by this
     Agreement are in the ordinary course of business of the Originator; and

          (xi) Neither this Agreement nor any written statement, report or other
     document prepared and furnished or to be prepared and furnished by the
     Originator pursuant to this Agreement or in connection with the
     transactions contemplated hereby contains any untrue statement of material
     fact or omits to state a material fact necessary to make the statements
     contained herein or therein not misleading.

          (b) The Seller hereby represents and warrants to the Originator and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

                                       -6-

<PAGE>

          (i) The Seller is duly organized, validly existing and in good
     standing as a corporation under the laws of the State of New York with full
     corporate power and authority to conduct its business as presently
     conducted by it to the extent material to the consummation of the
     transactions contemplated herein. The Seller has the full corporate power
     and authority to own the Mortgage Loans and to transfer and convey the
     Mortgage Loans to the Purchaser and has the full corporate power and
     authority to execute and deliver, engage in the transactions contemplated
     by, and perform and observe the terms and conditions of this Agreement.

          (ii) The Seller has duly authorized the execution, delivery and
     performance of this Agreement, has duly executed and delivered this
     Agreement, and this Agreement, assuming due authorization, execution and
     delivery by the Originator and the Purchaser, constitutes a legal, valid
     and binding obligation of the Seller, enforceable against it in accordance
     with its terms except as the enforceability thereof may be limited by
     bankruptcy, insolvency or reorganization or by general principles of
     equity.

          (iii) The execution, delivery and performance of this Agreement by the
     Seller (x) does not conflict and will not conflict with, does not breach
     and will not result in a breach of and does not constitute and will not
     constitute a default (or an event, which with notice or lapse of time or
     both, would constitute a default) under (A) any terms or provisions of the
     articles of incorporation or by-laws of the Seller, (B) any term or
     provision of any material agreement, contract, instrument or indenture, to
     which the Seller is a party or by which the Seller or any of its property
     is bound or (C) any law, rule, regulation, order, judgment, writ,
     injunction or decree of any court or governmental authority having
     jurisdiction over the Seller or any of its property and (y) does not create
     or impose and will not result in the creation or imposition of any lien,
     charge or encumbrance which would have a material adverse effect upon the
     Mortgage Loans or any documents or instruments evidencing or securing the
     Mortgage Loans.

          (iv) No consent, approval, authorization or order of, registration or
     filing with, or notice on behalf of the Seller to any governmental
     authority or court is required, under federal laws or the laws of the State
     of New York, for the execution, delivery and performance by the Seller of,
     or compliance by the Seller with, this Agreement or the consummation by the
     Seller of any other transaction contemplated hereby and by the Pooling and
     Servicing Agreement; provided, however, that the Seller makes no
     representation or warranty regarding federal or state securities laws in
     connection with the sale or distribution of the Certificates.

          (v) This Agreement does not contain any untrue statement of material
     fact or omit to state a material fact necessary to make the statements
     contained herein not misleading. The written statements, reports and other
     documents prepared and furnished or to be prepared and furnished by the
     Seller pursuant to this Agreement or in connection with the transactions
     contemplated hereby taken in the aggregate do not contain any untrue
     statement of material fact or omit to state a material fact necessary to
     make the statements contained therein not misleading.

                                       -7-

<PAGE>

          (vi) The Seller is not in violation of, and the execution and delivery
     of this Agreement by the Seller and its performance and compliance with the
     terms of this Agreement will not constitute a violation with respect to,
     any order or decree of any court or any order or regulation of any federal,
     state, municipal or governmental agency having jurisdiction over the Seller
     or its assets, which violation might have consequences that would
     materially and adversely affect the condition (financial or otherwise) or
     the operation of the Seller or its assets or might have consequences that
     would materially and adversely affect the performance of its obligations
     and duties hereunder.

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

          (viii) Immediately prior to the sale of the Mortgage Loans to the
     Purchaser as herein contemplated, the Seller will be the owner of the
     related Mortgage and the indebtedness evidenced by the related Mortgage
     Note, and, upon the payment to the Seller of the Purchase Price, in the
     event that the Seller retains or has retained record title, the Seller
     shall retain such record title to each Mortgage, each related Mortgage Note
     and the related Mortgage Files with respect thereto in trust for the
     Purchaser as the owner thereof from and after the date hereof.

          (ix) There are no actions or proceedings against, or investigations
     known to it of, the Seller before any court, administrative or other
     tribunal (A) that might prohibit its entering into this Agreement, (B)
     seeking to prevent the sale of the Mortgage Loans by the Seller or the
     consummation of the transactions contemplated by this Agreement or (C) that
     might prohibit or materially and adversely affect the performance by the
     Seller of its obligations under, or validity or enforceability of, this
     Agreement.

          (x) The consummation of the transactions contemplated by this
     Agreement are in the ordinary course of business of the Seller, and the
     transfer, assignment and conveyance of the Mortgage Notes and the Mortgages
     by the Seller are not subject to the bulk transfer or any similar statutory
     provisions.

          (xi) The Seller has not dealt with any broker, investment banker,
     agent or other person, except for the Purchaser or any of its affiliates,
     that may be entitled to any commission or compensation in connection with
     the sale of the Mortgage Loans.

          (xiii) There is no litigation currently pending or, to the best of the
     Seller's knowledge without independent investigation, threatened against
     the Seller that would reasonably be expected to adversely affect the
     transfer of the Mortgage Loans, the issuance of the Certificates or the
     execution, delivery, performance or enforceability of this Agreement, or
     that would result in a material adverse change in the financial condition
     of the Seller.

                                       -8-

<PAGE>

          (xiv) The Seller is solvent and will not be rendered insolvent by the
     consummation of the transactions contemplated hereby. The Seller is not
     transferring any Mortgage loan with any intent to hinder, delay or defraud
     any of its creditors.

          (xv) Each Mortgage Loan constitutes a "qualified mortgage" within the
     meaning of Section 860G(a)(3) of the Code.

          (xvi) Each Mortgage Loan at the time it was made complied in all
     material respects with applicable local, state and federal laws, including,
     but not limited to, all applicable predatory and abusive lending laws.

          (xvii) None of the Mortgage Loans are High Cost as defined by any
     applicable predatory and abusive lending laws.

          SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR RELATING
                     TO THE MORTGAGE LOANS.

          Representations and Warranties as to Individual Mortgage Loans.
          --------------------------------------------------------------

          The Originator hereby represents and warrants to the Seller and the
Purchaser that as to each Mortgage Loan as of the Closing Date or as of such
other date as specified herein:

          (i) The information set forth in the Mortgage Loan Schedule with
respect to the Mortgage Loans subject to this Agreement, including any
information therein regarding the Prepayment Charges, is complete, true and
correct and each Prepayment Charge is permissible, enforceable and collectable
under applicable law;

          (ii) Any Mortgage Loan with a Monthly Payment due on or before April
1, 2003 will have made such Monthly Payment as of the close of business on May
1, 2003;

          (iii) All payments required to be made up to the close of business on
March 31, 2003 have been made; the Originator has not advanced funds, or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the related Mortgaged Property, directly or indirectly, for
the payment of any amount required by the Mortgage Note or Mortgage; and there
has been no delinquency greater than 29 days, exclusive of any period of grace,
in any payment by the Mortgagor thereunder since the origination of the Mortgage
Loan;

          (iv) There are no delinquent taxes, ground rents, water charges, sewer
rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;

          (v) The terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public

                                       -9-

<PAGE>

recording office if necessary to maintain the lien priority of the Mortgage, and
which have been delivered to the Purchaser or the Trustee on behalf of the
Purchaser; the substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required by the related policy, and
is reflected on the Mortgage Loan Schedule. No Mortgagor has been released, in
whole or in part, except in connection with an assumption agreement approved by
the title insurer, to the extent required by the policy, and which assumption
agreement has been delivered to the Purchaser or the Trustee on behalf of the
Purchaser and the terms of which are reflected in the Mortgage Loan Schedule;

          (vi) The Mortgage Note and the Mortgage are not subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto. Each Prepayment Charge or penalty with respect to any Mortgage
Loan is permissible, enforceable and collectible under applicable law subject to
bankruptcy laws and general principles of equity;

          (vii) All buildings upon the Mortgaged Property are insured by an
insurer acceptable to Fannie Mae and Freddie Mac against loss by fire, hazards
of extended coverage and such other hazards as are customary in the area where
the Mortgaged Property is located. All such insurance policies contain a
standard mortgagee clause naming the Originator, its successors and assigns as
mortgagee and all currently due premiums thereon have been paid. If the
Mortgaged Property is in an area identified on a Flood Hazard Map or Flood
Insurance Rate Map issued by the Federal 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 Insurance Administration is in effect which policy conforms to the
requirements of Fannie Mae and Freddie Mac. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and expense,
and on the Mortgagor's failure to do so, authorizes the holder of the Mortgage
to maintain such insurance at Mortgagor's cost and expense and to seek
reimbursement therefor from the Mortgagor;

          (viii) Any and all requirements of any federal, state or local law
including, but not limited to, all applicable predatory and abusive lending,
usury, truth in lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity, fair housing or disclosure laws applicable
to the origination and servicing of mortgage loans of a type similar to the
Mortgage Loans have been complied with;

          (ix) The Mortgage has not been satisfied, cancelled, subordinated or
rescinded, in whole or in part, and the Mortgaged Property has not been released
from the lien of the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such satisfaction, cancellation, subordination,
rescission or release;

          (x) The Mortgage is a valid, existing and enforceable (subject to
bankruptcy laws and general principles of equity) first lien on the Mortgaged
Property, including all improvements on the

                                      -10-

<PAGE>

Mortgaged Property subject only to (a) the lien of current real property taxes
and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of the public record as
of the date of recording being acceptable to mortgage lending institutions
generally and specifically referred to in the lender's title insurance policy
delivered to the originator of the Mortgage Loan and which do not adversely
affect the Value of the Mortgaged Property, and (c) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the related Mortgaged Property. Any
security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
existing and enforceable first lien and first priority security interest on the
property described therein. The Mortgaged Property was not, as of the date of
origination of the Mortgage Loan, subject to a mortgage, deed of trust, deed to
secure debt or other security instrument creating a lien subordinate to the lien
of the Mortgage, except as allowed by the Originator's underwriting guidelines;

          (xi) 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 subject to bankruptcy laws and general principles of
equity;

          (xii) All parties to the Mortgage Note and the Mortgage had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and
properly executed by such parties. The Mortgagor is a natural person or a trust
acceptable to Fannie Mae and Freddie Mac and with a natural person obligated
under the Mortgage Note;

          (xiii) Except to the extent the Mortgage Loan is subject to completion
escrows which have been disclosed to and acknowledged in writing by the Seller
and which meet the requirements of the Originator's underwriting guidelines, and
as to which a completed Fannie Mae form 442 has been or will be delivered to the
Seller within sixty (60) days following the closing of the purchase of the
Mortgage Loans by the Seller from the Originator (the "Previous Sale Date"), the
proceeds of the Mortgage Loan have been fully disbursed to or for the account of
the Mortgagor and there is no obligation for the Mortgagee to advance additional
funds thereunder and any and all requirements as to completion of any on site or
off site improvement and as to disbursements of any escrow funds therefor have
been complied with. All costs, fees and expenses incurred in making or closing
the Mortgage Loan and the recording of the Mortgage have been paid, and the
Mortgagor is not entitled to any refund of any amounts paid or due to the
Mortgagee pursuant to the Mortgage Note or Mortgage;

          (xiv) The Mortgage Loan was underwritten in accordance with the
underwriting standards of the Originator in effect at the time the Mortgage Loan
was originated, which underwriting standards satisfy the standards of prudent
mortgage lenders in the secondary market; and the Mortgage Note and Mortgage are
on forms acceptable to Fannie Mae and Freddie Mac;

          (xv) 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

                                      -11-

<PAGE>

such interest, were) in compliance with any and all applicable "doing business"
and licensing requirements of the laws of the state wherein the Mortgaged
Property is located;

          (xvi) The Mortgage Loan is covered by an American Land Title
Association ("ALTA") ALTA lender's title insurance policy (which, in the case of
an Adjustable-Rate Mortgage Loan has an adjustable rate mortgage endorsement in
the form of ALTA 6.0 or 6.1) or other form of title insurance acceptable to
Fannie Mae and Freddie Mac, issued by a title insurer or other issuer acceptable
to Fannie Mae and Freddie Mac and qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring (subject to the exceptions
contained in (x)(a) and (b) above) the Originator, its successors and assigns as
to the first priority lien of the Mortgage in the original principal amount of
the Mortgage Loan and, with respect to any Adjustable-Rate Mortgage Loan,
against any loss by reason of the invalidity or unenforceability of the lien
resulting from the provisions of the Mortgage providing for adjustment in the
Mortgage Rate and Monthly Payment. Additionally, such lender's title insurance
policy affirmatively insures ingress and egress to and from the Mortgaged
Property, and against encroachments by or upon the Mortgaged Property or any
interest therein. The Originator and its successor and assigns are the sole
insured of such lender's title insurance policy, and such lender's title
insurance policy is in full force and effect and will be in full force and
effect upon the consummation of the transactions contemplated by this Agreement.
No claims have been made under such lender's title insurance policy, and no
prior holder of the related Mortgage, including the Originator, has done, by act
or omission, anything which would impair the coverage of such lender's title
insurance policy;

          (xvii) Except for the Monthly Payment due on April 1, 2003 which is
not more than 25 days delinquent, there is no default, breach, violation or
event of acceleration existing under the Mortgage or the Mortgage Note and no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration, and the Originator has not waived any default, breach, violation
or event of acceleration;

          (xviii) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage;

          (xix) All improvements which were considered in determining the Value
of the related Mortgaged Property lay wholly within the boundaries and building
restriction lines of the Mortgaged Property, and no improvements on adjoining
properties encroached upon the Mortgaged Property;

          (xx) The Mortgage Loan was originated by the Originator or by a
savings and loan association, a savings bank, a commercial bank or similar
banking institution which is supervised and examined by a federal or state
authority, or by a mortgagee approved as such by the Secretary of HUD;

          (xxi) Principal payments on the Mortgage Loan commenced or will
commence no more than sixty (60) days after the proceeds of the Mortgage Loan
were disbursed. The Mortgage Loan bears interest at the Mortgage Rate. With
respect to each Mortgage Loan, the Mortgage Note is payable on the

                                      -12-
<PAGE>

first day of each month in Monthly Payments, which, in the case of a Fixed-Rate
Mortgage Loan, are sufficient to fully amortize the original principal balance
over the original term thereof and to pay interest at the related Mortgage Rate,
and, in the case of an Adjustable-Rate Mortgage Loan, are changed on each
Adjustment Date, and in any case, are sufficient to fully amortize the original
principal balance over the original term thereof and to pay interest at the
related Mortgage Rate. The Index for each Adjustable-Rate Mortgage Loan is as
provided on the Mortgage Loan Schedule. The Mortgage Note does not permit
negative amortization. No Adjustable-Rate Mortgage Loan may, by its terms, be
converted to a Fixed-Rate Mortgage Loan;

          (xxii) The origination and collection practices used by the Originator
with respect to each Mortgage Note and Mortgage have been in all respects legal,
proper, prudent and customary in the mortgage origination and servicing
industry. During the time that the Originator serviced the Mortgage Loan, the
Mortgage Loan has been serviced by the Originator, and any predecessor servicer
in accordance with the terms of the Mortgage Note. With respect to escrow
deposits and Escrow Payments, if any, all such payments are in the possession
of, or under the control of, the Originator and there exist no deficiencies in
connection therewith for which customary arrangements for repayment thereof have
not been made. No escrow deposits or Escrow Payments or other charges or
payments due the Originator have been capitalized under any Mortgage or the
related Mortgage Note and no such escrow deposits or Escrow Payments are being
held by the Originator for any work on a Mortgaged Property which has not been
completed;

          (xxiii) As of the Previous Sale Date and, to the Originator's
knowledge, as of the Closing Date, the Mortgaged Property is free of damage and
waste and there is no proceeding pending for the total or partial condemnation
thereof;

          (xxiv) The Mortgage and related Mortgage Note contain customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (a) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (b) otherwise by
judicial foreclosure. The Mortgaged Property is not subject to any bankruptcy
proceeding or foreclosure proceeding and the Mortgagor has not filed for
protection under applicable bankruptcy laws. There is no homestead or other
exemption available to the Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the
Mortgage. The Mortgagor has not notified the Originator and the Originator has
no knowledge of any relief requested or allowed to the Mortgagor under the
Soldiers and Sailors Civil Relief Act of 1940;

          (xxv) The Mortgage Loan was underwritten in accordance with the
underwriting standards of the Originator in effect at the time the Mortgage Loan
was originated and the Mortgage Note and Mortgage are on forms acceptable to
Fannie Mae and Freddie Mac;

          (xxvi) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;

                                      -13-
<PAGE>

          (xxvii) The Mortgage File contains an appraisal of the related
Mortgaged Property which satisfied the standards of Fannie Mae and Freddie Mac
and was made and signed, prior to the approval of the Mortgage Loan application,
by 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, whose compensation was not affected by the approval or disapproval of
the Mortgage Loan and who met the minimum qualifications of Fannie Mae and
Freddie Mac. Each appraisal of the Mortgage Loan was made in accordance with the
relevant provisions of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989;

          (xxviii) In the event the Mortgage constitutes 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 the Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor;

          (xxix) No Mortgage Loan contains provisions pursuant to which Monthly
Payments are (a) paid or partially paid with funds deposited in any separate
account established by the Originator, the Mortgagor, or anyone on behalf of the
Mortgagor, (b) paid by any source other than the Mortgagor or (c) contains any
other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature;

          (xxx) The Mortgagor has executed one or more statements to the effect
that the Mortgagor has received all disclosure materials required by applicable
law with respect to the making of fixed rate mortgage loans in the case of
Fixed-Rate Mortgage Loans, and adjustable rate mortgage loans in the case of
Adjustable-Rate Mortgage Loans and rescission materials with respect to
Refinanced Mortgage Loans, and such statements are and will remain in the
Mortgage File;

          (xxxi) No Mortgage Loan was made (a) to finance the construction or
rehabilitation of a Mortgaged Property or (b) facilitating the trade-in or
exchange of a Mortgaged Property;

          (xxxii) The Originator has no knowledge of any circumstances or
condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or
the Mortgagor's credit standing that can reasonably be expected to cause the
Mortgage Loan to be an unacceptable investment, cause the Mortgage Loan to
become delinquent, or adversely affect the value of the Mortgage Loan;

          (xxxiii) At origination and, to the best of Originator's knowledge, on
the Closing Date, the Mortgaged Property was capable of being lawfully occupied
under applicable law; all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property
and, with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy, have been made or obtained from the
appropriate authorities;

          (xxxiv) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Mortgage Loan has taken place on the part
of any person, including without limitation the

                                      -14-
<PAGE>

Mortgagor, any appraiser, any builder or developer, or any other party involved
in the origination of the Mortgage Loan or in the application of any insurance
in relation to such Mortgage Loan;

          (xxxv) The Assignment of Mortgage prepared and delivered by the
Originator, if any, is in recordable form and is acceptable for recording under
the laws of the jurisdiction in which the Mortgaged Property is located;

          (xxxvi) Any principal advances made to the Mortgagor prior to the
Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan;

          (xxxvii) [Reserved];

          (xxxviii) If the Residential Dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development) such condominium or planned unit development
project conforms to the Originator's underwriting guidelines;

          (ixl) The source of the down payment, if any, with respect to each
Mortgage Loan has been fully verified by the Originator as and if required
pursuant to the Originator's underwriting guidelines

          (xl) Interest on each Mortgage Loan is calculated on the basis of a
360-day year consisting of twelve 30-day months;

          (xli) To the best of Originator's knowledge, based upon customary and
prudent residential mortgage industry underwriting and servicing practices, the
Mortgaged Property is in material compliance with all applicable environmental
laws pertaining to environmental hazards including, without limitation,
asbestos, and neither the Originator nor, to the Originator's knowledge, the
related Mortgagor, has received any notice of any violation or potential
violation of such law;

          (xlii) Each Mortgage Loan is covered by a fully assignable, life of
loan tax service contract which is assignable to the Purchaser or its designee
without the payment of any fee by the Purchaser or its designee;

          (xliii) Each Mortgage Loan is covered by a flood zone service contract
which is assignable to the Purchaser or its designee or, for each Mortgage Loan
not covered by such flood zone service contract, the Originator agrees to
purchase such flood zone service contract;

          (xliv) No Mortgage Loan is subject to the provisions of the
Homeownership and Equity Protection Act of 1994 as amended ("HOEPA") or any
comparable state or local statutes or regulations,

                                      -15-
<PAGE>

including, without limitation, the provisions of the City of Oakland, California
Anti-Predatory Lending Ordinance No. 12361. The total combined points and fees
charged in connection with the origination of the Mortgage Loan did not exceed
8% of the original principal balance of the Mortgage Loan;

          (xlv) Each Mortgage Loan, at the time it was originated, complied in
all material respects with applicable local, state, and federal laws, including,
but not limited to, all applicable predatory, abusive or deceptive lending laws;

          (xlvi) The debt-to-income ratio of the related Mortgagor was not
greater than 60% at the origination of the related Mortgage Loan;

          (xlvii) None of the proceeds of the Mortgage Loan were used, in
connection with the closing of the Mortgage Loan, to finance the purchase of
single premium credit life or disability insurance policies or any comparable
insurance;

          (xlviii) No Mortgage Loan had a Loan-to-Value Ratio in excess of 95%
at origination of such Mortgage Loan;

          (il) [Reserved];

          (l) The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder;

          (li) The Mortgage Loan complies with all applicable consumer credit
statutes and regulations, including, without limitation, the respective Uniform
Consumer Credit Code laws in effect in Colorado, Idaho, Indiana, Iowa, Kansas,
Maine, Oklahoma, South Carolina, Utah and Wyoming, has been originated by a
properly licensed entity, and in all other respects, complies with all of the
material requirements of any such applicable laws;

          (lii) With respect to each ground lease to which the Mortgaged
Property is subject (a "Ground Lease"), as of the Previous Sale Date and, to the
Originator's knowledge with respect to clauses (ii), (iii) and (v) through (vii)
only, as of the Closing Date: (i) the Mortgagor is the owner of a valid and
subsisting interest as tenant under the Ground Lease; (ii) the Ground Lease is
in full force and effect, unmodified and not supplemented by any writing or
otherwise; (iii) all rent, additional rent and other charges reserved therein
have been paid to the extent they are payable to the date hereof; (iv) the
Mortgagor enjoys the quiet and peaceful possession of the estate demised
thereby, subject to any sublease; (v) the Mortgagor is not in default under any
of the terms thereof and there are no circumstances which, with the passage of
time or the giving of notice or both, would constitute an event of default
thereunder; (vi) the lessor under the Ground Lease is not in default under any
of the terms or provisions thereof on the part of the lessor to be observed or
performed; (vii) the lessor under the Ground Lease has satisfied all of its
repair or construction obligations, if any, to date pursuant to the terms of the
Ground Lease; (viii) the remaining term of the Ground Lease extends not less
than ten (10) years following the maturity date of such Mortgage

                                      -16-
<PAGE>

Loan; and (ix) the execution, delivery and performance of the Mortgage do not
require the consent (other than those consents which have been obtained and are
in full force and effect) under, and will not contravene any provision of or
cause a default under, the Ground Lease; and

          (liii) The Mortgage Loan is not a "High Cost Home Loan" within the
meaning of the Georgia Fair Lending Act (the "Georgia Act"). To the extent that
the Mortgage Loan is a "Covered Loan" within the meaning of the Georgia Act, the
Mortgage Loan complies with all provisions of the Georgia Act, and the Mortgage
Loan was either (i) a purchase money loan, or (ii) a refinancing of an existing
mortgage loan that had been closed more than five years prior to the closing of
such Mortgage Loan.

          SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND FOR
                     BREACH OF REPRESENTATION AND WARRANTY.

          (a) The representations and warranties contained in Section 6 shall
not be impaired by any review and examination of loan files or other documents
evidencing or relating to the Mortgage Loans or any failure on the part of the
Seller or the Purchaser to review or examine such documents and shall inure to
the benefit of any assignee, transferee or designee of the Purchaser, including
the Trustee for the benefit of holders of the Certificates; provided, however,
that neither the Seller nor the Purchaser may demand repurchase or other relief
or remedy solely on the basis that one of the Mortgage Loan examined by the
Seller or its designee prior to the Previous Sale Date (as set forth on Schedule
A hereto) does not comply with the Originator's underwriting guidelines provided
by the Originator to the Seller prior to such examination.

          Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by or at the direction of the
Seller (as listed on the Trustee's Preliminary Exception Report) as part of any
Mortgage File, or of a breach of any of the representations and warranties
contained in Section 6 that materially and adversely affects the value of any
Mortgage Loan or the interest therein of the Purchaser or the Purchaser's
assignee, transferee or designee, the party discovering such breach shall give
prompt written notice to the Seller or the Originator, as applicable. Within
sixty (60) days of its discovery or its receipt of notice of any such missing
documentation that was not transferred to the Purchaser as described above, or
of materially defective documentation, or of any such breach of a representation
and warranty, the Seller or the Originator, as applicable, promptly shall
deliver such missing document or cure such defect or breach in all material
respects or, in the event the Seller or the Originatorr cannot deliver such
missing document or cannot cure such defect or breach, the Seller or the
Originator, as applicable, shall, within ninety (90) days of its discovery or
receipt of notice, either (i) repurchase the affected Mortgage Loan at the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement)
or (ii) pursuant to the provisions of the Pooling and Servicing Agreement, cause
the removal of such Mortgage Loan from the Trust Fund and substitute one or more
Qualified Substitute Mortgage Loans. The Seller shall amend the Closing Schedule
to reflect the withdrawal of such Mortgage Loan from the terms of this Agreement
and the Pooling and Servicing Agreement. The Seller shall deliver to the
Purchaser such amended Closing Schedule and shall deliver such other documents
as are required by this Agreement or the Pooling and Servicing Agreement within
five (5) days of any such amendment. Any repurchase pursuant to this Section

                                      -17-
<PAGE>

7(a) shall be accomplished by transfer to an account designated by the Purchaser
of the amount of the Purchase Price in accordance with Section 2.03 of the
Pooling and Servicing Agreement. Any repurchase required by this Section shall
be made in a manner consistent with Section 2.03 of the Pooling and Servicing
Agreement.

          Notwithstanding the foregoing, within 90 days of the earlier of
discovery by the Originator or receipt of notice by the Originator of the breach
of the representation of the Originator set forth in Section 6(i) above
regarding Prepayment Charges which materially and adversely affects the
interests of the Holders of the Class P Certificates in any Prepayment Charge,
the Originator shall pay the amount of the scheduled Prepayment Charge, for the
benefit of the Holders of the Class P Certificates by remitting such amount to
the Servicer for deposit into the Collection Account, net of any amount
previously collected by the Servicer or paid by the Servicer, for the benefit of
the Holders of the Class P Certificates in respect of such Prepayment Charge and
net of any amount which was collectible by the Servicer but which was not
collected by the Servicer.

          (b) Notwithstanding the foregoing, with respect to an alleged breach
of a representation and warranty which breach is covered by a title insurance
policy, the Purchaser shall use reasonable efforts to enforce the provisions of
any related title insurance policy prior to seeking a remedy against the
Originator or the Seller hereunder.

          (c) It is understood and agreed that the obligations of the Originator
or the Seller set forth in this Section 7 to cure or repurchase a defective
Mortgage Loan constitute the sole remedies of the Purchaser against the
Originator or the Seller respecting a missing document or a breach of the
representations and warranties contained in Section 6.

          SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The closing of the
purchase and sale of the Mortgage Loans shall be held at the New York City
office of Thacher Proffitt & Wood at 10:00 a.m. New York City time on the
Closing Date.

          The closing shall be subject to each of the following conditions:

          (a)  All of the representations and warranties of the Seller and the
               Originator under this Agreement shall be true and correct in all
               material respects as of the date as of which they are made and no
               event shall have occurred which, with notice or the passage of
               time, would constitute a default under this Agreement;

          (b)  The Purchaser shall have received, or the attorneys of the
               Purchaser shall have received in escrow (to be released from
               escrow at the time of closing), all Closing Documents as
               specified in Section 9 of this Agreement, in such forms as are
               agreed upon and acceptable to the Purchaser, duly executed by all
               signatories other than the Purchaser as required pursuant to the
               respective terms thereof;

                                      -18-
<PAGE>

          (c)  The Seller shall have delivered or caused to be delivered and
               released to the Purchaser or to its designee, all documents
               (including without limitation, the Mortgage Loans) required to be
               so delivered by the Purchaser pursuant to Section 2.01 of the
               Pooling and Servicing Agreement;

          (d)  The Seller shall have executed the Indemnification Agreement,
               dated as of April 22, 2003, between the Purchaser and Litton Loan
               Servicing LP, and shall have assumed all of the obligations of
               the Purchaser thereunder; and

          (e)  All other terms and conditions of this Agreement and the Pooling
               and Servicing Agreement shall have been complied with.

          Subject to the foregoing conditions, the Purchaser shall deliver or
cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the consideration for the Mortgage Loans as
specified in Section 3 of this Agreement, by delivery to the Seller of the
Purchase Price in immediately available funds.

          SECTION 9. CLOSING DOCUMENTS. Without limiting the generality of
Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:

          (a)  An Officer's Certificate of the Seller, dated the Closing Date,
               in form satisfactory to and upon which the Purchaser and
               Citigroup Global Markets Inc. (the "Representative") may rely,
               and attached thereto copies of the certificate of incorporation,
               by-laws and certificate of good standing of the Seller under the
               laws of New York;

          (b)  An Officer's Certificate of the Seller, dated the Closing Date,
               in form satisfactory to and upon which the Purchaser and the
               Representative may rely, with respect to certain facts regarding
               the sale of the Mortgage Loans by the Seller to the Purchaser;

          (c)  An Opinion of Counsel of the Seller, dated the Closing Date, in
               form satisfactory to and addressed to the Purchaser and the
               Representative;

          (d)  An Officer's Certificate of the Originator, dated the Closing
               Date, in form satisfactory to and upon which the Purchaser and
               the Representative may rely, and attached thereto copies of the
               certificate of incorporation, by-laws and certificate of good
               standing of the Originator under the laws of California;

          (e)  Such opinions of counsel as the Rating Agencies or the Trustee
               may request in connection with the sale of the Mortgage Loans by
               the Seller to the Purchaser or the Seller's execution and
               delivery of, or performance under, this Agreement;

                                      -19-
<PAGE>

          (f)  A letter from Deloitte & Touche LLP, certified public
               accountants, to the effect that they have performed certain
               specified procedures as a result of which they determined that
               certain information of an accounting, financial or statistical
               nature set forth in the Purchaser's prospectus supplement for
               Series 2003-HE1, dated April 22, 2003 (the "Prospectus
               Supplement") relating to the Offered Certificates contained under
               the captions "Summary--The Mortgage Loans," "Risk Factors," (to
               the extent of information concerning the Mortgage Loans contained
               therein) "The Mortgage Pool" agrees with the records of the
               Seller; and

          (g) Such further information, certificates, opinions and documents as
          the Purchaser or the Representative may reasonably request.

          SECTION 10. COSTS. The Seller shall pay (or shall reimburse the
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and, except
as set forth in Section 4(b), the fees for recording Assignments.

          The Seller shall pay (or shall reimburse the Purchaser or any other
Person to the extent that the Purchaser or such other Person shall pay) the fees
and expenses of the Seller's accountants and attorneys, the costs and expenses
incurred in connection with producing the Servicer's or any Subservicer's loan
loss, foreclosure and delinquency experience, the costs and expenses incurred in
connection with obtaining the documents referred to in Sections 9(a), 9(b), 9(c)
and 9(h), the costs and expenses of printing (or otherwise reproducing) and
delivering this Agreement, the Pooling and Servicing Agreement, the
Certificates, the prospectus and Prospectus Supplement, and any private
placement memorandum relating to the Certificates and other related documents,
the initial fees, costs and expenses of the Trustee, the fees and expenses of
the Purchaser's counsel in connection with the preparation of all documents
relating to the securitization of the Mortgage Loans, the filing fee charged by
the Securities and Exchange Commission for registration of the Certificates, the
cost of outside special counsel that may be required by the Originator and the
fees charged by any rating agency to rate the Certificates. All other costs and
expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.

          SECTION 11. [RESERVED].

          SECTION 12. INDEMNIFICATION.

          The Originator shall indemnify and hold harmless each of (i) the
Purchaser, (ii) the Underwriters, (iii) the Person, if any, to which the
Purchaser assigns its rights in and to a Mortgage Loan and each of their
respective successors and assigns and (iv) each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933 Act") ((i) through (iv) collectively, the "Indemnified
Party") against any and all losses, claims, expenses, damages or liabilities

                                      -20-
<PAGE>

to which the Indemnified Party may become subject, under the 1933 Act or
otherwise, insofar as such losses, claims, expenses, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained in the
Prospectus Supplement or any private placement memorandum relating to the
offering by the Purchaser or an affiliate thereof, of the Class CE Certificates
or the Class P Certificates or net interest margin securities backed by
distributions on the Class CE Certificates or Class P Certificates, or the
omission or the alleged omission to state therein the material fact necessary in
order to make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity with
information furnished in writing to the Purchaser or any of its affiliates by
the Originator or any of its affiliates specifically for use therein, which
shall include, with respect to the Prospectus Supplement, (i) the information
set forth under the caption "Summary--The Mortgage Loans," "Risk Factors," (to
the extent of information concerning the characteristics of the Mortgage Loans
contained therein) and "The Mortgage Pool" but only to the extent that any
untrue statement or alleged untrue statement or omission therein results (or is
alleged to have resulted) from an error or material omission in the information
concerning the characteristics of the Mortgage Loans furnished by the Originator
and (ii) "The Originators--Underwriting Standards of Accredited Home Lenders,
Inc." and, with respect to any private placement memorandum, any information of
a comparable nature and (b) any representation, warranty or covenant made by the
Originator or any affiliate of the Originator herein, on which the Purchaser has
relied, being, or alleged to be, untrue or incorrect and which would have a
material adverse effect upon the Mortgage Loans; provided, however, that to the
extent that any such losses, claims, expenses, damages or liabilities to which
the Indemnified Party may become subject arise out of or are based upon both (1)
statements, omissions, representations, warranties or covenants of the
Originator described in clause (a) or (b) above and (2) any other factual basis,
the Originator shall indemnify and hold harmless the Indemnified Party only to
the extent that the losses, claims, expenses, damages, or liabilities of the
person or persons asserting the claim are determined to rise from or be based
upon matters set forth in clause (1) above and do not result from the negligence
or willful misconduct of such Indemnified Party. This indemnity shall be in
addition to any liability that the Originator may otherwise have.

          SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale
and delivery on the Closing Date of the Mortgage Loans described on the Mortgage
Loan Schedule in accordance with the terms and conditions of this Agreement is
mandatory. It is specifically understood and agreed that each Mortgage Loan is
unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the losses and damages
incurred by the Purchaser in the event of the Seller's failure to deliver the
Mortgage Loans on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in the Seller's interest
in each Mortgage Loan and each document and instrument evidencing each such
Mortgage Loan to secure the performance by the Seller of its obligation
hereunder, and the Seller agrees that it holds such Mortgage Loans in custody
for the Purchaser, subject to the Purchaser's (i) right, prior to the Closing
Date, to reject any Mortgage Loan to the extent permitted by this Agreement, and
(ii) obligation to deliver or cause to be delivered the consideration for the
Mortgage Loans pursuant to Section 8 hereof. Any Mortgage Loans rejected by the
Purchaser shall concurrently therewith be released from the security interest
created hereby. All rights and

                                      -21-
<PAGE>

remedies of the Purchaser under this Agreement are distinct from, and cumulative
with, any other rights or remedies under this Agreement or afforded by law or
equity and all such rights and remedies may be exercised concurrently,
independently or successively.

          Notwithstanding the foregoing, if on the Closing Date, each of the
conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the re-delivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.

          SECTION 14. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
fax and, receipt of which is confirmed by telephone, if to the Purchaser,
addressed to the Purchaser at 390 Greenwich Street, 4th Floor, New York, New
York 10013, Attention: Mortgage Finance Group, or such other address as may
hereafter be furnished to the Originator and the Seller in writing by the
Purchaser; if to the Seller, addressed to the Seller at 390 Greenwich Street,
4th Floor, New York, New York 10013, Attention: Mortgage Finance Group, or to
such other address as the Originator and the Seller may designate in writing to
the Purchaser and if to the Originator, addressed to the Originator at
Accredited Home Lenders, Inc., 15030 Avenue of Science, #100, San Diego,
California 92128, Attn: Jeff Crawford, or such other address as may hereafter be
furnished to the Purchaser and the Seller in writing by the Originator.

          SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

          SECTION 16. AGREEMENT OF PARTIES. The Seller, the Originator and the
Purchaser each agree to execute and deliver such instruments and take such
actions as either of the others may, from time to time, reasonably request in
order to effectuate the purpose and to carry out the terms of this Agreement and
the Pooling and Servicing Agreement.

          SECTION 17. SURVIVAL. (a) The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on its behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the delivery of and payment for the Mortgage Loans and
shall continue in full force and effect, notwithstanding any restrictive or
qualified

                                      -22-
<PAGE>

endorsement on the Mortgage Notes and notwithstanding subsequent termination of
this Agreement, the Pooling and Servicing Agreement or the Trust Fund.

          (b) The Originator agrees that the representations, warranties and
agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Seller and
the Purchaser, subject to Section 7(a) hereof, notwithstanding any investigation
heretofore or hereafter made by the Seller or the Purchaser or on the behalf of
either of them, and that the representations, warranties and agreements made by
the Originator herein or in any such certificate or other instrument shall
continue in full force and effect, notwithstanding subsequent termination of
this Agreement, the Pooling and Servicing Agreement or the Trust Fund.

          SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (WITHOUT GIVING EFFECT TO THE CHOICE OF
LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO
INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW SHALL APPLY TO THIS AGREEMENT.

          SECTION 19. MISCELLANEOUS. This Agreement may be executed in two or
more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

          It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Seller to the Purchaser as provided in Section 4
hereof be, and be construed as, a sale of the Mortgage Loans by the Seller to
the Purchaser and not as a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,

                                      -23-
<PAGE>

instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related Mortgages and such other items of
property that constitute instruments, money, negotiable documents or chattel
paper shall be deemed to be "possession" by the secured party for purposes of
perfecting the security interest pursuant to the New York Uniform Commercial
Code; and (4) notifications to persons holding such property and
acknowledgments, receipts or confirmations from persons holding such property
shall be deemed notifications to, or acknowledgments, receipts or confirmations
from, financial intermediaries, bailees or agents (as applicable) of the
Purchaser for the purpose of perfecting such security interest under applicable
law. Any assignment of the interest of the Purchaser pursuant to Section 4(d)
hereof shall also be deemed to be an assignment of any security interest created
hereby. The Seller and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Mortgage Loans, such
security interest would be deemed to be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement and the Pooling and Servicing Agreement.

                                      -24-
<PAGE>

          IN WITNESS WHEREOF, the Purchaser, the Seller and the Originator have
caused their names to be signed by their respective officers thereunto duly
authorized as of the date first above written.

                                        SALOMON BROTHERS MORTGAGE SECURITIES
                                        VII, INC.

                                        By:________________________________
                                        Name:
                                        Title:

                                        CITIGROUP GLOBAL MARKETS REALTY CORP.

                                        By:________________________________
                                        Name:
                                        Title:

                                        ACCREDITED HOME LENDERS, INC.

                                        By:________________________________
                                        Name:
                                        Title:

<PAGE>

                                   Schedule A
                                   ----------

                                      -26-

<PAGE>

                                   EXHIBIT D-2
                                   -----------

                 FORM OF ENCORE MORTGAGE LOAN PURCHASE AGREEMENT

                                       D-2
<PAGE>
                        MORTGAGE LOAN PURCHASE AGREEMENT

          This is a Mortgage Loan Purchase Agreement (this "Agreement"), dated
April 22, 2003, among Encore Credit Corp., a California corporation (the
"Originator"), Citigroup Global Markets Realty Corp., a New York corporation
(the "Seller") and Salomon Brothers Mortgage Securities VII, Inc., a Delaware
corporation (the "Purchaser").

                              Preliminary Statement
                              ---------------------

          The Seller intends to sell the Mortgage Loans (as hereinafter
identified) to the Purchaser on the terms and subject to the conditions set
forth in this Agreement. The Purchaser intends to deposit the Mortgage Loans
into a mortgage pool comprising the Trust Fund. The Trust Fund will be evidenced
by a single series of mortgage pass-through certificates designated as Series
2003-HE1 (the "Certificates"). The Certificates will consist of ten classes of
certificates and will be issued pursuant to a Pooling and Servicing Agreement,
dated as of April 1, 2003 (the "Pooling and Servicing Agreement"), among the
Depositor as depositor, Litton Loan Servicing LP as servicer (the "Servicer")
and Deutsche Bank National Trust Company as trustee (the "Trustee"). Capitalized
terms used but not defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement.

          The parties hereto agree as follows:

          SECTION 1. AGREEMENT TO PURCHASE. The Seller agrees to sell and the
Purchaser agrees to purchase, on or before April 25, 2003 (the "Closing Date"),
certain fixed-rate and adjustable-rate conventional, one- to four-family, first
lien, residential mortgage loans purchased by the Seller from the Originator
(the "Mortgage Loans"), having an aggregate principal balance as of the close of
business on April 1, 2003, (the "Cut-off Date") of $107,331,555.40 (the "Closing
Balance"), after giving effect to all payments due on the Mortgage Loans on or
before the Cut-off Date, whether or not received including the right to any
Prepayment Charges payable by the related Mortgagors in connection with any
Principal Prepayments on the Mortgage Loans.

          SECTION 2. MORTGAGE LOAN SCHEDULE. The Purchaser and the Seller have
agreed upon which of the mortgage loans owned by the Seller and purchased from
the Originator are to be purchased by the Purchaser pursuant to this Agreement
and the Seller will prepare or cause to be prepared on or prior to the Closing
Date a final schedule (the "Closing Schedule") that shall describe such Mortgage
Loans and set forth all of the Mortgage Loans to be purchased under this
Agreement, including the Prepayment Charges. The Closing Schedule will conform
to the requirements set forth in this Agreement and, with respect to the
Mortgage Loans subject to this Agreement, to the definition of "Mortgage Loan
Schedule" under the Pooling and Servicing Agreement. The Closing Schedule shall
be used as part of the Mortgage Loan Schedule under the Pooling and Servicing
Agreement and shall be based on information provided by the Originator.

          SECTION 3. CONSIDERATION.

<PAGE>

          (a) In consideration for the Mortgage Loans to be purchased hereunder,
the Purchaser shall, as described in Section 8, pay to or upon the order of the
Seller in immediately available funds an amount (the "Purchase Price") equal to
the net sale proceeds of the Certificates.

          (b) The Purchaser or any assignee, transferee or designee of the
Purchaser shall be entitled to all scheduled payments of principal due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Mortgage Loans allocable to
the period after the Cut-off Date. All scheduled payments of principal and
interest due on or before the Cut-off Date and collected after the Cut-off Date
shall belong to the Seller.

          (c) Pursuant to the Pooling and Servicing Agreement, the Purchaser
will assign all of its right, title and interest in and to the Mortgage Loans,
together with its rights under this Agreement, to the Trustee for the benefit of
the Certificateholders.

          SECTION 4. TRANSFER OF THE MORTGAGE LOANS.

          (a) POSSESSION OF MORTGAGE FILES. The Seller does hereby sell, and in
connection therewith hereby assigns, to the Purchaser, effective as of the
Closing Date, without recourse but subject to the terms of this Agreement, all
of its right, title and interest in, to and under the Mortgage Loans, including
the related Prepayment Charges. The contents of each Mortgage File not delivered
to the Purchaser or to any assignee, transferee or designee of the Purchaser on
or prior to the Closing Date are and shall be held in trust by the Seller for
the benefit of the Purchaser or any assignee, transferee or designee of the
Purchaser. Upon the sale of the Mortgage Loans, the ownership of each Mortgage
Note, the related Mortgage and the other contents of the related Mortgage File
is vested in the Purchaser and the ownership of all records and documents with
respect to the related Mortgage Loan prepared by or that come into the
possession of the Seller on or after the Closing Date shall immediately vest in
the Purchaser and shall be delivered immediately to the Purchaser or as
otherwise directed by the Purchaser.

          (b) DELIVERY OF MORTGAGE LOAN DOCUMENTS. The Seller will, on or prior
to the Closing Date, deliver or cause to be delivered to the Purchaser or any
assignee, transferee or designee of the Purchaser each of the following
documents for each Mortgage Loan:

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

          (ii) the original Mortgage, noting the presence of the MIN of the
     Mortgage Loan and language indicating that the Mortgage Loan is a MOM Loan
     if the Mortgage Loan is a MOM Loan, with evidence of recording thereon, and
     the original recorded power of attorney, if the Mortgage was executed
     pursuant to a power of attorney, with evidence of recording thereon;

                                       -2-

<PAGE>

          (iii) unless the Mortgage Loan is registered on the MERS(R)System, an
     original Assignment in blank;

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

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

          (vi) the original lender's title insurance policy, together with all
     endorsements or riders that were issued with or subsequent to the issuance
     of such policy, insuring the priority of the Mortgage as a first lien on
     the Mortgaged Property represented therein as a fee interest vested in the
     Mortgagor, or in the event such original title policy is unavailable, a
     written commitment or uniform binder or preliminary report of title issued
     by the title insurance or escrow company.

          Except with respect to any Mortgage Loan for which MERS is identified
on the Mortgage or on a properly recorded assignment of the Mortgage as the
mortgagee of record, the Seller (at the expense of the Originator) promptly
shall (within sixty days following the later of the Closing Date and the date of
the receipt by the Originator of the recording information for a Mortgage but in
no event later than ninety days following the Closing Date) submit or cause to
be submitted for recording, at no expense to the Purchaser (or the Trust Fund or
the Trustee under the Pooling and Servicing Agreement), in the appropriate
public office for real property records, each Assignment referred to in clauses
(b)(iii) and (b)(iv) of this Section 4 and shall execute or cause to be executed
each original Assignment in the following form: "Deutsche Bank National Trust
Company, as Trustee under the applicable agreement." In the event that any such
Assignment is lost or returned unrecorded because of a defect therein, the
Seller (at the expense of the Originator) promptly shall prepare or cause to be
prepared a substitute Assignment or cure such defect, as the case may be, and
thereafter cause each such Assignment to be duly recorded.

          With respect to a maximum of approximately 2.0% of the Mortgage Loans,
by outstanding principal balance of the Mortgage Loans as of the Cut-off Date,
if any original Mortgage Note referred to in Section 4(b)(i) above cannot be
located, the obligations of the Seller to deliver such documents shall be deemed
to be satisfied upon delivery to the Purchaser of a photocopy of such Mortgage
Note, if available, with a lost note affidavit substantially in the form of
Exhibit K to the Pooling and Servicing Agreement. If any of the original
Mortgage Notes for which a lost note affidavit was delivered to the Purchaser is
subsequently located, such original Mortgage Note shall be delivered to the
Purchaser within three Business Days.

          If any of the documents referred to in Sections 4(b)(ii), (iii) or
(iv) above has, as of the Closing Date, been submitted for recording but either
(x) has not been returned from the applicable public recording office or (y) has
been lost or such public recording office has retained the original of such
document, the obligations of the Seller to deliver such documents shall be
deemed to be satisfied upon (1) delivery to the Purchaser of a copy of each such
document certified by the Originator or its agent in the case of (x) above or
the applicable public recording office in the

                                       -3-

<PAGE>

case of (y) above to be a true and complete copy of the original that was
submitted for recording and (2) if such copy is certified by the Originator,
delivery to the Purchaser promptly upon receipt thereof of either the original
or a copy of such document certified by the applicable public recording office
to be a true and complete copy of the original. Notice shall be provided to the
Trustee and the Rating Agencies by the Seller if delivery pursuant to clause (2)
above will be made more than 180 days after the Closing Date. If the original
lender's title insurance policy was not delivered pursuant to Section 4(b)(vi)
above, the Seller shall deliver or cause to be delivered to the Purchaser,
promptly after receipt thereof, the original lender's title insurance policy.
The Seller shall deliver or cause to be delivered to the Purchaser promptly upon
receipt thereof any other original documents constituting a part of a Mortgage
File received with respect to any Mortgage Loan, including, but not limited to,
any original documents evidencing an assumption or modification of any Mortgage
Loan.

          In connection with the assignment of any Mortgage Loan registered on
the MERS(R) System, the Seller further agrees that it will cause (at the expense
of the Originator), within 30 Business Days after the Closing Date, the MERS(R)
System to indicate that such Mortgage Loans have been assigned by the Purchaser
to the Trustee in accordance with the Pooling and Servicing Agreement for the
benefit of the Certificateholders by including in such computer files (a) the
code in the field which identifies the specific Trustee and (b) the code in the
field "Pool Field" which identifies the series of the Certificates issued in
connection with such Mortgage Loans.

          Each original document relating to a Mortgage Loan which is not
delivered to the Purchaser or its assignee, transferee or designee, if held by
the Seller, shall be so held for the benefit of the Purchaser, its assignee,
transferee or designee.

          (c) ACCEPTANCE OF MORTGAGE LOANS. The documents delivered pursuant to
Section 4(b) hereof shall be reviewed by the Purchaser or any assignee,
transferee or designee of the Purchaser at any time before or after the Closing
Date (and with respect to each document permitted to be delivered after the
Closing Date, within seven days of its delivery) to ascertain that all required
documents have been executed and received and that such documents relate to the
Mortgage Loans identified on the Mortgage Loan Schedule.

          (d) TRANSFER OF INTEREST IN AGREEMENTS. The Purchaser has the right to
assign its interest under this Agreement, in whole or in part, to the Trustee,
as may be required to effect the purposes of the Pooling and Servicing
Agreement, without the consent of the Seller or the Originator, and the assignee
shall succeed to the rights and obligations hereunder of the Purchaser. Any
expense reasonably incurred by or on behalf of the Purchaser or the Trustee in
connection with enforcing any obligations of the Seller or the Originator under
this Agreement will be promptly reimbursed by the Seller or the Originator, as
applicable.

          (e) EXAMINATION OF MORTGAGE FILES. Prior to the Closing Date, the
Seller shall either (i) deliver in escrow to the Purchaser, or to any assignee,
transferee or designee of the Purchaser for examination, the Mortgage File
pertaining to each Mortgage Loan or (ii) make such Mortgage Files available to
the Purchaser or to any assignee, transferee or designee of the Purchaser for
examination. Such examination may be made by the Purchaser or the Trustee, and
their respective designees, upon reasonable notice to the Seller during normal
business hours before the Closing Date and within 60 days after the Closing
Date. If any such person makes such examination

                                       -4-

<PAGE>

prior to the Closing Date and identifies any Mortgage Loans that do not conform
to the requirements of the Purchaser as described in this Agreement, such
Mortgage Loans shall be deleted from the Closing Schedule. The Purchaser may, at
its option and without notice to the Seller, purchase all or part of the
Mortgage Loans without conducting any partial or complete examination. The fact
that the Purchaser or any person has conducted or has failed to conduct any
partial or complete examination of the Mortgage Files shall not affect the
rights of the Purchaser or any assignee, transferee or designee of the Purchaser
to demand repurchase or other relief as provided herein or under the Pooling and
Servicing Agreement.

          SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ORIGINATOR
                     AND THE SELLER.

          (a) The Originator hereby represents and warrants to the Seller and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

          (i) The Originator is duly organized, validly existing and in good
     standing under the laws of the state of California and is and will remain
     in compliance with the laws of each state in which any Mortgaged Property
     is located to the extent necessary to ensure the enforceability of each
     Mortgage Loan;

          (ii) The Originator has the full power and authority to execute,
     deliver and perform, and to enter into and consummate, all transactions
     contemplated by this Agreement. The Originator has duly authorized the
     execution, delivery and performance of this Agreement, has duly executed
     and delivered this Agreement, and this Agreement, assuming due
     authorization, execution and delivery by the Seller and the Purchaser,
     constitutes a legal, valid and binding obligation of the Originator,
     enforceable against it in accordance with its terms except as the
     enforceability thereof may be limited by bankruptcy, insolvency or
     reorganization;

          (iii) The execution and delivery of this Agreement by the Originator
     and the performance of and compliance with the terms of this Agreement
     which are applicable to the Originator will not violate the Originator's
     articles of incorporation or by-laws or constitute a default under or
     result in a breach or acceleration of, any material contract, agreement or
     other instrument to which the Originator is a party or which may be
     applicable to the Originator or its assets;

          (iv) The Originator is not in violation of, and the execution and
     delivery of this Agreement by the Originator and its performance and
     compliance with the terms of this Agreement will not constitute a violation
     with respect to, any order or decree of any court or any order or
     regulation of any federal, state, municipal or governmental agency having
     jurisdiction over the Originator or its assets, which violation might have
     consequences that would materially and adversely affect the condition
     (financial or otherwise) or the operation of the Originator or its assets
     or might have consequences that would materially and adversely affect the
     enforceability of the Mortgage Loans or this Agreement or the performance
     of its obligations and duties hereunder;

                                       -5-

<PAGE>

          (v) The Originator is a HUD approved mortgagee pursuant to Section 203
     of the National Housing Act. No event has occurred, including but not
     limited to a change in insurance coverage, which would make the Originator
     unable to comply with HUD eligibility requirements or which would require
     notification to HUD;

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

          (vii) [Reserved];

          (viii) There are no actions or proceedings against, or investigations
     of, the Originator before any court, administrative or other tribunal (A)
     that might prohibit its entering into this Agreement, (B) seeking to
     prevent the consummation of the transactions contemplated by this Agreement
     or (C) that might prohibit or materially and adversely affect the
     performance by the Originator of its obligations under, or the validity or
     enforceability of, this Agreement

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

          (x) The consummation of the transactions contemplated by this
     Agreement are in the ordinary course of business of the Originator; and

          (xi) Neither this Agreement nor any written statement, report or other
     document prepared and furnished or to be prepared and furnished by the
     Originator pursuant to this Agreement or in connection with the
     transactions contemplated hereby contains any untrue statement of material
     fact or omits to state a material fact necessary to make the statements
     contained herein or therein not misleading.

          (b) The Seller hereby represents and warrants to the Originator and
the Purchaser, as of the date hereof and as of the Closing Date, and covenants,
that:

          (i) The Seller is duly organized, validly existing and in good
     standing as a corporation under the laws of the State of New York with full
     corporate power and authority to conduct its business as presently
     conducted by it to the extent material to the consummation of the
     transactions contemplated herein. The Seller has the full corporate power
     and authority to own the Mortgage Loans and to transfer and convey the
     Mortgage Loans to the Purchaser and has the full corporate power and
     authority to execute and deliver, engage in the transactions contemplated
     by, and perform and observe the terms and conditions of this Agreement.

                                       -6-

<PAGE>

          (ii) The Seller has duly authorized the execution, delivery and
     performance of this Agreement, has duly executed and delivered this
     Agreement, and this Agreement, assuming due authorization, execution and
     delivery by the Originator and the Purchaser, constitutes a legal, valid
     and binding obligation of the Seller, enforceable against it in accordance
     with its terms except as the enforceability thereof may be limited by
     bankruptcy, insolvency or reorganization or by general principles of
     equity.

          (iii) The execution, delivery and performance of this Agreement by the
     Seller (x) does not conflict and will not conflict with, does not breach
     and will not result in a breach of and does not constitute and will not
     constitute a default (or an event, which with notice or lapse of time or
     both, would constitute a default) under (A) any terms or provisions of the
     articles of incorporation or by-laws of the Seller, (B) any term or
     provision of any material agreement, contract, instrument or indenture, to
     which the Seller is a party or by which the Seller or any of its property
     is bound or (C) any law, rule, regulation, order, judgment, writ,
     injunction or decree of any court or governmental authority having
     jurisdiction over the Seller or any of its property and (y) does not create
     or impose and will not result in the creation or imposition of any lien,
     charge or encumbrance which would have a material adverse effect upon the
     Mortgage Loans or any documents or instruments evidencing or securing the
     Mortgage Loans.

          (iv) No consent, approval, authorization or order of, registration or
     filing with, or notice on behalf of the Seller to any governmental
     authority or court is required, under federal laws or the laws of the State
     of New York, for the execution, delivery and performance by the Seller of,
     or compliance by the Seller with, this Agreement or the consummation by the
     Seller of any other transaction contemplated hereby and by the Pooling and
     Servicing Agreement; provided, however, that the Seller makes no
     representation or warranty regarding federal or state securities laws in
     connection with the sale or distribution of the Certificates.

          (v) This Agreement does not contain any untrue statement of material
     fact or omit to state a material fact necessary to make the statements
     contained herein not misleading. The written statements, reports and other
     documents prepared and furnished or to be prepared and furnished by the
     Seller pursuant to this Agreement or in connection with the transactions
     contemplated hereby taken in the aggregate do not contain any untrue
     statement of material fact or omit to state a material fact necessary to
     make the statements contained therein not misleading.

          (vi) The Seller is not in violation of, and the execution and delivery
     of this Agreement by the Seller and its performance and compliance with the
     terms of this Agreement will not constitute a violation with respect to,
     any order or decree of any court or any order or regulation of any federal,
     state, municipal or governmental agency having jurisdiction over the Seller
     or its assets, which violation might have consequences that would
     materially and adversely affect the condition (financial or otherwise) or
     the operation of the Seller or its assets or might have consequences that
     would materially and adversely affect the performance of its obligations
     and duties hereunder.

                                       -7-

<PAGE>

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

          (viii) Immediately prior to the sale of the Mortgage Loans to the
     Purchaser as herein contemplated, the Seller will be the owner of the
     related Mortgage and the indebtedness evidenced by the related Mortgage
     Note, and, upon the payment to the Seller of the Purchase Price, in the
     event that the Seller retains or has retained record title, the Seller
     shall retain such record title to each Mortgage, each related Mortgage Note
     and the related Mortgage Files with respect thereto in trust for the
     Purchaser as the owner thereof from and after the date hereof.

          (ix) There are no actions or proceedings against, or investigations
     known to it of, the Seller before any court, administrative or other
     tribunal (A) that might prohibit its entering into this Agreement, (B)
     seeking to prevent the sale of the Mortgage Loans by the Seller or the
     consummation of the transactions contemplated by this Agreement or (C) that
     might prohibit or materially and adversely affect the performance by the
     Seller of its obligations under, or validity or enforceability of, this
     Agreement.

          (x) The consummation of the transactions contemplated by this
     Agreement are in the ordinary course of business of the Seller, and the
     transfer, assignment and conveyance of the Mortgage Notes and the Mortgages
     by the Seller are not subject to the bulk transfer or any similar statutory
     provisions.

          (xi) The Seller has not dealt with any broker, investment banker,
     agent or other person, except for the Purchaser or any of its affiliates,
     that may be entitled to any commission or compensation in connection with
     the sale of the Mortgage Loans.

          (xiii) There is no litigation currently pending or, to the best of the
     Seller's knowledge without independent investigation, threatened against
     the Seller that would reasonably be expected to adversely affect the
     transfer of the Mortgage Loans, the issuance of the Certificates or the
     execution, delivery, performance or enforceability of this Agreement, or
     that would result in a material adverse change in the financial condition
     of the Seller.

          (xiv) The Seller is solvent and will not be rendered insolvent by the
     consummation of the transactions contemplated hereby. The Seller is not
     transferring any Mortgage loan with any intent to hinder, delay or defraud
     any of its creditors.

          (xv) Each Mortgage Loan constitutes a "qualified mortgage" within the
     meaning of Section 860G(a)(3) of the Code.

          (xvi) Each Mortgage Loan at the time it was made complied in all
     material respects with applicable local, state and federal laws, including,
     but not limited to, all applicable predatory and abusive lending laws.

                                       -8-

<PAGE>

          (xvii) None of the Mortgage Loans are High Cost as defined by any
     applicable predatory and abusive lending laws.

          SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR RELATING
                     TO THE MORTGAGE LOANS.

          Representations and Warranties as to Individual Mortgage Loans.
          --------------------------------------------------------------

          The Originator hereby represents and warrants to the Seller and the
Purchaser that as to each Mortgage Loan as of the Closing Date or as of such
other date as specified herein:

          (i) The information set forth in the Mortgage Loan Schedule with
respect to the Mortgage Loans originated by the Originator is complete, true and
correct;

          (ii) [Reserved];

          (iii) Except with respect to 2.14% of the Mortgage Loans, by aggregate
principal balance of the Encore Mortgage Loans as of the Cut-off Date, all
payments required to be made up to the close of business on March 31, 2003 have
been made; the Originator has not advanced funds, or induced, solicited or
knowingly received any advance of funds from a party other than the owner of the
related Mortgaged Property, directly or indirectly, for the payment of any
amount required by the Mortgage Note or Mortgage; and there has been no
delinquency, exclusive of any period of grace, in any payment by the Mortgagor
thereunder since the origination of the Mortgage Loan;

          (iv) There are no delinquent taxes, ground rents, water charges, sewer
rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments or other outstanding charges
affecting the related Mortgaged Property;

          (v) The terms of the Mortgage Note and the Mortgage have not been
impaired, waived, altered or modified in any respect, except by written
instruments, recorded in the applicable public recording office if necessary to
maintain the lien priority of the Mortgage, and which have been delivered to the
Purchaser; the substance of any such waiver, alteration or modification has been
approved by the title insurer, to the extent required by the related policy, and
is reflected on the Mortgage Loan Schedule. No instrument of waiver, alteration
or modification has been executed, and no Mortgagor has been released, in whole
or in part, except in connection with an assumption agreement approved by the
title insurer, to the extent required by the policy, and which assumption
agreement has been delivered to the Purchaser and the terms of which are
reflected in the Mortgage Loan Schedule;

          (vi) The Mortgage Note and the Mortgage are not subject to any right
of rescission, set off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission, set
off, counterclaim or defense, including the defense of usury and no such right
of rescission, set off, counterclaim or defense has been asserted with respect
thereto. Each Prepayment Charge or penalty

                                       -9-

<PAGE>

with respect to any Mortgage Loan is permissible, enforceable and collectible
under applicable federal, state and local law;

          (vii) All buildings upon the Mortgaged Property are insured by an
insurer acceptable to prudent mortgage lenders in the secondary market against
loss by fire, hazards of extended coverage and such other hazards as are
customary in the area where the Mortgaged Property is located. All such
insurance policies contain a standard mortgagee clause naming the Originator,
its successors and assigns as mortgagee and all premiums thereon have been paid.
If the Mortgaged Property is in an area identified on a Flood Hazard Map or
Flood Insurance Rate Map issued by the Federal 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 Insurance Administration is in effect which policy is generally
acceptable to prudent mortgage lenders in the secondary market. The Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and on the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to maintain such insurance at Mortgagor's
cost and expense and to seek reimbursement therefor from the Mortgagor;

          (viii) Any and all requirements of any federal, state or local law
including, but not limited to, all applicable predatory and abusive lending,
usury, truth in lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity, fair housing or disclosure laws applicable
to the origination and servicing of mortgage loans of a type similar to the
Mortgage Loans have been complied with;

          (ix) The Mortgage has not been satisfied, cancelled, subordinated or
rescinded, in whole or in part, and the Mortgaged Property has not been released
from the lien of the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such satisfaction, cancellation, subordination,
rescission or release;

          (x) The Mortgage is a valid, existing and enforceable first lien on
the Mortgaged Property, including all improvements on the Mortgaged Property
subject only to (a) the lien of current real property taxes and assessments not
yet due and payable, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of recording
being acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the originator
of the Mortgage Loan and which do not adversely affect the Value of the
Mortgaged Property, and (c) other matters to which like properties are commonly
subject which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property. Any security agreement, chattel
mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, existing and enforceable first
lien and first priority security interest on the property described therein. The
Mortgaged Property was not, as of the date of origination of the Mortgage Loan,
subject to a mortgage, deed of trust, deed to secure debt or, unless otherwise
indicated on the Mortgage Loan Schedule, other security instrument creating a
lien subordinate to the lien of the Mortgage;

          (xi) 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;

                                      -10-

<PAGE>

          (xii) All parties to the Mortgage Note and the Mortgage had legal
capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage
Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and
properly executed by such parties. The Mortgagor is a natural person;

          (xiii) The proceeds of the Mortgage Loan have been fully disbursed to
or for the account of the Mortgagor and there is no obligation for the Mortgagee
to advance additional funds thereunder and any and all requirements as to
completion of any on site or off site improvement and as to disbursements of any
escrow funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of the
Mortgage have been paid, and the Mortgagor is not entitled to any refund of any
amounts paid or due to the Mortgagee pursuant to the Mortgage Note or Mortgage

          (xiv) [Reserved];

          (xv) 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) in compliance with any
and all applicable "doing business" and licensing requirements of the laws of
the state wherein the Mortgaged Property is located;

          (xvi) The Mortgage Loan is covered by an American Land Title
Association ("ALTA") ALTA lender's title insurance policy (which, in the case of
an Adjustable-Rate Mortgage Loan has an adjustable rate mortgage endorsement in
the form of ALTA 6.0 or 6.1) acceptable to prudent mortgage lenders in the
secondary market, issued by a title insurer acceptable to acceptable to prudent
mortgage lenders in the secondary market and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring (subject to the
exceptions contained in (x)(a) and (b) above) the Originator, its successors and
assigns as to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan and, with respect to any Adjustable-Rate Mortgage
Loan, against any loss by reason of the invalidity or unenforceability of the
lien resulting from the provisions of the Mortgage providing for adjustment in
the Mortgage Rate and Monthly Payment. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress to and from the
Mortgaged Property, and against encroachments by or upon the Mortgaged Property
or any interest therein. The Originator is the sole insured of such lender's
title insurance policy, and such lender's title insurance policy is in full
force and effect and will be in full force and effect upon the consummation of
the transactions contemplated by this Agreement. No claims have been made under
such lender's title insurance policy, and no prior holder of the related
Mortgage, including the Originator, has done, by act or omission, anything which
would impair the coverage of such lender's title insurance policy;

          (xvii) There is no default, breach, violation or event of acceleration
existing under the Mortgage or the Mortgage Note and no event which, with the
passage of time or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of acceleration, and the
Originator has not waived any default, breach, violation or event of
acceleration;

                                      -11-

<PAGE>

          (xviii) There are no mechanics' or similar liens or claims which have
been filed for work, labor or material (and no rights are outstanding that under
law could give rise to such lien) affecting the related Mortgaged Property which
are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage;

          (xix) All improvements which were considered in determining the Value
of the related Mortgaged Property lay wholly within the boundaries and building
restriction lines of the Mortgaged Property, and no improvements on adjoining
properties encroach upon the Mortgaged Property;

          (xx) Each Mortgage Loan was originated or acquired by a savings and
loan association, a savings bank, a commercial bank or similar banking
institution which is supervised and examined by a federal or state authority, or
by a mortgagee approved by the Secretary of HUD. The mortgage loan was
underwritten in accordance with the underwriting standards of the Originator in
effect at the time the Mortgage Loan was originated; and the Mortgage Note and
Mortgage are on form acceptable to Fannie Mae and Freddie Mac;

          (xxi) Principal payments on the Mortgage Loan commenced no more than
sixty (60) days after the proceeds of the Mortgage Loan were disbursed. The
Mortgage Loan bears interest at the Mortgage Rate. With respect to each Mortgage
Loan, the Mortgage Note is payable on the first day of each month in Monthly
Payments, which, in the case of a Fixed-Rate Mortgage Loan, are sufficient to
fully amortize the original principal balance over the original term thereof and
to pay interest at the related Mortgage Rate, and, in the case of an
Adjustable-Rate Mortgage Loan, are changed on each Adjustment Date, and in any
case, are sufficient to fully amortize the original principal balance over the
original term thereof and to pay interest at the related Mortgage Rate. The
Index for each Adjustable-Rate Mortgage Loan is as provided on the Mortgage Loan
Schedule. The Mortgage Note does not permit negative amortization. No
Adjustable-Rate Mortgage Loan may be converted to a Fixed-Rate Mortgage Loan;

          (xxii) The origination and collection practices used by the Originator
with respect to each Mortgage Note and Mortgage have been in all respects legal,
proper, prudent and customary in the mortgage origination and servicing
industry. During the time that the Originator serviced the Mortgage Loan, the
Mortgage Loan has been serviced by the Originator, and any predecessor servicer
or sub-servicer in accordance with the terms of the Mortgage Note. With respect
to escrow deposits and Escrow Payments, if any, all such payments are in the
possession of, or under the control of, the Originator and there exist no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. No escrow deposits or Escrow Payments or
other charges or payments due the Originator have been capitalized under any
Mortgage or the related Mortgage Note and no such escrow deposits or Escrow
Payments are being held by the Originator for any work on a Mortgaged Property
which has not been completed;

          (xxiii) The Mortgaged Property is free of damage and waste and there
is no proceeding pending for the total or partial condemnation thereof;

          (xxiv) The Mortgage and related Mortgage Note contain customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization

                                      -12-

<PAGE>

against the Mortgaged Property of the benefits of the security provided thereby,
including, (a) in the case of a Mortgage designated as a deed of trust, by
trustee's sale, and (b) otherwise by judicial foreclosure. The Mortgaged
Property is not subject to any bankruptcy proceeding or foreclosure proceeding
and the Mortgagor has not filed for protection under applicable bankruptcy laws.
There is no homestead or other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage. The Mortgagor has not notified the
Originator and the Originator has no knowledge of any relief requested or
allowed to the Mortgagor under the Soldiers and Sailors Civil Relief Act of
1940;

          (xxv) [Reserved];

          (xxvi) The Mortgage Note is not and has not been secured by any
collateral except the lien of the corresponding Mortgage on the Mortgaged
Property and the security interest of any applicable security agreement or
chattel mortgage referred to in (x) above;

          (xxvii) The Mortgage File contains an appraisal of the related
Mortgaged Property which satisfied the standards of Fannie Mae and Freddie Mac
and was made and signed, prior to the approval of the Mortgage Loan application,
by a qualified appraiser, duly appointed by, or acceptable to, the Originator,
who had no interest, direct or indirect in the Mortgaged Property or in any loan
made on the security thereof, whose compensation is not affected by the approval
or disapproval of the Mortgage Loan and who met the minimum qualifications of
Fannie Mae and Freddie Mac. Each appraisal of the Mortgage Loan was made in
accordance with the relevant provisions of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989;

          (xxviii) In the event the Mortgage constitutes 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 the Mortgage, and no fees or
expenses are or will become payable by the Purchaser to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor;

          (xxix) No Mortgage Loan contains provisions pursuant to which Monthly
Payments are (a) paid or partially paid with funds deposited in any separate
account established by the Originator, the Mortgagor, or anyone on behalf of the
Mortgagor, (b) paid by any source other than the Mortgagor or (c) contains any
other similar provisions which may constitute a "buydown" provision. The
Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan
does not have a shared appreciation or other contingent interest feature;

          (xxx) The Mortgagor has received all disclosure materials required by
applicable law with respect to the making of fixed rate mortgage loans in the
case of Fixed-Rate Mortgage Loans, and adjustable rate mortgage loans in the
case of Adjustable-Rate Mortgage Loans and rescission materials with respect to
Refinanced Mortgage Loans, and such statement is and will remain in the Mortgage
File;

          (xxxi) No Mortgage Loan was made in connection with (a) the
construction or rehabilitation of a Mortgaged Property or (b) facilitating the
trade-in or exchange of a Mortgaged Property;

                                      -13-

<PAGE>

          (xxxii) The Originator has no knowledge of any circumstances or
condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or
the Mortgagor's credit standing that can reasonably be expected to cause the
Mortgage Loan to be an unacceptable investment, cause the Mortgage Loan to
become delinquent, or adversely affect the value of the Mortgage Loan;

          (xxxiii) The Mortgaged Property is lawfully occupied under applicable
law; all inspections, licenses and certificates required to be made or issued
with respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited to
certificates of occupancy, have been made or obtained from the appropriate
authorities;

          (xxxiv) No error, omission, misrepresentation, negligence, fraud or
similar occurrence with respect to a Mortgage Loan has taken place on the part
of any person, including without limitation the Mortgagor, any appraiser, any
builder or developer, or any other party involved in the origination of the
Mortgage Loan or in the application of any insurance in relation to such
Mortgage Loan;

          (xxxv) The Assignment of Mortgage is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which the
Mortgaged Property is located

          (xxxvi) Any principal advances made to the Mortgagor prior to the
Cut-off Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority by a title insurance policy, an endorsement to the policy insuring
the mortgagee's consolidated interest or by other title evidence acceptable to
prudent mortgage lenders in the secondary market. The consolidated principal
amount does not exceed the original principal amount of the Mortgage Loan;

          (xxxvii) No Mortgage Loan has a balloon payment feature;

          (xxxviii) If the Residential Dwelling on the Mortgaged Property is a
condominium unit or a unit in a planned unit development (other than a de
minimis planned unit development) such condominium or planned unit development
project meets the eligibility requirements of Fannie Mae and Freddie Mac;

          (ixl) The source of the down payment with respect to each Mortgage
Loan has been fully verified by the Originator pursuant to the Originator's
underwriting guidelines

          (xl) Interest on each Mortgage Loan is calculated on the basis of a
360-day year consisting of twelve 30-day months;

          (xli) The Mortgaged Property is in material compliance with all
applicable environmental laws pertaining to environmental hazards including,
without limitation, asbestos, and neither the Originator nor, to the
Originator's knowledge, the related Mortgagor, has received any notice of any
violation or potential violation of such law;

                                      -14-

<PAGE>

          (xlii) Each Mortgage Loan is covered by a fully assignable, life of
loan tax service contract which is assignable to the Purchaser or its designee
without the payment of any fee by the Purchaser or its designee;

          (xliii) Each Mortgage Loan is covered by a flood zone service contract
which is assignable to the Purchaser or its designee or, for each Mortgage Loan
not covered by such flood zone service contract, the Originator agrees to
purchase such flood zone service contract;

          (xliv) No Mortgage Loan is subject to the applicable provisions of the
Homeownership and Equity Protection Act of 1994 as amended ("HOEPA") or any
comparable state or local statutes or regulations, including, without
limitation, the provisions of the City of Oakland, California Anti-Predatory
Lending Ordinance No. 12361 or any other statute or regulation providing
assignee liability to holders of such mortgage loans;

          (xlv) No predatory, abusive or deceptive lending practices, including
but not limited to, the extension of credit to a mortgagor without regard for
the mortgagor's ability to repay the Mortgage Loan and the extension of credit
to a mortgagor which has no apparent benefit to the mortgagor, were employed in
connection with the origination of the Mortgage Loan;

          (xlvi) The debt-to-income ratio of the related Mortgagor was not
greater than 60% at the origination of the related Mortgage Loan;

          (xlvii) None of the proceeds of the Mortgage Loan were used to finance
the purchase of single premium credit life or disability insurance policies or
any comparable insurance;

          (xlviii) No Mortgage Loan had a Loan-to-Value Ratio in excess of 100%
origination of such Mortgage Loan;

          (il) [Reserved];

          (l) The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder;

          (li) The Mortgage Loan complies with all applicable consumer credit
statutes and regulations, including, without limitation, the respective Uniform
Consumer Credit Code laws in effect in Colorado, Idaho, Indiana, Iowa, Kansas,
Maine, Oklahoma, South Carolina, Utah and Wyoming, has been originated by a
properly licensed entity, and in all other respects, complies with all of the
material requirements of any such applicable laws;

          (lii) The information set forth in the Prepayment Charge Schedule with
respect to the Mortgage Loans originated by the Originator is complete, true and
correct in all material respects and each Prepayment Charge is permissible,
enforceable and collectable under applicable federal and state law;

          (liii) [Reserved];

                                      -15-

<PAGE>

          (liv) The Mortgage Loan is not a "High Cost Home Loan" within the
meaning of the Georgia Fair Lending Act (the "Georgia Act"). To the extent that
the Mortgage Loan is a "Covered Loan" within the meaning of the Georgia Act, the
Mortgage Loan complies with all provisions of the Georgia Act, and the Mortgage
Loan was either (i) a purchase money loan, or (ii) a refinancing of an existing
mortgage loan that had been closed more than five years prior to the closing of
such Mortgage Loan; and

          (lv) With respect to each Mortgage Loan that is a mobile home or
manufactured housing unit, such unit is a "single family residence" within the
meaning of Section 25(e)(1) of the Code, and has a minimum of 400 square feet of
living space, a minimum width of 102 inches and is of a kind customarily used at
a fixed location.

          SECTION 7. REPURCHASE OBLIGATION FOR DEFECTIVE DOCUMENTATION AND FOR
                     BREACH OF REPRESENTATION AND WARRANTY.

          (a) The representations and warranties contained in Section 6 shall
not be impaired by any review and examination of loan files or other documents
evidencing or relating to the Mortgage Loans or any failure on the part of the
Seller or the Purchaser to review or examine such documents and shall inure to
the benefit of any assignee, transferee or designee of the Purchaser, including
the Trustee for the benefit of holders of the Certificates. With respect to the
representations and warranties contained herein that are made to the knowledge
or the best knowledge of the Originator or as to which the Originator has no
knowledge, if it is discovered that the substance of any such representation and
warranty is inaccurate and the inaccuracy materially and adversely affects the
value of the related Mortgage Loan, or the interest therein of the Purchaser or
the Purchaser's assignee, designee or transferee, then notwithstanding the
Originator's lack of knowledge with respect to the substance of such
representation and warranty being inaccurate at the time the representation and
warranty was made, such inaccuracy shall be deemed a breach of the applicable
representation and warranty and the Originator shall take such action described
in the following paragraphs in respect of such Mortgage Loan.

          Upon discovery by the Seller, the Purchaser or any assignee,
transferee or designee of the Purchaser of any materially defective document in,
or that any material document was not transferred by or at the direction of the
Seller (as listed on the Trustee's Preliminary Exception Report) as part of any
Mortgage File, or of a breach of any of the representations and warranties
contained in Section 6 that materially and adversely affects the value of any
Mortgage Loan or the interest therein of the Purchaser or the Purchaser's
assignee, transferee or designee, the party discovering such breach shall give
prompt written notice to the Originator or the Seller, as applicable. Within
sixty (60) days of its discovery or its receipt of notice of any such missing
documentation that was not transferred to the Purchaser as described above, or
of materially defective documentation, or of any such breach of a representation
and warranty, the Originator or the Seller, as applicable, promptly shall
deliver such missing document or cure such defect or breach in all material
respects or, in the event the Originator or the Seller cannot deliver such
missing document or cannot cure such defect or breach, the Originator or the
Seller, as applicable, shall, within ninety (90) days of its discovery or
receipt of notice, either (i) repurchase the affected Mortgage Loan at the
Purchase Price (as such term is defined in the Pooling and Servicing Agreement)
or (ii) pursuant to the provisions of the Pooling and Servicing Agreement, cause
the

                                      -16-

<PAGE>

removal of such Mortgage Loan from the Trust Fund and substitute one or more
Qualified Substitute Mortgage Loans. The Originator or the Seller, as
applicable, shall amend the Closing Schedule to reflect the withdrawal of such
Mortgage Loan from the terms of this Agreement and the Pooling and Servicing
Agreement. The Originator or the Seller, as applicable, shall deliver to the
Purchaser such amended Closing Schedule and shall deliver such other documents
as are required by this Agreement or the Pooling and Servicing Agreement within
five (5) days of any such amendment. Any repurchase pursuant to this Section
7(a) shall be accomplished by transfer to an account designated by the Purchaser
of the amount of the Purchase Price in accordance with Section 2.03 of the
Pooling and Servicing Agreement. Any repurchase required by this Section shall
be made in a manner consistent with Section 2.03 of the Pooling and Servicing
Agreement.

          Notwithstanding the foregoing, within 90 days of the earlier of
discovery by the Originator or receipt of notice by the Originator of the breach
of the representation of the Originator set forth in Section 6(lii) above which
materially and adversely affects the interests of the Holders of the Class P
Certificates in any Prepayment Charge, the Originator shall pay the amount of
the scheduled Prepayment Charge, for the benefit of the Holders of the Class P
Certificates by remitting such amount to the Servicer for deposit into the
Collection Account, net of any amount previously collected by the Servicer or
paid by the Servicer, for the benefit of the Holders of the Class P Certificates
in respect of such Prepayment Charge.

          (b) Notwithstanding the foregoing, with respect to an alleged breach
of a representation and warranty which breach is covered by a title insurance
policy, the Purchaser shall use reasonable efforts to enforce the provisions of
any related title insurance policy prior to seeking a remedy against the
Originator or the Seller hereunder.

          (c) It is understood and agreed that the obligations of the Originator
or the Seller set forth in this Section 7 to cure or repurchase a defective
Mortgage Loan constitute the sole remedies of the Purchaser against the
Originator or the Seller respecting a missing document or a breach of the
representations and warranties contained in Section 6.

          SECTION 8. CLOSING; PAYMENT FOR THE MORTGAGE LOANS. The closing of the
purchase and sale of the Mortgage Loans shall be held at the New York City
office of Thacher Proffitt & Wood at 10:00 a.m. New York City time on the
Closing Date.

          The closing shall be subject to each of the following conditions:

          (a)  All of the representations and warranties of the Seller and the
               Originator under this Agreement shall be true and correct in all
               material respects as of the date as of which they are made and no
               event shall have occurred which, with notice or the passage of
               time, would constitute a default under this Agreement;

          (b)  The Purchaser shall have received, or the attorneys of the
               Purchaser shall have received in escrow (to be released from
               escrow at the time of closing), all Closing Documents as
               specified in Section 9 of this Agreement, in such forms as are
               agreed upon and acceptable to the Purchaser, duly executed by

                                      -17-

<PAGE>

               all signatories other than the Purchaser as required pursuant to
               the respective terms thereof;

          (c)  The Seller shall have delivered or caused to be delivered and
               released to the Purchaser or to its designee, all documents
               (including without limitation, the Mortgage Loans) required to be
               so delivered by the Purchaser pursuant to Section 2.01 of the
               Pooling and Servicing Agreement; and

          (d)  The Seller shall have executed the Indemnification Agreement,
               dated as of April 22, 2003, between the Purchaser and Litton Loan
               Servicing LP, and shall have assumed all of the obligations of
               the Purchaser thereunder; and

          (e)  All other terms and conditions of this Agreement and the Pooling
               and Servicing Agreement shall have been complied with.

          Subject to the foregoing conditions, the Purchaser shall deliver or
cause to be delivered to the Seller on the Closing Date, against delivery and
release by the Seller to the Trustee of all documents required pursuant to the
Pooling and Servicing Agreement, the consideration for the Mortgage Loans as
specified in Section 3 of this Agreement, by delivery to the Seller of the
Purchase Price in immediately available funds.

          SECTION 9. CLOSING DOCUMENTS. Without limiting the generality of
Section 8 hereof, the closing shall be subject to delivery of each of the
following documents:

          (a)  An Officer's Certificate of the Seller, dated the Closing Date,
               in form satisfactory to and upon which the Purchaser and
               Citigroup Global Markets Inc. (the "Representative") may rely,
               and attached thereto copies of the certificate of incorporation,
               by-laws and certificate of good standing of the Seller under the
               laws of New York;

          (b)  An Officer's Certificate of the Seller, dated the Closing Date,
               in form satisfactory to and upon which the Purchaser and the
               Representative may rely, with respect to certain facts regarding
               the sale of the Mortgage Loans by the Seller to the Purchaser;

          (c)  An Opinion of Counsel of the Seller, dated the Closing Date, in
               form satisfactory to and addressed to the Purchaser and the
               Representative;

          (d)  An Officer's Certificate of the Originator, dated the Closing
               Date, in form satisfactory to and upon which the Purchaser and
               the Representative may rely, and attached thereto copies of the
               certificate of incorporation, by-laws and certificate of good
               standing of the Originator under the laws of California;

          (e)  Such opinions of counsel as the Rating Agencies or the Trustee
               may request in connection with the sale of the Mortgage Loans by
               the Seller to the

                                      -18-

<PAGE>

               Purchaser or the Seller's execution and delivery of, or
               performance under, this Agreement;

          (f)  A letter from Deloitte & Touche LLP, certified public
               accountants, to the effect that they have performed certain
               specified procedures as a result of which they determined that
               certain information of an accounting, financial or statistical
               nature set forth in the Purchaser's prospectus supplement for
               Series 2003-HE1, dated April 22, 2003 (the "Prospectus
               Supplement") relating to the Offered Certificates contained under
               the captions "Summary--The Mortgage Loans," "Risk Factors," (to
               the extent of information concerning the Mortgage Loans contained
               therein) "The Mortgage Pool" agrees with the records of the
               Seller; and

          (g)  Such further information, certificates, opinions and documents as
               the Purchaser or the Representative may reasonably request.

          SECTION 10. COSTS. The Seller shall pay (or shall reimburse the
Purchaser or any other Person to the extent that the Purchaser or such other
Person shall pay) all costs and expenses incurred in connection with the
transfer and delivery of the Mortgage Loans, including without limitation,
recording fees, fees for title policy endorsements and continuations and, except
as set forth in Section 4(b), the fees for recording Assignments.

          The Seller shall pay (or shall reimburse the Purchaser or any other
Person to the extent that the Purchaser or such other Person shall pay) the fees
and expenses of the Seller's accountants and attorneys, the costs and expenses
incurred in connection with producing the Servicer's or any Subservicer's loan
loss, foreclosure and delinquency experience, the costs and expenses incurred in
connection with obtaining the documents referred to in Sections 9(a), 9(b), 9(c)
and 9(h), the costs and expenses of printing (or otherwise reproducing) and
delivering this Agreement, the Pooling and Servicing Agreement, the
Certificates, the prospectus and Prospectus Supplement, and any private
placement memorandum relating to the Certificates and other related documents,
the initial fees, costs and expenses of the Trustee, the fees and expenses of
the Purchaser's counsel in connection with the preparation of all documents
relating to the securitization of the Mortgage Loans, the filing fee charged by
the Securities and Exchange Commission for registration of the Certificates, the
cost of outside special counsel that may be required by the Originator and the
fees charged by any rating agency to rate the Certificates. All other costs and
expenses in connection with the transactions contemplated hereunder shall be
borne by the party incurring such expense.

          SECTION 11. [RESERVED].

          SECTION 12. INDEMNIFICATION.

          The Originator shall indemnify and hold harmless each of (i) the
Purchaser, (ii) the Underwriters, (iii) the Person, if any, to which the
Purchaser assigns its rights in and to a Mortgage Loan and each of their
respective successors and assigns and (iv) each person, if any, who controls the
Purchaser within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "1933

                                      -19-

<PAGE>

Act") ((i) through (iv) collectively, the "Indemnified Party") against any and
all losses, claims, expenses, damages or liabilities to which the Indemnified
Party may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, expenses, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of any material fact contained in the Prospectus Supplement or any
private placement memorandum relating to the offering by the Purchaser or an
affiliate thereof, of the Class CE Certificates or the Class P Certificates or
net interest margin securities backed by distributions on the Class CE
Certificates or Class P Certificates, or the omission or the alleged omission to
state therein the material fact necessary in order to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with information furnished
in writing to the Purchaser or any of its affiliates by the Originator or any of
its affiliates specifically for use therein, which shall include, with respect
to the Prospectus Supplement, only (i) the information set forth under the
caption "Summary--The Mortgage Loans," "Risk Factors," (to the extent of
information concerning the characteristics of the Mortgage Loans contained
therein) and "The Mortgage Pool" but only to the extent that any untrue
statement or alleged untrue statement or omission therein results (or is alleged
to have resulted) from an error or material omission in the information
concerning the characteristics of the Mortgage Loans furnished by the
Originator, all such information being considered as a whole and (ii) "The
Originators--Underwriting Standards of Encore Credit Corp." and, with respect to
any private placement memorandum, any information of a comparable nature and (b)
any representation, warranty or covenant made by the Originator or any affiliate
of the Originator herein, on which the Purchaser has relied, being, or alleged
to be, untrue or incorrect and which would have a material adverse effect upon
the Mortgage Loans; provided, however, that to the extent that any such losses,
claims, expenses, damages or liabilities to which the Indemnified Party may
become subject arise out of or are based upon both (1) statements, omissions,
representations, warranties or covenants of the Originator described in clause
(a) or (b) above and (2) any other factual basis, the Originator shall indemnify
and hold harmless the Indemnified Party only to the extent that the losses,
claims, expenses, damages, or liabilities of the person or persons asserting the
claim are determined to rise from or be based upon matters set forth in clause
(1) above and do not result from the negligence or willful misconduct of such
Indemnified Party. This indemnity shall be in addition to any liability that the
Originator may otherwise have.

          SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST. The sale
and delivery on the Closing Date of the Mortgage Loans described on the Mortgage
Loan Schedule in accordance with the terms and conditions of this Agreement is
mandatory. It is specifically understood and agreed that each Mortgage Loan is
unique and identifiable on the date hereof and that an award of money damages
would be insufficient to compensate the Purchaser for the losses and damages
incurred by the Purchaser in the event of the Seller's failure to deliver the
Mortgage Loans on or before the Closing Date. The Seller hereby grants to the
Purchaser a lien on and a continuing security interest in the Seller's interest
in each Mortgage Loan and each document and instrument evidencing each such
Mortgage Loan to secure the performance by the Seller of its obligation
hereunder, and the Seller agrees that it holds such Mortgage Loans in custody
for the Purchaser, subject to the Purchaser's (i) right, prior to the Closing
Date, to reject any Mortgage Loan to the extent permitted by this Agreement, and
(ii) obligation to deliver or cause to be delivered the consideration for the
Mortgage Loans pursuant to Section 8 hereof. Any Mortgage Loans rejected by the
Purchaser shall concurrently therewith be released from the security interest
created hereby. All rights and remedies

                                      -20-

<PAGE>

of the Purchaser under this Agreement are distinct from, and cumulative with,
any other rights or remedies under this Agreement or afforded by law or equity
and all such rights and remedies may be exercised concurrently, independently or
successively.

          Notwithstanding the foregoing, if on the Closing Date, each of the
conditions set forth in Section 8 hereof shall have been satisfied and the
Purchaser shall not have paid or caused to be paid the Purchase Price, or any
such condition shall not have been waived or satisfied and the Purchaser
determines not to pay or cause to be paid the Purchase Price, the Purchaser
shall immediately effect the re-delivery of the Mortgage Loans, if delivery to
the Purchaser has occurred, and the security interest created by this Section 12
shall be deemed to have been released.

          SECTION 14. NOTICES. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered to or mailed by registered mail, postage prepaid, or transmitted by
fax and, receipt of which is confirmed by telephone, if to the Purchaser,
addressed to the Purchaser at 390 Greenwich Street, 4th Floor, New York, New
York 10013, Attention: Mortgage Finance Group, or such other address as may
hereafter be furnished to the Originator and the Seller in writing by the
Purchaser; if to the Seller, addressed to the Seller at 390 Greenwich Street,
4th Floor, New York, New York 10013, Attention: Mortgage Finance Group, or to
such other address as the Originator and the Seller may designate in writing to
the Purchaser and if to the Originator, addressed to the Originator at Encore
Credit Corp., 101 Innovation Drive, Suite 200, Irvine, California 92612, Attn:
John Kontoulis, with a copy to: Encore Credit Corp., 101 Innovation Drive, Suite
200, Irvine, California 92612, Attn: John Daurio, or such other address as may
hereafter be furnished to the Purchaser and the Seller in writing by the
Originator.

          SECTION 15. SEVERABILITY OF PROVISIONS. Any part, provision,
representation or warranty of this Agreement that is prohibited or that is held
to be void or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof. Any part, provision, representation or warranty of this Agreement that
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.

          SECTION 16. AGREEMENT OF PARTIES. The Seller, the Originator and the
Purchaser each agree to execute and deliver such instruments and take such
actions as either of the others may, from time to time, reasonably request in
order to effectuate the purpose and to carry out the terms of this Agreement and
the Pooling and Servicing Agreement.

          SECTION 17. SURVIVAL. (a) The Seller agrees that the representations,
warranties and agreements made by it herein and in any certificate or other
instrument delivered pursuant hereto shall be deemed to be relied upon by the
Purchaser, notwithstanding any investigation heretofore or hereafter made by the
Purchaser or on its behalf, and that the representations, warranties and
agreements made by the Seller herein or in any such certificate or other
instrument shall survive the

                                      -21-

<PAGE>

delivery of and payment for the Mortgage Loans and shall continue in full force
and effect, notwithstanding any restrictive or qualified endorsement on the
Mortgage Notes and notwithstanding subsequent termination of this Agreement, the
Pooling and Servicing Agreement or the Trust Fund.

     (b) The Originator agrees that the representations, warranties and
agreements made by it herein and in any certificate or other instrument
delivered pursuant hereto shall be deemed to be relied upon by the Seller and
the Purchaser, notwithstanding any investigation heretofore or hereafter made by
the Seller or the Purchaser or on the behalf of either of them, and that the
representations, warranties and agreements made by the Originator herein or in
any such certificate or other instrument shall continue in full force and
effect, notwithstanding subsequent termination of this Agreement, the Pooling
and Servicing Agreement or the Trust Fund.

          SECTION 18. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS, DUTIES,
OBLIGATIONS AND RESPONSIBILITIES OF THE PARTIES HERETO SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS (WITHOUT GIVING EFFECT TO THE CHOICE OF
LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. THE PARTIES HERETO
INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW SHALL APPLY TO THIS AGREEMENT.

          SECTION 19. MISCELLANEOUS. This Agreement may be executed in two or
more counterparts, each of which when so executed and delivered shall be an
original, but all of which together shall constitute one and the same
instrument. This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof.

          It is the express intent of the parties hereto that the conveyance of
the Mortgage Loans by the Seller to the Purchaser as provided in Section 4
hereof be, and be construed as, a sale of the Mortgage Loans by the Seller to
the Purchaser and not as a pledge of the Mortgage Loans by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. However, in the
event that, notwithstanding the aforementioned intent of the parties, the
Mortgage Loans are held to be property of the Seller, then (a) it is the express
intent of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the Seller to the Purchaser to secure a debt or other obligation of the
Seller and (b) (1) this Agreement shall also be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New York Uniform
Commercial Code; (2) the conveyance provided for in Section 4 hereof shall be
deemed to be a grant by the Seller to the Purchaser of a security interest in
all of the Seller's right, title and interest in and to the Mortgage Loans and
all amounts payable to the holders of the Mortgage Loans in accordance with the
terms thereof and all proceeds of the conversion, voluntary or involuntary, of
the foregoing into cash, instruments, securities or other property, including
without limitation all amounts, other than investment earnings, from time to
time held or invested in the Collection Account whether in the form of cash,
instruments, securities or other property; (3) the possession by the Purchaser
or its agent of Mortgage Notes, the related

                                      -22-

<PAGE>

Mortgages and such other items of property that constitute instruments, money,
negotiable documents or chattel paper shall be deemed to be "possession" by the
secured party for purposes of perfecting the security interest pursuant to the
New York Uniform Commercial Code; and (4) notifications to persons holding such
property and acknowledgments, receipts or confirmations from persons holding
such property shall be deemed notifications to, or acknowledgments, receipts or
confirmations from, financial intermediaries, bailees or agents (as applicable)
of the Purchaser for the purpose of perfecting such security interest under
applicable law. Any assignment of the interest of the Purchaser pursuant to
Section 4(d) hereof shall also be deemed to be an assignment of any security
interest created hereby. The Seller and the Purchaser shall, to the extent
consistent with this Agreement, take such actions as may be necessary to ensure
that, if this Agreement were deemed to create a security interest in the
Mortgage Loans, such security interest would be deemed to be a perfected
security interest of first priority under applicable law and will be maintained
as such throughout the term of this Agreement and the Pooling and Servicing
Agreement.

                                      -23-

<PAGE>

          IN WITNESS WHEREOF, the Purchaser, the Seller and the Originator have
caused their names to be signed by their respective officers thereunto duly
authorized as of the date first above written.

                                          SALOMON BROTHERS MORTGAGE
                                          SECURITIES VII, INC.

                                          By:________________________________
                                          Name:
                                          Title:

                                          CITIGROUP GLOBAL MARKETS REALTY CORP.

                                          By:________________________________
                                          Name:
                                          Title:

                                          ENCORE CREDIT CORP.

                                          By:________________________________
                                          Name:
                                          Title:

<PAGE>

                                    EXHIBIT E
                                    ---------

                               REQUEST FOR RELEASE
                             (for Trustee/Custodian)

LOAN INFORMATION

         Name of Mortgagor:     ________________________________

         Master Servicer
         Loan No.:              ________________________________

TRUSTEE/CUSTODIAN

         Name:                  ________________________________

         Address:               ________________________________
                                ________________________________

         Trustee/Custodian
         Mortgage File No.:     ________________________________

TRUSTEE

         Name:                  _____________________________

         Address:               _____________________________
                                _____________________________

DEPOSITOR

         Name:                  SALOMON BROTHERS MORTGAGE
                                SECURITIES VII, INC.

         Address:               __________________________________
                                __________________________________

         Certificates:          Asset Backed Mortgage Pass-Through
                                Certificates, Series 2003-HE1

          The undersigned Servicer hereby acknowledges that it has received from
_______________________, as Trustee for the Holders of Asset Backed Pass-Through
Certificates, Series 2003-HE1 the documents referred to below (the "Documents").
All capitalized terms not otherwise defined in this Request for Release shall
have the meanings given them in the Pooling and Servicing Agreement, dated as of
April 1, 2003, among the Trustee, the Depositor and the Servicer (the "Pooling
and Servicing Agreement").

                                       E-1

<PAGE>

          ( ) Promissory Note dated _______________, 20__, in the original
principal sum of $__________, made by _____________________, payable to, or
endorsed to the order of, the Trustee.

          ( ) Mortgage recorded on _________________________ as instrument no.
____________________ in the County Recorder's Office of the County of
_________________, State of __________________ in book/reel/docket
_________________ of official records at page/image _____________.

          ( ) Deed of Trust recorded on ___________________ as instrument no.
________________ in the County Recorder's Office of the County of
_________________, State of ____________________ in book/reel/docket
_________________ of official records at page/image ______________.

          ( ) Assignment of Mortgage or Deed of Trust to the Trustee, recorded
on ___________________ as instrument no. _________ in the County Recorder's
Office of the County of _______________, State of _______________________ in
book/reel/docket ____________ of official records at page/image ____________.

          ( ) Other documents, including any amendments, assignments or other
assumptions of the Mortgage Note or Mortgage.

          ( ) _____________________________________________

          ( ) _____________________________________________

          ( ) _____________________________________________

          ( ) _____________________________________________

          The undersigned Servicer hereby acknowledges and agrees as follows:

          (1) The 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 Servicer shall not cause or 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 Servicer assert or seek
to assert any claims or rights of setoff to or against the Documents or any
proceeds thereof.

          (3) The Servicer shall return each and every Document previously
requested from the Mortgage File to the Trustee when the need therefor no longer
exists, unless the Mortgage Loan relating to the Documents has been liquidated
and the proceeds thereof have been remitted to the Collection Account and except
as expressly provided in the Agreement.

                                       E-2

<PAGE>

          (4) The Documents and any proceeds thereof, including any proceeds of
proceeds, coming into the possession or control of the Servicer shall at all
times be earmarked for the account of the Trustee, and the Servicer shall keep
the Documents and any proceeds separate and distinct from all other property in
the Servicer's possession, custody or control.

Dated:

                                                LITTON LOAN SERVICING LP

                                                By:__________________________
                                                Name:
                                                Title:

                                       E-3

<PAGE>

                                   EXHIBIT F-1
                                   -----------

                    FORM OF TRANSFEROR REPRESENTATION LETTER

                                                      [Date]

Deutsche Bank National Trust Company
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Trust Administration - SB 0301

          Re:  Citigroup Home Equity Loan Trust, Series 2003-HE1, Asset Backed
               Mortgage Pass-Through Certificates, Class ___, representing a
               ___% Class ___ Percentage Interest
               ----------------------------------------------------------------

Ladies and Gentlemen:

          In connection with the transfer by ________________ (the "Transferor")
to ________________ (the "Transferee") of the captioned mortgage pass-through
certificates (the "Certificates"), the Transferor hereby certifies as follows:

          Neither the Transferor nor anyone acting on its behalf has (a)
offered, pledged, sold, disposed of or otherwise transferred any Certificate,
any interest in any Certificate or any other similar security to any person in
any manner, (b) has solicited any offer to buy or to accept a pledge,
disposition or other transfer of any Certificate, any interest in any
Certificate or any other similar security from any person in any manner, (c) has
otherwise approached or negotiated with respect to any Certificate, any interest
in any Certificate or any other similar security with any person in any manner,
(d) has made any general solicitation by means of general advertising or in any
other manner, (e) has taken any other action, that (in the case of each of
subclauses (a) through (e) above) would constitute a distribution of the
Certificates under the Securities Act of 1933, as amended (the "1933 Act"), or
would render the disposition of any Certificate a violation of Section 5 of the
1933 Act or any state securities law or would require registration or
qualification pursuant thereto. The Transferor will not act, nor has it
authorized or will it authorize any person to act, in any manner set forth in
the foregoing sentence with respect to any Certificate. The Transferor will not
sell or otherwise transfer any of the Certificates, except in compliance with
the provisions of that certain Pooling and Servicing Agreement, dated as of
April 1, 2003, among Salomon Brothers Mortgage Securities VII, Inc. as
Depositor, Litton Loan Servicing LP as Servicer and Deutsche Bank National Trust
Company as Trustee (the "Pooling and Servicing Agreement"), pursuant to which
Pooling and Servicing Agreement the Certificates were issued.

                                      F-1-1

<PAGE>

          Capitalized terms used but not defined herein shall have the meanings
assigned thereto in the Pooling and Servicing Agreement.

                                           Very truly yours,

                                           [Transferor]

                                           By:___________________________
                                           Name:
                                           Title:

                                      F-1-2

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER

                                                   [Date]

Deutsche Bank National Trust Company
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Trust Administration - SB 0301

          Re:  Citigroup Home Equity Loan Trust, Series 2003-HE1, Asset Backed
               Mortgage Pass-Through Certificates, Class ___, representing a
               ___% Percentage Interest
               ---------------------------------------------------------------

Ladies and Gentlemen:

          In connection with the purchase from ______________________ (the
"Transferor") on the date hereof of the captioned trust certificates (the
"Certificates"), _______________ (the "Transferee") hereby certifies as follows:

          1. The Transferee is a "qualified institutional buyer" as that term is
defined in Rule 144A ("Rule 144A") under the Securities Act of 1933 (the "1933
Act") and has completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. The Transferee is aware that the sale to
it is being made in reliance on Rule 144A. The Transferee is acquiring the
Certificates for its own account or for the account of a qualified institutional
buyer, and understands that such Certificate may be resold, pledged or
transferred only (i) to a person reasonably believed to be a qualified
institutional buyer that purchases for its own account or for the account of a
qualified institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, or (ii) pursuant to another
exemption from registration under the 1933 Act.

          2. The Transferee has been furnished with all information regarding
(a) the Certificates and distributions thereon, (b) the nature, performance and
servicing of the Mortgage Loans, (c) the Pooling and Servicing Agreement
referred to below, and (d) any credit enhancement mechanism associated with the
Certificates, that it has requested.

          All capitalized terms used but not otherwise defined herein have the
respective meanings assigned thereto in the Pooling and Servicing Agreement,
dated as of April 1, 2003, among Salomon Brothers Mortgage Securities VII, Inc.
as Depositor, Litton Loan Servicing LP as Servicer and Deutsche Bank National
Trust Company as Trustee, pursuant to which the Certificates were issued.

                                           [TRANSFEREE]

                                           By:__________________________
                                           Name:
                                           Title:

                                      F-1-3

<PAGE>

                                                          ANNEX 1 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

          [For Transferees Other Than Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and Deutsche Bank National Trust Company, as Trustee, with
respect to the mortgage pass-through certificates (the "Certificates") described
in the Transferee Certificate to which this certification relates and to which
this certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
entity purchasing the Certificates (the "Transferee").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Transferee owned and/or
invested on a discretionary basis $______________________1 in securities (except
for the excluded securities referred to below) as of the end of the Transferee's
most recent fiscal year (such amount being calculated in accordance with Rule
144A) and (ii) the Transferee satisfies the criteria in the category marked
below.

     ___ CORPORATION, ETC. The Transferee is a corporation (other than a bank,
savings and loan association or similar institution), Massachusetts or similar
business trust, partnership, or any organization described in Section 501(c)(3)
of the Internal Revenue Code of 1986.

     ___ BANK. The Transferee (a) is a national bank or banking institution
organized under the laws of any State, territory or the District of Columbia,
the business of which is substantially confined to banking and is supervised by
the State or territorial banking commission or similar official or is a foreign
bank or equivalent institution, and (b) has an audited net worth of at least
$25,000,000 as demonstrated in its latest annual financial statements, a copy of
which is attached hereto.

     ___ SAVINGS AND LOAN. The Transferee (a) is a savings and loan association,
building and loan association, cooperative bank, homestead association or
similar institution, which is supervised and examined by a State or Federal
authority having supervision over any such institutions or is a foreign savings
and loan association or equivalent institution and (b) has an audited net worth
of at least

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

1    Transferee must own and/or invest on a discretionary basis at least
     $100,000,000 in securities unless Transferee is a dealer, and, in that
     case, Transferee must own and/or invest on a discretionary basis at least
     $10,000,000 in securities. $25,000,000 as demonstrated in its latest annual
     financial statements, A COPY OF WHICH IS ATTACHED HERETO.

                                      F-1-4

<PAGE>

     ___ BROKER-DEALER. The Transferee is a dealer registered pursuant to
Section 15 of the Securities Exchange Act of 1934.

     ___ INSURANCE COMPANY. The Transferee is an insurance company whose primary
and predominant business activity is the writing of insurance or the reinsuring
of risks underwritten by insurance companies and which is subject to supervision
by the insurance commissioner or a similar official or agency of a State,
territory or the District of Columbia.

     ___ STATE OR LOCAL PLAN. The Transferee is a plan established and
maintained by a State, its political subdivisions, or any agency or
instrumentality of the State or its political subdivisions, for the benefit of
its employees.

     ___ ERISA PLAN. The Transferee is an employee benefit plan within the
meaning of Title I of the Employee Retirement Income Security Act of 1974.

     ___ INVESTMENT ADVISOR. The Transferee is an investment advisor registered
under the Investment Advisers Act of 1940.

          3. The term "SECURITIES" as used herein DOES NOT INCLUDE (i)
securities of issuers that are affiliated with the Transferee, (ii) securities
that are part of an unsold allotment to or subscription by the Transferee, if
the Transferee is a dealer, (iii) securities issued or guaranteed by the U.S. or
any instrumentality thereof, (iv) bank deposit notes and certificates of
deposit, (v) loan participations, (vi) repurchase agreements, (vii) securities
owned but subject to a repurchase agreement and (viii) currency, interest rate
and commodity swaps.

          4. For purposes of determining the aggregate amount of securities
owned and/or invested on a discretionary basis by the Transferee, the Transferee
used the cost of such securities to the Transferee and did not include any of
the securities referred to in the preceding paragraph. Further, in determining
such aggregate amount, the Transferee may have included securities owned by
subsidiaries of the Transferee, but only if such subsidiaries are consolidated
with the Transferee in its financial statements prepared in accordance with
generally accepted accounting principles and if the investments of such
subsidiaries are managed under the Transferee's direction. However, such
securities were not included if the Transferee is a majority-owned, consolidated
subsidiary of another enterprise and the Transferee is not itself a reporting
company under the Securities Exchange Act of 1934.

          5. The Transferee acknowledges that it is familiar with Rule 144A and
understands that the Transferor and other parties related to the Certificates
are relying and will continue to rely on the statements made herein because one
or more sales to the Transferee may be in reliance on Rule 144A.

          ___      ___      Will the Transferee be purchasing the Certificates
          Yes      No       only for the Transferee's own account?

          6. If the answer to the foregoing question is "no", the Transferee
agrees that, in connection with any purchase of securities sold to the
Transferee for the account of a third party

                                      F-1-5

<PAGE>

(including any separate account) in reliance on Rule 144A, the Transferee will
only purchase for the account of a third party that at the time is a "qualified
institutional buyer" within the meaning of Rule 144A. In addition, the
Transferee agrees that the Transferee will not purchase securities for a third
party unless the Transferee has obtained a current representation letter from
such third party or taken other appropriate steps contemplated by Rule 144A to
conclude that such third party independently meets the definition of "qualified
institutional buyer" set forth in Rule 144A.

          7. The Transferee will notify each of the parties to which this
certification is made of any changes in the information and conclusions herein.
Until such notice is given, the Transferee's purchase of the Certificates will
constitute a reaffirmation of this certification as of the date of such
purchase. In addition, if the Transferee is a bank or savings and loan as
provided above, the Transferee agrees that it will furnish to such parties
updated annual financial statements promptly after they become available.

Dated:

                                           ____________________________________
                                           Print Name of Transferee

                                           By:_________________________________
                                           Name:
                                           Title:

                                      F-1-6

<PAGE>

                                                          ANNEX 2 TO EXHIBIT F-1
                                                          ----------------------

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
            --------------------------------------------------------

           [For Transferees That Are Registered Investment Companies]

          The undersigned hereby certifies as follows to [name of Transferor]
(the "Transferor") and Deutsche Bank National Trust Company, as Trustee, with
respect to the mortgage pass- through certificates (the "Certificates")
described in the Transferee Certificate to which this certification relates and
to which this certification is an Annex:

          1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the entity purchasing the
Certificates (the "Transferee") or, if the Transferee is a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act of 1933 ("Rule 144A") because the Transferee is part of a Family of
Investment Companies (as defined below), is such an officer of the investment
adviser (the "Adviser").

          2. In connection with purchases by the Transferee, the Transferee is a
"qualified institutional buyer" as defined in Rule 144A because (i) the
Transferee is an investment company registered under the Investment Company Act
of 1940, and (ii) as marked below, the Transferee alone, or the Transferee's
Family of Investment Companies, owned at least $100,000,000 in securities (other
than the excluded securities referred to below) as of the end of the
Transferee's most recent fiscal year. For purposes of determining the amount of
securities owned by the Transferee or the Transferee's Family of Investment
Companies, the cost of such securities was used.

    ____       The Transferee owned $___________________ in securities (other
               than the excluded securities referred to below) as of the end of
               the Transferee's most recent fiscal year (such amount being
               calculated in accordance with Rule 144A).

    ____       The Transferee is part of a Family of Investment Companies which
               owned in the aggregate $______________ in securities (other than
               the excluded securities referred to below) as of the end of the
               Transferee's most recent fiscal year (such amount being
               calculated in accordance with Rule 144A).

          3. The term "FAMILY OF INVESTMENT COMPANIES" as used herein means two
or more registered investment companies (or series thereof) that have the same
investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

          4. The term "SECURITIES" as used herein does not include (i)
securities of issuers that are affiliated with the Transferee or are part of the
Transferee's Family of Investment Companies, (ii) securities issued or
guaranteed by the U.S. or any instrumentality thereof, (iii) bank deposit notes
and certificates of deposit, (iv) loan participations, (v) repurchase
agreements, (vi) securities owned but subject to a repurchase agreement and
(vii) currency, interest rate and commodity swaps.

                                      F-1-7

<PAGE>

          5. The Transferee is familiar with Rule 144A and understands that the
parties to which this certification is being made are relying and will continue
to rely on the statements made herein because one or more sales to the
Transferee will be in reliance on Rule 144A. In addition, the Transferee will
only purchase for the Transferee's own account.

          6. The undersigned will notify the parties to which this certification
is made of any changes in the information and conclusions herein. Until such
notice, the Transferee's purchase of the Certificates will constitute a
reaffirmation of this certification by the undersigned as of the date of such
purchase.

Dated:

                                           ___________________________________
                                           Print Name of Transferee or Advisor

                                           By:________________________________
                                           Name:
                                           Title:

                                           IF AN ADVISER:

                                           ___________________________________
                                           Print Name of Transferee

                                      F-1-8

<PAGE>

                    FORM OF TRANSFEREE REPRESENTATION LETTER
                    ----------------------------------------

          The undersigned hereby certifies on behalf of the purchaser named
below (the "Purchaser") as follows:

          1. I am an executive officer of the Purchaser.

          2. The Purchaser is a "qualified institutional buyer", as defined in
Rule 144A, ("Rule 144A") under the Securities Act of 1933, as amended.

          3. As of the date specified below (which is not earlier than the last
day of the Purchaser's most recent fiscal year), the amount of "securities",
computed for purposes of Rule 144A, owned and invested on a discretionary basis
by the Purchaser was in excess of $100,000,000.

                                            Name of Purchaser

                                            _______________________________

                                            By:____________________________
                                            Name:
                                            Title:

Date of this certificate:

Date of information provided in paragraph 3

                                      F-1-9

<PAGE>

                                   EXHIBIT F-2
                                   -----------

                    FORM OF TRANSFER AFFIDAVIT AND AGREEMENT

STATE OF NEW YORK    )

COUNTY OF NEW YORK   )

          __________________________, being duly sworn, deposes, represents and
warrants as follows:

          1. I am a ______________________ of ____________________________ (the
"Owner") a corporation duly organized and existing under the laws of
______________, the record owner of Citigroup Home Equity Loan Trust, Series
2003-HE1, Asset Backed Mortgage Pass-Through Certificates, Class [R] [R-X]
Certificates, (the "Class [R] [R-X] Certificates"), on behalf of whom I make
this affidavit and agreement. Capitalized terms used but not defined herein have
the respective meanings assigned thereto in the Pooling and Servicing Agreement
pursuant to which the Class [R] [R-X] Certificates were issued.

          2. The Owner (i) is and will be a "Permitted Transferee" as of
____________, 20__ and (ii) is acquiring the Class [R] [R-X] Certificates for
its own account or for the account of another Owner from which it has received
an affidavit in substantially the same form as this affidavit. A "Permitted
Transferee" is any person other than a "disqualified organization" or a
possession of the United States. For this purpose, a "disqualified organization"
means the United States, any state or political subdivision thereof, any agency
or instrumentality of any of the foregoing (other than an instrumentality all of
the activities of which are subject to tax and, except for the Federal Home Loan
Mortgage Corporation, a majority of whose board of directors is not selected by
any such governmental entity) or any foreign government, international
organization or any agency or instrumentality of such foreign government or
organization, any rural electric or telephone cooperative, or any organization
(other than certain farmers' cooperatives) that is generally exempt from federal
income tax unless such organization is subject to the tax on unrelated business
taxable income.

          3. The Owner is aware (i) of the tax that would be imposed on
transfers of the Class [R] [R-X] Certificates to disqualified organizations
under the Internal Revenue Code of 1986 that applies to all transfers of the
Class [R] [R-X] Certificates after March 31, 1988; (ii) that such tax would be
on the transferor or, if such transfer is through an agent (which person
includes a broker, nominee or middleman) for a non-Permitted Transferee, on the
agent; (iii) that the person otherwise liable for the tax shall be relieved of
liability for the tax if the transferee furnishes to such person an affidavit
that the transferee is a Permitted Transferee and, at the time of transfer, such
person does not have actual knowledge that the affidavit is false; and (iv) that
each of the Class [R] [R-X] Certificates may be a "noneconomic residual
interest" within the meaning of proposed Treasury regulations promulgated under
the Code and that the transferor of a "noneconomic residual interest" will
remain liable for any taxes due with respect to the income on such residual
interest, unless no significant purpose of the transfer is to impede the
assessment or collection of tax.

                                      F-2-1

<PAGE>

          4. The Owner is aware of the tax imposed on a "pass-through entity"
holding the Class [R] [R-X] Certificates if, at any time during the taxable year
of the pass-through entity, a non-Permitted Transferee is the record holder of
an interest in such entity. (For this purpose, a "pass-through entity" includes
a regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives.)

          5. The Owner is aware that the Trustee will not register the transfer
of any Class [R] [R-X] Certificate unless the transferee, or the transferee's
agent, delivers to the Trustee, among other things, an affidavit in
substantially the same form as this affidavit. The Owner expressly agrees that
it will not consummate any such transfer if it knows or believes that any of the
representations contained in such affidavit and agreement are false.

          6. The Owner consents to any additional restrictions or arrangements
that shall be deemed necessary upon advice of counsel to constitute a reasonable
arrangement to ensure that the Class [R] [R-X] Certificates will only be owned,
directly or indirectly, by an Owner that is a Permitted Transferee.

          7. The Owner's taxpayer identification number is _________________.

          8. The Owner has reviewed the restrictions set forth on the face of
the Class [R] [R-X] Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing Agreement under which the Class [R] [R-X] Certificates
were issued (in particular, clauses (iii)(A) and (iii)(B) of Section 5.02(d)
which authorize the Trustee to deliver payments to a person other than the Owner
and negotiate a mandatory sale by the Trustee in the event that the Owner holds
such Certificate in violation of Section 5.02(d)); and that the Owner expressly
agrees to be bound by and to comply with such restrictions and provisions.

          9. The Owner is not acquiring and will not transfer the Class [R]
[R-X] Certificates in order to impede the assessment or collection of any tax.

          10. The Owner anticipates that it will, so long as it holds the Class
[R] [R-X] Certificates, have sufficient assets to pay any taxes owed by the
holder of such Class [R] [R-X] Certificates, and hereby represents to and for
the benefit of the person from whom it acquired the Class [R] [R-X] Certificates
that the Owner intends to pay taxes associated with holding such Class [R] [R-X]
Certificates as they become due, fully understanding that it may incur tax
liabilities in excess of any cash flows generated by the Class [R] [R-X]
Certificates.

          11. The Owner has no present knowledge that it may become insolvent or
subject to a bankruptcy proceeding for so long as it holds the Class [R] [R-X]
Certificates.

          12. The Owner has no present knowledge or expectation that it will be
unable to pay any United States taxes owed by it so long as any of the
Certificates remain outstanding.

          13. The Owner is not acquiring the Class [R] [R-X] Certificates with
the intent to transfer the Class [R] [R-X] Certificates to any person or entity
that will not have sufficient assets to pay any taxes owed by the holder of such
Class [R] [R-X] Certificates, or that may become

                                      F-2-2

<PAGE>

insolvent or subject to a bankruptcy proceeding, for so long as the Class [R]
[R-X] Certificates remain outstanding.

          14. The Owner will, in connection with any transfer that it makes of
the Class [R] [R-X] Certificates, obtain from its transferee the representations
required by Section 5.02(d) of the Pooling and Servicing Agreement under which
the Class [R] [R-X] Certificate were issued and will not consummate any such
transfer if it knows, or knows facts that should lead it to believe, that any
such representations are false.

          15. The Owner will, in connection with any transfer that it makes of
the Class [R] [R-X] Certificates, deliver to the Trustee an affidavit, which
represents and warrants that it is not transferring the Class [R] [R-X]
Certificates to impede the assessment or collection of any tax and that it has
no actual knowledge that the proposed transferee: (i) has insufficient assets to
pay any taxes owed by such transferee as holder of the Class [R] [R-X]
Certificates; (ii) may become insolvent or subject to a bankruptcy proceeding
for so long as the Class [R] [R-X] Certificates remains outstanding; and (iii)
is not a "Permitted Transferee".

          16. The Owner is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate or
trust whose income from sources without the United States may be included in
gross income for United States federal income tax purposes regardless of its
connection with the conduct of a trade or business within the United States.

          17. The Owner of the Class [R] [R-X] Certificate, hereby agrees that
in the event that the Trust Fund created by the Pooling and Servicing Agreement
is terminated pursuant to Section 9.01 thereof, the undersigned shall assign and
transfer to the Holders of the Class CE Certificates (with respect to a
termination of REMIC I) any amounts in excess of par received in connection with
such termination. Accordingly, in the event of such termination, the Trustee is
hereby authorized to withhold any such amounts in excess of par and to pay such
amounts directly to the Holders of the Class CE Certificates. This agreement
shall bind and be enforceable against any successor, transferee or assigned of
the undersigned in the Class [R] [R-X] Certificate. In connection with any
transfer of the Class [R] [R-X] Certificate, the Owner shall obtain an agreement
substantially similar to this clause from any subsequent owner.

                                      F-2-3

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
__________, 20__.

                                                 [OWNER]

                                                 By:__________________________
                                                 Name:
                                                 Title:   [Vice] President

ATTEST:

By:_________________________________
Name:
Title:   [Assistant] Secretary

          Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be a [Vice]
President of the Owner, and acknowledged to me that [he/she] executed the same
as [his/her] free act and deed and the free act and deed of the Owner.

          Subscribed and sworn before me this ____ day of __________, 20___.

                                                   ____________________________
                                                            Notary Public

                                                   County of __________________
                                                   State of ___________________

                                                   My Commission expires:

                                      F-2-4

<PAGE>

                          FORM OF TRANSFEROR AFFIDAVIT
                          ----------------------------

STATE OF NEW YORK    )

COUNTY OF NEW YORK   )

          __________________________, being duly sworn, deposes, represents and
warrants as follows:

          1. I am a ____________________ of ____________________________ (the
"Owner"), a corporation duly organized and existing under the laws of
______________, on behalf of whom I make this affidavit.

          2. The Owner is not transferring the Class [R] [R-X] Certificates (the
"Residual Certificates") to impede the assessment or collection of any tax.

          3. The Owner has no actual knowledge that the Person that is the
proposed transferee (the "Purchaser") of the Residual Certificates: (i) has
insufficient assets to pay any taxes owed by such proposed transferee as holder
of the Residual Certificates; (ii) may become insolvent or subject to a
bankruptcy proceeding for so long as the Residual Certificates remain
outstanding and (iii) is not a Permitted Transferee.

          4. The Owner understands that the Purchaser has delivered to the
Trustee a transfer affidavit and agreement in the form attached to the Pooling
and Servicing Agreement as Exhibit F-2. The Owner does not know or believe that
any representation contained therein is false.

          5. At the time of transfer, the Owner has conducted a reasonable
investigation of the financial condition of the Purchaser as contemplated by
Treasury Regulations Section 1.860E-1(c)(4)(i) and, as a result of that
investigation, the Owner has determined that the Purchaser has historically paid
its debts as they became due and has found no significant evidence to indicate
that the Purchaser will not continue to pay its debts as they become due in the
future. The Owner understands that the transfer of a Residual Certificate may
not be respected for United States income tax purposes (and the Owner may
continue to be liable for United States income taxes associated therewith)
unless the Owner has conducted such an investigation.

          6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Pooling and Servicing Agreement.

                                      F-2-5

<PAGE>

          IN WITNESS WHEREOF, the Owner has caused this instrument to be
executed on its behalf, pursuant to the authority of its Board of Directors, by
its [Vice] President, attested by its [Assistant] Secretary, this ____ day of
___________, 20__.

                                             [OWNER]

                                             By:_____________________________
                                             Name:
                                             Title:      [Vice] President

ATTEST:

By:______________________________
Name:
Title:   [Assistant] Secretary

          Personally appeared before me the above-named , known or proved to me
to be the same person who executed the foregoing instrument and to be a [Vice]
President of the Owner, and acknowledged to me that [he/she] executed the same
as [his/her] free act and deed and the free act and deed of the Owner.

          Subscribed and sworn before me this ____ day of __________, 20___.

                                                 ____________________________
                                                          Notary Public

                                                 County of __________________
                                                 State of ___________________

                                                 My Commission expires:

                                      F-2-6

<PAGE>

                                    EXHIBIT G
                                    ---------

            FORM OF CERTIFICATION WITH RESPECT TO ERISA AND THE CODE

                                             _____________, 20__

Deutsche Bank National Trust Company
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Trust Administration - SB 0301

          Re:   Citigroup Home Equity Loan Trust, Series 2003-HE1, Asset Backed
                Pass-Through Certificates, Class ___
                ---------------------------------------------------------------

Dear Sirs:

          _______________________ (the "Transferee") intends to acquire from
_____________________ (the "Transferor") $____________ Initial Certificate
Principal Balance of Citigroup Home Equity Loan Trust, Series 2003-HE1, Asset
Backed Pass-Through Certificates, Class [CE] [P] [R] [R-X](the "Certificates"),
issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") dated as of April 1, 2003, among Salomon Brothers Mortgage
Securities VII, Inc. as depositor (the "Depositor"), Litton Loan Servicing LP as
servicer (the "Servicer") and Deutsche Bank National Trust Company as trustee
(the "Trustee"). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned thereto in the Pooling and Servicing Agreement. The
Transferee hereby certifies, represents and warrants to, and covenants with the
Depositor, the Trustee and the Servicer that:

          The Certificates (i) are not being acquired by, and will not be
transferred to, any employee benefit plan within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
other retirement arrangement, including individual retirement accounts and
annuities, Keogh plans and bank collective investment funds and insurance
company general or separate accounts in which such plans, accounts or
arrangements are invested, that is subject to Section 406 of ERISA or Section
4975 of the Internal Revenue Code of 1986 (the "Code") (any of the foregoing, a
"Plan"), (ii) are not being acquired with "plan assets" of a Plan within the
meaning of the Department of Labor ("DOL") regulation, 29 C.F.R.ss.2510.3-101,
and (iii) will not be transferred to any entity that is deemed to be investing
in plan assets within the meaning of the DOL regulation at 29 C.F.R.ss.
2510.3-101.

                                       G-1

<PAGE>

                                             Very truly yours,

                                             _______________________________

                                             By:____________________________
                                             Name:
                                             Title:

                                       G-2

<PAGE>

                                    EXHIBIT H

                                   [RESERVED]

                                       H-1

<PAGE>

                                    EXHIBIT I

                                   [RESERVED]

                                       H-2

<PAGE>

                                    EXHIBIT J

            FORM OF OFFICER'S CERTIFICATE WITH RESPECT TO PREPAYMENTS

                              Officer's Certificate

               Citigroup Home Equity Loan Trust, Series 2003-HE1,
                 Asset Backed Mortgage Pass-Through Certificates

Deutsche Bank National Trust Company, Trustee
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Trust Administration - SB 0301

    Re:   Prepayments

Dear Sir or Madam:

          __________________ hereby certifies that he/she is an officer of the
Servicer, holding the office set forth beneath his/her name and hereby further
certifies as follows:

          With respect to the Mortgage Loans, as the term is defined in the
Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Pooling and
Servicing Agreement"), among Salomon Brothers Mortgage Securities VII, Inc. as
depositor (the "Depositor"), Litton Loan Servicing LP as servicer (the
"Servicer") and Deutsche Bank National Trust Company as trustee (the "Trustee"),
set forth in the attached schedule:

          (1) A Principal Prepayment in full was received during the related Due
Period;

          (2) Any prepayment penalty due under the terms of the Mortgage Note
with respect to such Principal Prepayment in full was received from the
mortgagor and delivered to the Trustee for deposit in the Distribution Account;
____ Yes ____ No

          (3) As to each Mortgage Loan so noted on the attached schedule, all or
part of the prepayment penalty required in connection with the Principal
Prepayment in full was waived based upon (Circle one): (i) the Servicer's
determination that such waiver would maximize recovery of Liquidation Proceeds
for such Mortgage Loan, taking into account the value of such prepayment
penalty, or (ii)(A) the enforceability thereof is limited (1) by bankruptcy
insolvency, moratorium, receivership, or other similar law relating to
creditors' rights generally or (2) due to acceleration in connection with a
foreclosure or other involuntary payment, or (B) the enforceability is otherwise
limited or prohibited by applicable law;

          (4) We certify that all amounts due in connection with the waiver of a
prepayment penalty inconsistent with number 3 above which are required to be
delivered to the Trustee for

                                       J-1

<PAGE>

deposit in the Distribution Account pursuant to Section 3.01 of the Pooling and
Servicing Agreement, have been or will be so delivered.

                                              By:_________________________
                                              Name:
                                              Title:

                                       J-2

<PAGE>

                                    EXHIBIT K

                           FORM OF LOST NOTE AFFIDAVIT

Loan #: ____________
Borrower: _____________

                               LOST NOTE AFFIDAVIT

          I, as ____________________ of ______________________, a
_______________ corporation am authorized to make this Affidavit on behalf of
_____________________ (the "Seller"). In connection with the administration of
the Mortgage Loans held by ____________________, a _________________ corporation
as Seller on behalf of Salomon Brothers Mortgage Securities VII, Inc. (the
"Purchaser"), _____________________ (the "Deponent"), being duly sworn, deposes
and says that:

     1.       The Seller's address is:  _____________________
                                        _____________________
                                        _____________________

     2.   The Seller previously delivered to the Purchaser a signed Initial
          Certification with respect to such Mortgage and/or Assignment of
          Mortgage;

     3.   Such Mortgage Note and/or Assignment of Mortgage was assigned or sold
          to the Purchaser by ________________________, a ____________
          corporation pursuant to the terms and provisions of a Mortgage Loan
          Purchase Agreement dated as of __________ __, _____;

     4.   Such Mortgage Note and/or Assignment of Mortgage is not outstanding
          pursuant to a request for release of Documents;

     5.   Aforesaid Mortgage Note and/or Assignment of Mortgage (the "Original")
          has been lost;

     6.   Deponent has made or caused to be made a diligent search for the
          Original and has been unable to find or recover same;

     7.   The Seller was the Seller of the Original at the time of the loss; and

     8.   Deponent agrees that, if said Original should ever come into Seller's
          possession, custody or power, Seller will immediately and without
          consideration surrender the Original to the Purchaser.

     9.   Attached hereto is a true and correct copy of (i) the Note, endorsed
          in blank by the Mortgagee and (ii) the Mortgage or Deed of Trust
          (strike one) which secures the

                                       K-1

<PAGE>

          Note, which Mortgage or Deed of Trust is recorded in the county where
          the property is located.

     10.  Deponent hereby agrees that the Seller (a) shall indemnify and hold
          harmless the Purchaser, its successors and assigns, against any loss,
          liability or damage, including reasonable attorney's fees, resulting
          from the unavailability of any Notes, including but not limited to any
          loss, liability or damage arising from (i) any false statement
          contained in this Affidavit, (ii) any claim of any party that has
          already purchased a mortgage loan evidenced by the Lost Note or any
          interest in such mortgage loan, (iii) any claim of any borrower with
          respect to the existence of terms of a mortgage loan evidenced by the
          Lost Note on the related property to the fact that the mortgage loan
          is not evidenced by an original note and (iv) the issuance of a new
          instrument in lieu thereof (items (i) through (iv) above hereinafter
          referred to as the "Losses") and (b) if required by any Rating Agency
          in connection with placing such Lost Note into a Pass-Through
          Transfer, shall obtain a surety from an insurer acceptable to the
          applicable Rating Agency to cover any Losses with respect to such Lost
          Note.

     11.  This Affidavit is intended to be relied upon by the Purchaser, its
          successors and assigns. _____________________, a ______________
          corporation represents and warrants that is has the authority to
          perform its obligations under this Affidavit of Lost Note.

Executed this ____ day, of ___________ ______.

                                                    SELLER

                                                    By:_________________________
                                                    Name:
                                                    Title:

          On this _____ day of ________, _____, before me appeared
_________________ to me personally known, who being duly sworn did say that he
is the _____________________ of ____________________ a ______________
corporation and that said Affidavit of Lost Note was signed and sealed on behalf
of such corporation and said acknowledged this instrument to be the free act and
deed of said corporation.

                                           Signature:

                                           [Seal]

                                       K-2

<PAGE>

                                   EXHIBIT L-1

        FORM CERTIFICATION TO BE PROVIDED BY THE DEPOSITOR WITH FORM 10-K

          Re:   Citigroup Home Equity Loan Trust, Series 2003-HE1
                Asset Backed Pass-Through Certificates, Series 2003-HE1

          I, [identify the certifying individual], certify that:

          l. I have reviewed this annual report on Form 10-K, and all reports on
Form 8-K containing distribution or servicing reports filed in respect of
periods included in the year covered by this annual report, of Salomon Brothers
Mortgage Securities VII, Inc. (the "Registrant");

          2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading as of the
last day of the period covered by this annual report;

          3. Based on my knowledge, the distribution information, and the
servicing information required to be provided to the Trustee by the Servicer
under the Pooling and Servicing Agreement, is included in these reports;

          4. Based on my knowledge and upon the annual compliance statement
included in the report and required to be delivered to the Trustee in accordance
with the terms of the Pooling and Servicing Agreement, and except as disclosed
in the reports, the Servicer has fulfilled its obligations under the Pooling and
Servicing Agreement; and

          5. The reports disclose all significant deficiencies relating to the
Servicer's compliance with the minimum servicing standards based upon the report
provided by an independent public accountant, after conducting a review in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
similar procedure, as set forth in the Pooling and Servicing Agreement, that is
included in these reports.

          In giving the certifications above, I have reasonably relied on
information provided to me by Deutsche Bank National Trust Company and Litton
Loan Servicing L.P.

          Capitalized terms used but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement, dated April 1, 2003
(the "Pooling and Servicing Agreement"), among the Registrant as Depositor,
Litton Loan Servicing L.P. as servicer and Deutsche Bank National Trust Company
as trustee.

                                      L-1-1

<PAGE>

                                         SALOMON BROTHERS MORTGAGE SECURITIES
                                         VII, INC.

                                         By:____________________________________
                                         Name:
                                         Title:
                                         Date:

                                      L-1-2

<PAGE>

                                   EXHIBIT L-2

                            FORM CERTIFICATION TO BE
                      PROVIDED TO DEPOSITOR BY THE TRUSTEE

          Re:   Citigroup Home Equity Loan Trust, Series 2003-HE1
                Asset Backed Pass-Through Certificates, Series 2003-HE1

          I, [identify the certifying individual], a [title] of Deutsche Bank
National Trust Company, as Trustee of the Trust Fund, hereby certify to Salomon
Brothers Mortgage Securities VII, Inc. (the "Depositor"), and its officers,
directors and affiliates, and with the knowledge and intent that they will rely
upon this certification, that:

          1. I have reviewed the annual report on Form 10-K for the fiscal year
[___], and all reports on Form 8-K containing distribution reports filed in
respect of periods included in the year covered by that annual report, of the
Depositor relating to the above-referenced trust;

          2. Based on my knowledge, the information in these distribution
reports prepared by the Trustee, taken as a whole, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading as of the last day of the period covered by that
annual report; and

          3. Based on my knowledge, the distribution information required to be
provided by the Trustee under the Pooling and Servicing Agreement is included in
these reports.

          Capitalized terms used but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement, dated April 1, 2003
(the "Pooling and Servicing Agreement"), among the Registrant as Depositor,
Litton Loan Servicing L.P. as servicer and Deutsche Bank National Trust Company
as trustee.

                                           DEUTSCHE BANK NATIONAL TRUST
                                           COMPANY, as Trustee

                                           By:__________________________________
                                           Name:
                                           Title:
                                           Date:

                                      L-2-1

<PAGE>

                                   EXHIBIT L-3

                            FORM CERTIFICATION TO BE
                      PROVIDED TO DEPOSITOR BY THE SERVICER

          Re:   Citigroup Home Equity Loan Trust, Series 2003-HE1
                Asset Backed Pass-Through Certificates, Series 2003-HE1

          I, [identify the certifying individual], certify to Salomon Brothers
Mortgage Securities VII, Inc. (the "Depositor"), Deutsche Bank National Trust
Company (the "Trustee") and their respective officers, directors and affiliates,
and with the knowledge and intent that they will rely upon this certification,
that:

          1. I have reviewed the information provided to the Trustee by the
Servicer pursuant to the Pooling and Servicing Agreement and information
correctly derived by the Trustee from such information and included in the
annual report on Form 10-K for the fiscal year [___] and on all reports on Form
8-K filed in respect of periods included in the year covered by that annual
report, of the Depositor relating to the Trust Fund (the "Servicing
Information");

          2. Based on my knowledge, the Servicing Information in these reports,
taken as a whole, does not contain any untrue statement of a material fact;

          3. Based on my knowledge, the Servicing Information is correct;

          4. I am responsible for reviewing the activities performed by the
Servicer under the Pooling and Servicing Agreement and based upon the annual
compliance review required under the Pooling and Servicing Agreement, and except
as disclosed by written notice to the Depositor and the Trustee or in the annual
compliance statement or certified public accountant's report required to be
delivered to the Trustee under the Pooling and Servicing Agreement, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement; and

          5. The Servicer has disclosed to its certified public accountants and
the Depositor all significant deficiencies relating to the Servicer's compliance
with the minimum servicing standards in accordance with a review conducted in
compliance with the Uniform Single Attestation Program for Mortgage Bankers or
similar procedure, as set forth in the Pooling and Servicing Agreement.

                                      L-3-1

<PAGE>

          Capitalized terms used but not defined herein have the meanings
ascribed to them in the Pooling and Servicing Agreement, dated April 1, 2003
(the "Pooling and Servicing Agreement"), among the Registrant as Depositor,
Litton Loan Servicing L.P. as servicer and the Trustee.

                                           LITTON LOAN SERVICING L.P.

                                           By:____________________________
                                           Name:
                                           Title:
                                           Date:

                                      L-3-2

<PAGE>

                                   Schedule 1

                             MORTGAGE LOAN SCHEDULE

                                [FILED BY PAPER]

                                  Schedule 1-1

<PAGE>

                                   Schedule 2

                         SCHEDULE OF PREPAYMENT CHARGES

                             Available Upon Request

                                  Schedule 2-1BEAR STEARNS ASSET BACKED SECURITIES, INC.,

                                    Depositor

                            EMC MORTGAGE CORPORATION,

                               Seller and Company

                WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,

                  Master Servicer and Securities Administrator

                                       and

                              JPMORGAN CHASE BANK,

                                     Trustee
                              ____________________

                         POOLING AND SERVICING AGREEMENT

                            Dated as of April 1, 2003
                    ________________________________________

               BEAR STEARNS ASSET BACKED SECURITIES TRUST 2003-AC2

                   ASSET-BACKED CERTIFICATES, SERIES 2003-AC2

<PAGE>

<TABLE>
<CAPTION>
                                                 TABLE OF CONTENTS
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>

                                                     ARTICLE I

                                                    DEFINITIONS
Section 1.01      DEFINED TERMS.................................................................................-4-
Section 1.02      ALLOCATION OF CERTAIN INTEREST SHORTFALLS....................................................-40-

                                                    ARTICLE II

                                             CONVEYANCE OF TRUST FUND
                                          REPRESENTATIONS AND WARRANTIES
Section 2.01      CONVEYANCE OF TRUST FUND.....................................................................-42-
Section 2.02      ACCEPTANCE OF THE MORTGAGE LOANS.............................................................-43-
Section 2.03      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY AND THE SELLER
                   ............................................................................................-46-
Section 2.04      REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR..............................................-55-
Section 2.05      DELIVERY OF OPINION OF COUNSEL IN CONNECTION WITH SUBSTITUTIONS AND REPURCHASES.
                   ............................................................................................-56-
Section 2.06      COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES................................................-57-

                                                    ARTICLE III

                           ADMINISTRATION AND SERVICING OF EMC MORTGAGE LOANS BY COMPANY
Section 3.01      THE COMPANY..................................................................................-58-
Section 3.02      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS...................................................-59-
Section 3.03      SUBSERVICERS.................................................................................-60-
Section 3.04      DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF COMPANY TO BE HELD FOR TRUSTEE
                   ............................................................................................-60-
Section 3.05      MAINTENANCE OF HAZARD INSURANCE..............................................................-61-
Section 3.06      PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.............................................-62-
Section 3.07      MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.......................................-62-
Section 3.08      FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE................................................-63-
Section 3.09      REALIZATION UPON DEFAULTED MORTGAGE LOANS; DETERMINATION OF EXCESS LIQUIDATION
                  PROCEEDS AND REALIZED LOSSES; REPURCHASES OF CERTAIN MORTGAGE LOANS..........................-63-
Section 3.10      SERVICING COMPENSATION.......................................................................-66-
Section 3.11      REO PROPERTY.................................................................................-66-
Section 3.12      LIQUIDATION REPORTS..........................................................................-66-
Section 3.13      ANNUAL CERTIFICATE AS TO COMPLIANCE..........................................................-66-

                                                         i

<PAGE>

Section 3.14      ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING REPORT............................-67-
Section 3.15      BOOKS AND RECORDS............................................................................-68-

                                                    ARTICLE IV

                          ADMINISTRATION AND MASTER SERVICING OF MORTGAGE LOANS BY MASTER
                                                     SERVICER
Section 4.01      MASTER SERVICER..............................................................................-69-
Section 4.02      REMIC-RELATED COVENANTS......................................................................-70-
Section 4.03      MONITORING OF COMPANY AND SERVICER...........................................................-70-
Section 4.04      FIDELITY BOND................................................................................-71-
Section 4.05      POWER TO ACT; PROCEDURES.....................................................................-71-
Section 4.06      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS...................................................-72-
Section 4.07      RELEASE OF MORTGAGE FILES....................................................................-72-
Section 4.08      DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF MASTER SERVICER, COMPANY AND
         SERVICER TO BE HELD FOR TRUSTEE.......................................................................-73-
Section 4.09      STANDARD HAZARD INSURANCE AND FLOOD INSURANCE POLICIES.......................................-74-
Section 4.10      PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.............................................-75-
Section 4.11      MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.......................................-75-
Section 4.12      TRUSTEE TO RETAIN POSSESSION OF CERTAIN INSURANCE POLICIES AND DOCUMENTS.....................-75-
Section 4.13      REALIZATION UPON DEFAULTED MORTGAGE LOANS....................................................-76-
Section 4.14      COMPENSATION FOR THE MASTER SERVICER.........................................................-76-
Section 4.15      REO PROPERTY.................................................................................-76-
Section 4.16      ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE................................................-77-
Section 4.17      ANNUAL INDEPENDENT ACCOUNTANT'S SERVICING REPORT.............................................-77-
Section 4.18      REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION........................................-78-
Section 4.19      EMC..........................................................................................-79-
Section 4.20      UCC..........................................................................................-79-
Section 4.21      OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS..................................................-79-

                                                     ARTICLE V

                                                     ACCOUNTS
Section 5.01      COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT......................................-80-
Section 5.02      PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.............................................-81-
Section 5.02A     REPORTS TO MASTER SERVICER...................................................................-83-
Section 5.03      COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS..........................-84-
Section 5.04      SERVICER PROTECTED ACCOUNTS..................................................................-84-
Section 5.05      MASTER SERVICER COLLECTION ACCOUNT...........................................................-85-
Section 5.06      PERMITTED WITHDRAWALS AND TRANSFERS FROM THE MASTER SERVICER COLLECTION ACCOUNT
          .....................................................................................................-87-
Section 5.07      DISTRIBUTION ACCOUNT.........................................................................-87-

                                                        ii

<PAGE>

Section 5.08      PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION ACCOUNT............................-88-

                                                    ARTICLE VI

                                            DISTRIBUTIONS AND ADVANCES

Section 6.01      ADVANCES.....................................................................................-91-
Section 6.02      COMPENSATING INTEREST PAYMENTS...............................................................-92-
Section 6.03      REMIC DISTRIBUTIONS..........................................................................-92-
Section 6.04      DISTRIBUTIONS................................................................................-92-
Section 6.04A     ALLOCATION OF REALIZED LOSSES................................................................-95-
Section 6.05      MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.....................................................-96-
Section 6.06      REMIC  DESIGNATIONS AND REMIC I ALLOCATIONS..................................................-99-
Section 6.07      REMIC II ALLOCATIONS........................................................................-100-
Section 6.08      NET WAC RESERVE FUND........................................................................-102-

                                                    ARTICLE VII

                                                 THE CERTIFICATES
Section 7.01      THE CERTIFICATES............................................................................-104-
Section 7.02      CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES
                   ...........................................................................................-104-
Section 7.03      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...........................................-108-
Section 7.04      PERSONS DEEMED OWNERS.......................................................................-109-
Section 7.05      ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES...................................-109-
Section 7.06      BOOK-ENTRY CERTIFICATES.....................................................................-109-
Section 7.07      NOTICES TO DEPOSITORY.......................................................................-110-
Section 7.08      DEFINITIVE CERTIFICATES.....................................................................-110-
Section 7.09      MAINTENANCE OF OFFICE OR AGENCY.............................................................-111-

                                                   ARTICLE VIII

                                        THE COMPANY AND THE MASTER SERVICER
Section 8.01      LIABILITIES OF THE DEPOSITOR, THE COMPANY AND THE MASTER SERVICER...........................-112-
Section 8.02      MERGER OR CONSOLIDATION OF THE DEPOSITOR, THE COMPANY OR THE MASTER SERVICER
          ....................................................................................................-112-
Section 8.03      INDEMNIFICATION OF THE TRUSTEE, THE MASTER SERVICER AND THE SECURITIES ADMINISTRATOR
          ....................................................................................................-112-
Section 8.04      LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE COMPANY, THE MASTER SERVICER AND
         OTHERS...............................................................................................-113-

                                                        iii

<PAGE>

Section 8.05      MASTER SERVICER AND COMPANY NOT TO RESIGN...................................................-114-
Section 8.06      SUCCESSOR MASTER SERVICER...................................................................-115-
Section 8.07      SALE AND ASSIGNMENT OF MASTER SERVICING.....................................................-115-

                                                    ARTICLE IX

                                     DEFAULT; TERMINATION OF MASTER SERVICER;
                                              TERMINATION OF COMPANY

Section 9.01      EVENTS OF DEFAULT...........................................................................-117-
Section 9.02      TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR....................................................-118-
Section 9.03      NOTIFICATION TO CERTIFICATEHOLDERS..........................................................-120-

                                                     ARTICLE X

                              CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
Section 10.01     DUTIES OF TRUSTEE AND SECURITIES ADMINISTRATOR..............................................-123-
Section 10.02     CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR......................-125-
Section 10.03     TRUSTEE AND SECURITIES ADMINISTRATOR NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS
                   ...........................................................................................-126-
Section 10.04     TRUSTEE AND SECURITIES ADMINISTRATOR MAY OWN CERTIFICATES...................................-127-
Section 10.05     TRUSTEE'S AND SECURITIES ADMINISTRATOR'S FEES AND EXPENSES..................................-127-
Section 10.06     ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES ADMINISTRATOR...........................-128-
Section 10.07     INSURANCE...................................................................................-128-
Section 10.08     RESIGNATION AND REMOVAL OF TRUSTEE AND SECURITIES ADMINISTRATOR.............................-128-
Section 10.09     SUCCESSOR TRUSTEE OR SECURITIES ADMINISTRATOR...............................................-129-
Section 10.10     MERGER OR CONSOLIDATION OF TRUSTEE OR SECURITIES ADMINISTRATOR..............................-130-
Section 10.11     APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE...............................................-130-
Section 10.12     TAX MATTERS.................................................................................-131-

                                                    ARTICLE XI

                                                    TERMINATION
Section 11.01     TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL MORTGAGE LOANS............................-135-
Section 11.02     FINAL DISTRIBUTION ON THE CERTIFICATES......................................................-135-
Section 11.03     ADDITIONAL TERMINATION REQUIREMENTS.........................................................-137-

                                                        iv

<PAGE>

                                                    ARTICLE XII

                                             MISCELLANEOUS PROVISIONS
Section 12.01     AMENDMENT...................................................................................-138-
Section 12.02     RECORDATION OF AGREEMENT; COUNTERPARTS......................................................-139-
Section 12.03     GOVERNING LAW...............................................................................-139-
Section 12.04     INTENTION OF PARTIES........................................................................-140-
Section 12.05     NOTICES.....................................................................................-140-
Section 12.06     SEVERABILITY OF PROVISIONS..................................................................-141-
Section 12.07     ASSIGNMENT..................................................................................-141-
Section 12.08     LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS..................................................-141-
Section 12.09     INSPECTION AND AUDIT RIGHTS.................................................................-142-
Section 12.10     CERTIFICATES NONASSESSABLE AND FULLY PAID...................................................-142-
</TABLE>

                                                         v

<PAGE>

EXHIBITS

Exhibit A-1       Form of Class A-[1][2][3][4] Certificates
Exhibit A-2       Form of Class A-IO Certificates
Exhibit A-3       Form of Class M-[1][2] Certificates
Exhibit A-4       Form of Class B-[1][2] Certificates
Exhibit A-5       Form of Class C Certificates
Exhibit A-6       Form of Class P Certificates
Exhibit A-7       Form of Class R Certificates
Exhibit B         Mortgage Loan Schedule
Exhibit C-1       Form of Initial Certification of Trustee
Exhibit C-2       Form of Interim Certification of Trustee
Exhibit C-3       Form of Final Certification of Trustee
Exhibit D         Form of Transfer Affidavit
Exhibit E         Form of Transferor Certificate
Exhibit F         Form of Investment Letter (Non-Rule 144A)
Exhibit G         Form of Rule 144A Investment Letter
Exhibit H         Form of Request for Release
Exhibit I         DTC Letter of Representations
Exhibit J         Schedule of Mortgage Loans with Lost Notes
Exhibit K         Form of Custodial Agreement
Exhibit L         Form of Company Certification

                                       vi

<PAGE>

         POOLING AND SERVICING AGREEMENT, dated as of April 1, 2003, among BEAR
STEARNS ASSET BACKED SECURITIES, INC., a Delaware corporation, as depositor (the
"Depositor"), EMC MORTGAGE CORPORATION, a Delaware corporation, as seller (in
such capacity, the "Seller") and as company (in such capacity, the "Company"),
WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, a national banking
association, as master servicer (in such capacity, the "Master Servicer") and as
securities administrator (in such capacity, the "Securities Administrator") and
JPMORGAN CHASE BANK, a New York banking corporation, not in its individual
capacity, but solely as trustee (the "Trustee").

                              PRELIMINARY STATEMENT

         The Depositor is the owner of the Trust Fund that is hereby conveyed to
the Trustee in return for the Certificates.

                                     REMIC I
                                     -------

         As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement as a real estate mortgage investment
conduit (a "REMIC") for federal income tax purposes, and such segregated pool of
assets will be designated as "REMIC I." The Class R-1 Certificates will
represent the sole class of "residual interests" in REMIC I for purposes of the
REMIC Provisions (as defined herein) under federal income tax law. The following
table irrevocably sets forth the designation, the Uncertificated REMIC I
Pass-Through Rate, the initial Uncertificated Principal Balance, and solely for
purposes of satisfying Treasury regulation Section 1.860G-1(a)(4)(iii), the
"latest possible maturity date" for each of the REMIC I Regular Interests. None
of the REMIC I Regular Interests will be certificated.

<TABLE>
<CAPTION>
                                                                     Uncertificated
                                     Initial Uncertificated          REMIC I Pass-               Assumed Final
           Designation                  Principal Balance             Through Rate             Maturity Date(1)
           -----------                  -----------------             ------------             ----------------
<S>                                     <C>                           <C>                        <C>
              LTI-1                     $284,312,340.00               Variable(2)                June 25, 2033
            LTI-IO-A                    $ 10,050,000.00               Variable(2)                June 25, 2033
            LTI-IO-B                    $ 30,150,000.00               Variable(2)                June 25, 2033
            LTI-IO-C                    $        100.00               Variable(2)                June 25, 2033
              LTI-P                                                   Variable(2)                June 25, 2033
</TABLE>

___________________
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates that represents one or more of the "regular interests" in
         REMIC I.
(2)      Calculated in accordance with the definition of "Uncertificated REMIC I
         Pass-Through Rate" herein.

                                    REMIC II
                                    --------

         As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the REMIC I Regular Interests as a REMIC
for federal income tax purposes, and such

                                       -1-

<PAGE>

segregated pool of assets will be designated as "REMIC II". The Class R-2
Certificates will represent the sole class of "residual interests" in REMIC II
for purposes of the REMIC Provisions. The following table irrevocably sets forth
the designation, the Uncertificated REMIC II Pass-Through Rate, the initial
Uncertificated Principal Balance, and solely for purposes of satisfying Treasury
regulation Section 1.860G-1(a)(4)(iii), the "latest possible maturity date" for
each of the REMIC II Regular Interests. None of the REMIC II Regular Interests
will be certificated.

<TABLE>
<CAPTION>
                                                                     Uncertificated
                                     Initial Uncertificated          REMIC II Pass-             Assumed Final
           Designation                  Principal Balance             Through Rate             Maturity Date(1)
           -----------                  -----------------             ------------             ----------------
<S>                                     <C>                          <C>                       <C>
             LTII-AA                    $327,871,093.20              Variable(2)               June 25, 2033
             LTII-A1                    $  1,000,000.00              Variable(2)               June 25, 2033
             LTII-A2                    $    350,000.00              Variable(2)               June 25, 2033
             LTII-A3                    $  1,009,960.00              Variable(2)               June 25, 2033
             LTII-A4                    $    534,000.00              Variable(2)               June 25, 2033
             LTII-M1                    $    184,000.00              Variable(2)               June 25, 2033
             LTII-M2                    $    133,830.00              Variable(2)               June 25, 2033
             LTII-B1                    $     63,910.00              Variable(2)               June 25, 2033
             LTII-B2                    $     69,924.40              Variable(2)               June 25, 2033
             LTII-ZZ                    $  3,345,622.40              Variable(2)               June 25, 2033
           LTII-IO(4)                       N/A(3)                      5.00%                  June 25, 2033
             LTII-P                     $        100.00              Variable(2)               June 25, 2033
</TABLE>

___________________
      (1) Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
regulations, the Distribution Date in the month following the maturity date for
the Mortgage Loan with the latest maturity date has been designated as the
"latest possible maturity date" for each Class of Certificates that represents
one or more of the "regular interests" in REMIC II..
      (2) Calculated in accordance with the definition of "Uncertificated REMIC
II Pass-Through Rate" herein.
      (3) REMIC II Regular Interest LTII-IO will not have an Uncertificated
Principal Balance, but will accrue interest on its uncertificated notional
amount calculated in accordance with the definition of "Uncertificated Notional
Amount" herein.
      (4) The Class A-IO Certificates will represent 3 REMIC regular interest
components, REMIC II Regular Interest Component IO-1 through Component IO-3.
Each component will have (a) a rate of 5.00% per annum from the Closing Date to
but not including the Rate Change Date for such component and thereafter a rate
of 0.00% and (b) an uncertificated notional amount equal to the Uncertificated
Principal Balance of the REMIC I Regular Interest for which such component is
the Corresponding Interest.

                                    REMIC III
                                    ---------

      As provided herein, the Trustee will make an election to treat the
segregated pool of assets consisting of the REMIC II Regular Interests as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC III". The Class R-3 Certificates will represent the sole
class of "residual interests" in REMIC III for purposes of the REMIC Provisions.

      The following table irrevocably sets forth the Class designation,
Pass-Through Rate and Initial Certificate Principal Balance for each Class of
Certificates that represents one or more of the "regular interests" in REMIC III
created hereunder:

                                       -2-

<PAGE>

<TABLE>
<CAPTION>
                            Initial Certificate                                                 Assumed Final
    Class Designation        Principal Balance                Pass-Through Rate                Maturity Date(1)
    -----------------        -----------------                -----------------                ----------------
<S>                           <C>                         <C>                                  <C>
        Class A-1             $100,000,000.00             Class A-1  Pass-Through Rate           June 25, 2033
        Class A-2             $ 35,000,000.00             Class A-2 Pass-Through Rate            June 25, 2033
        Class A-3             $100,996,000.00             Class A-3 Pass-Through Rate            June 25, 2033
        Class A-4             $ 53,400,000.00             Class A-4 Pass-Through Rate            June 25, 2033
       Class A-IO                  N/A(2)                 Class A-IO Pass-Through Rate           June 25, 2033
        Class M-1             $ 18,400,000.00             Class M-1 Pass0Through Rate            June 25, 2033
        Class M-2             $ 13,383,000.00             Class M-2 Pass-Through Rate            June 25, 2033
        Class B-1             $  6,391,440.00             Class B-1 Pass Through Rate            June 25, 2033
        Class B-2             $  6,992,440.00             Class B-2 Pass-Through Rate            June 25, 2033
         Class C                   N/A(3)                 Class C Pass-Through Rate              June 25, 2033
         Class P              $        100.00                      N/A(4)                        June 25, 2033
</TABLE>
___________________
(1)      Solely for purposes of Section 1.860G-1(a)(4)(iii) of the Treasury
         regulations, the Distribution Date in the month following the maturity
         date for the Mortgage Loan with the latest maturity date has been
         designated as the "latest possible maturity date" for each Class of
         Certificates that represents one or more of the "regular interests" in
         REMIC II.
(2)      The Class A-IO Certificates will accrue interest at the Class A-IO
         Pass-Through Rate on the Certificate Notional Balance of the Class A-IO
         Certificates calculated in accordance with the definition of
         "Certificate Notional Balance" herein. The Class A-IO Certificates will
         not be entitled to distributions in respect of principal.
(3)      The Class C Certificates will accrue interest at the Class C
         Pass-Through Rate on the Certificate Notional Balance of the Class C
         Certificates outstanding from time to time which shall equal the
         aggregate of the Uncertificated Principal Balances of the REMIC II
         Regular Interests. The Class C Certificates will not accrue interest on
         their Certificate Principal Balance.
(4)      The Class P Certificates are not entitled to distributions in respect
         of interest.

         The Trust Fund shall be named, and may be referred to as, the "Bear
Stearns Asset Backed Securities Trust 2003-AC2." The Certificates issued
hereunder may be referred to as "Asset-Backed Certificates Series 2003-AC2"
(including for purposes of any endorsement or assignment of a Mortgage Note or
Mortgage).

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

                                       -3-

<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01      DEFINED TERMS.

         In addition to those terms defined in Section 1.02, whenever used in
this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:

         ACCEPTED MASTER SERVICING PRACTICES: With respect to any Mortgage Loan,
as applicable, either (a) those customary mortgage servicing practices of
prudent mortgage servicing institutions that master service mortgage loans of
the same type and quality as such Mortgage Loan in the jurisdiction where the
related Mortgaged Property is located, to the extent applicable to the Trustee
or the Master Servicer (except in its capacity as successor to the Company or
the related Servicer), or (b) as provided in Section 3.01 hereof or as provided
in the related Servicing Agreement, but, in each case, in no event below the
standard set forth in clause (a).

         ACCEPTED SERVICING PRACTICES: With respect to each EMC Mortgage Loan,
those mortgage servicing practices (including collection procedures) that are in
accordance with all applicable statutes, regulations and prudent mortgage
banking practices for similar mortgage loans.

         ACCOUNT: The Distribution Account, the Master Servicer Collection
Account, the Net WAC Reserve Fund and any Protected Account.

         ACCRUAL PERIOD: With respect to the Certificates (other than the Class
B-1, Class B-2, Class P and Class R Certificates) and any Distribution Date, the
calendar month immediately preceding such Distribution Date. With respect to the
Class B-1 Certificates and Class B-2 Certificates and any Distribution Date, the
period from and including the 25th day of the calendar month preceding the
calendar month in which the Distribution Date occurs to and including the 24th
day of the calendar month in which such Distribution Date occurs. All
calculations of interest on the Certificates (other than the Class B-1, Class
B-2, Class P and Class R Certificates) will be made on the basis of a 360- day
year consisting of twelve 30-day months. All calculations of interest on the
Class B-1 Certificates and Class B-2 Certificates will be made on the basis of
the actual number of days elapsed in the related Accrual Period.

         ADVANCE: An advance of delinquent payments of principal or interest in
respect of a Mortgage Loan required to be made by the Company as provided in
Section 6.01(a) hereof, by the related Servicer in accordance with the related
Servicing Agreement or by the Master Servicer as provided in Section 6.01(b)
hereof.

         AGREEMENT: This Pooling and Servicing Agreement and any and all
amendments or supplements hereto made in accordance with the terms herein.

         AMOUNT HELD FOR FUTURE DISTRIBUTION: As to any Distribution Date, the
aggregate amount held in the Company's or the related Sevicer's Protected
Account at the close of business on the

                                       -4-

<PAGE>

immediately preceding Determination Date on account of (i) all Scheduled
Payments or portions thereof received in respect of the Mortgage Loans due after
the related Due Period and (ii) Principal Prepayments and Liquidation Proceeds
received in respect of such Mortgage Loans after the last day of the related
Prepayment Period.

         APPLIED REALIZED LOSS AMOUNT: With respect to any Distribution Date and
a Class of Subordinated Certificates the sum of the Realized Losses with respect
to the Mortgage Loans which are to be applied in reduction of the Certificate
Principal Balance of that Class of Certificates pursuant to this Agreement,
which shall, on any such Distribution Date equal with respect to the Class B-2,
Class B-1, Class M-2 and Class M-1, so long as their respective Certificate
Principal Balances have not been reduced to zero, the amount, if any, by which,
(i) the aggregate Certificate Principal Balance of all of the Certificates
(after all distributions of principal on such Distribution Date and the
allocation of Realized Losses on such Distribution Date) exceeds (ii) the
aggregate Stated Principal Balance of all of the Mortgage Loans as of the last
day of the related Due Period.

         APPRAISED VALUE: With respect to any Mortgage Loan originated in
connection with a refinancing, the appraised value of the Mortgaged Property
based upon the appraisal made at the time of such refinancing or, with respect
to any other Mortgage Loan, the lesser of (x) the appraised value of the
Mortgaged Property based upon the appraisal made by a fee appraiser at the time
of the origination of the related Mortgage Loan, and (y) the sales price of the
Mortgaged Property at the time of such origination.

         ASSIGNMENT AGREEMENT: Shall mean, collectively, the National City
Assignment Agreement and the Union Federal Assignment Agreement.

         AVAILABLE FUNDS: The sum of Interest Funds and Principal Funds with
respect to the Mortgage Loans.

         BANKRUPTCY CODE: Title 11 of the United States Code.

         BASIC PRINCIPAL DISTRIBUTION AMOUNT: Shall mean, with respect to any
Distribution Date, the lesser of (a) the excess of (i) the Available Funds for
such Distribution Date over (ii) the aggregate Monthly Interest Distributable
Amount for the Certificates (other than the Class P, Class C and Class R
Certificates) for such Distribution Date and (b) the excess of (i) the Principal
Remittance Amount for such Distribution Date over (ii) the Overcollateralization
Release Amount, if any, for such Distribution Date.

         BOOK-ENTRY CERTIFICATES: Any of the Certificates that shall be
registered in the name of the Depository or its nominee, the ownership of which
is reflected on the books of the Depository or on the books of a person
maintaining an account with the Depository (directly, as a "Depository
Participant", or indirectly, as an indirect participant in accordance with the
rules of the Depository and as described in Section 7.06). As of the Closing
Date, each Class of Regular Certificates constitutes a Class of Book-Entry
Certificates.

         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,
Minneapolis, Minnesota, Columbia, Maryland or

                                      -5-

<PAGE>

the city in which the Corporate Trust Office of the Trustee or the principal
office of the Company or the Master Servicer is located are authorized or
obligated by law or executive order to be closed.

         CERTIFICATE: Any one of the certificates of any Class executed and
authenticated by the Trustee in substantially the forms attached hereto as
Exhibits A-1 through A-7.

         CERTIFICATE NOTIONAL BALANCE: With respect to the Class A-IO
Certificates and any Distribution Date, the lesser of (a)(i) $50,250,000, for
each Distribution Date from the Distribution Date in May 2003 to and including
the Distribution Date in October 2004, (ii) $40,200,000, for each Distribution
Date from the Distribution Date in November 2004 to and including the
Distribution Date in April 2005, (iii) $30,150,000, for each Distribution Date
from the Distribution Date in May 2005 to and including the Distribution Date in
October 2005 and (iv) $0, for each Distribution Date thereafter and (b) the
aggregate of the Stated Principal Balance of the Mortgage Loans. For federal
income tax purposes, however, the equivalent of the foregoing, expressed as the
Uncertificated Notional Balance of REMIC II Regular Interest LTII-IO. With
respect to the Class C Certificates, immediately prior to any Distribution Date,
the aggregate of the Uncertificated Principal Balances of the REMIC II Regular
Interests.

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

         CERTIFICATE PRINCIPAL BALANCE: As to any Certificate (other than any
Class A-IO, Class C or Class R Certificate) and as of any Distribution Date, the
Initial Certificate Principal Balance of such Certificate less the sum of (i)
all amounts distributed with respect to such Certificate in reduction of the
Certificate Principal Balance thereof on previous Distribution Dates pursuant to
Section 6.04, and (ii) in the case of any Subordinated Certificate, any Applied
Realized Loss Amounts allocated to such Certificate on previous Distribution
Dates.

         CERTIFICATE REGISTER: The register maintained pursuant to Section 7.02
hereof.

         CERTIFICATEHOLDER OR HOLDER: The person in whose name a Certificate is
registered in the Certificate Register (initially, Cede & Co., as nominee for
the Depository, in the case of any Book- Entry Certificates).

         CLASS: All Certificates bearing the same Class designation as set forth
in Section 7.01 hereof.

         CLASS A-1 CERTIFICATE: Any Certificate designated as a "Class A-1
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class A-1 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS A-1 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 4.461% per annum and
(ii) for each Distribution Date thereafter, 4.961% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

                                       -6-

<PAGE>

         CLASS A-2 CERTIFICATE: Any Certificate designated as a "Class A-2
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class A-2 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS A-2 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 4.455% per annum and
(ii) for each Distribution Date thereafter, 4.955% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

         CLASS A-3 CERTIFICATE: Any Certificate designated as a "Class A-3
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class A-3 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS A-3 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 3.500% per annum and
(ii) for each Distribution Date thereafter, 4.000% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

         CLASS A-4 CERTIFICATE: Any Certificate designated as a "Class A-4
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class A-4 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS A-4 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 5.000% per annum and
(ii) for each Distribution Date thereafter, 5.500% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

         CLASS A-IO CERTIFICATE: Any Certificate designated as a "Class A-IO
Certificate" on the face thereof, in the form of Exhibit A-2 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class A-IO Certificates as set forth herein and evidencing a Regular
Interest in REMIC III.

         CLASS A-IO PASS-THROUGH RATE: Shall mean (i) for the first thirty
Distribution Dates, 5.00% per annum and (ii) for any Distribution Date
thereafter, 0.00%. For federal income tax purposes, however, the Class A-IO
Certificates will not have a Class A-IO Pass-Through Rate, and the Monthly
Interest Distributable Amount for the Class A-IO Certificates and any
Distribution Date will be deemed to be 100% of the amount distributed on REMIC
II Regular Interest LTII-IO for such Distribution Date.

         CLASS B-1 CERTIFICATE: Any Certificate designated as a "Class B-1
Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class B-1 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

                                       -7-

<PAGE>

         CLASS B-1 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, the LIBOR Rate and
(ii) for each Distribution Date thereafter, the LIBOR Rate plus 0.50% per annum,
in each case subject to a cap equal to the Net WAC Rate Cap for such
Distribution Date.

         CLASS B-2 CERTIFICATE: Any Certificate designated as a "Class B-2
Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class B-2 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS B-2 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, the LIBOR Rate and
(ii) for each Distribution Date thereafter, the LIBOR Rate plus 0.50% per annum,
in each case subject to a cap equal to the Net WAC Rate Cap for such
Distribution Date.

         CLASS C CERTIFICATE: Any Certificate designated as a "Class C
Certificate" on the face thereof, in the form of Exhibit A-6 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class C Certificates herein and evidencing a Regular Interest in REMIC III.

         CLASS C DISTRIBUTION AMOUNT: With respect to any Distribution Date, the
sum of (i) the Monthly Interest Distributable Amount for the Class C
Certificates for such Distribution Date and (ii) any Overcollateralization
Release Amount for such Distribution Date; provided, however that on and after
the Distribution Date on which the Certificate Principal Balance of the
Certificates has been reduced to zero, the Class C Distribution Amount shall
include the Overcollateralized Amount.

         CLASS C PASS-THROUGH RATE: On any Distribution Date, a per annum rate
equal to the percentage equivalent of a fraction, the numerator of which is (x)
the sum of the amounts calculated pursuant to clauses (A) through (K) below, and
the denominator of which is (y) the aggregate of the Uncertificated Principal
Balances of the REMIC II Regular Interests. For purposes of calculating the
Pass-Through Rate for the Class C Certificates, the numerator is equal to the
sum of the following components:

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

                  (B) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-A1 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-A1;

                  (C) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-A2 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-A2;

                                       -8-

<PAGE>

                  (D) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-A3 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-A3;

                  (E) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-A4 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-A4;

                  (F) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-M1 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-M1;

                  (G) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-M2 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-M2;

                  (H) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-B1 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-B1;

                  (I) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-B2 minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-B2;

                  (J) the Uncertificated REMIC II Pass-Through Rate for REMIC II
Regular Interest LTII-ZZ minus the Marker Rate, applied to an amount equal to
the Uncertificated Principal Balance of REMIC II Regular Interest LTII-ZZ; and

                  (K) 100% of the interest distributable on REMIC II Regular
Interest LTII-P.

         CLASS M-1 CERTIFICATE: Any Certificate designated as a "Class M-1
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class M-1 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS M-1 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 4.958% per annum and
(ii) for each Distribution Date thereafter, 5.458% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

         CLASS M-2 CERTIFICATE: Any Certificate designated as a "Class M-2
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to the Percentage Interest of distributions provided for
the Class M-2 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

                                       -9-

<PAGE>

         CLASS M-2 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, 5.459% per annum and
(ii) for each Distribution Date thereafter, 5.959% per annum, in each case
subject to a cap equal to the Net WAC Rate Cap for such Distribution Date.

         CLASS P CERTIFICATE: Any Certificate designated as a "Class P
Certificate" on the face thereof, in the form of Exhibit A-6 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class P Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS R-1 CERTIFICATE: Any Certificate designated a "Class R-1
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-7 hereto, evidencing the Residual Interest in REMIC I and representing the
right to the Percentage Interest of distributions provided for the Class R-1
Certificates as set forth herein.

         CLASS R-2 CERTIFICATE: Any Certificate designated a "Class R-2
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-7 hereto, evidencing the Residual Interest in REMIC II and representing the
right to the Percentage Interest of distributions provided for the Class R-2
Certificates as set forth herein.

         CLASS R-3 CERTIFICATE: Any Certificate designated a "Class R-3
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-7 hereto, evidencing the Residual Interest in REMIC III and representing the
right to the Percentage Interest of distributions provided for the Class R-3
Certificates as set forth herein.

         CLOSING DATE: April 30, 2003.

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

         COMPENSATING INTEREST: An amount, not to exceed the Servicing Fee, to
be deposited in the Master Servicer Collection Account by the Company or the
related Servicer to the payment of a Prepayment Interest Shortfall on a Mortgage
Loan subject to this Agreement; provided that in the event the Company or the
related Servicer fails to make such payment, the Master Servicer shall be
obligated to do so pursuant to Section 6.02(c) hereof.

         CORPORATE TRUST OFFICE: The designated office of the Trustee where at
any particular time its corporate trust business with respect to this Agreement
shall be administered, which office at the date of the execution of this
Agreement is located at 4 New York Plaza, 6th Floor, New York, New York 10004,
Attention: Institutional Trust Services/Structured Finance Services, Bear
Stearns Asset Backed Securities, Inc., Series 2003-AC2, or at such other address
as the Trustee may designate from time to time.

         CORRESPONDING CERTIFICATE: With respect to:

                  (i)      REMIC II Regular Interest LTII-A1, the Class A-1
                           Certificates,

                                                       -10-

<PAGE>

                  (ii)     REMIC II Regular Interest LTII-A2, the Class A-2
                           Certificates,

                  (iii)    REMIC II Regular Interest LTII-A3, the Class A-3
                           Certificates,

                  (iv)     REMIC II Regular Interest LTII-A4, the Class A-4
                           Certificates,

                  (v)      REMIC II Regular Interest LTII-M1 the Class M-1
                           Certificates,

                  (vi)     REMIC II Regular Interest LTII-M2, the Class M-2
                           Certificates,

                  (vii)    REMIC II Regular Interest LTII-B1, the Class B-1
                           Certificates,

                  (viii)   REMIC II Regular Interest LTII-B2, the Class B-2
                           Certificates, and

                  (ix)     REMIC II Regular Interest LTII-P, the Class P
                           Certificates.

         CORRESPONDING INTEREST: With respect to each REMIC I Regular Interest
set forth below, the corresponding REMIC II Regular Interest Component set forth
below:

         REMIC I REGULAR INTEREST     REMIC II REGULAR          RATE CHANGE DATE
                                     INTEREST COMPONENT

                 LTI-IO-A                   IO-1                  November 2004

                 LTI-IO-B                   IO-2                    May 2005

                 LTI-IO-C                   IO-3                  November 2005

         CROSS-OVER DATE: The first Distribution Date on which the aggregate
Certificate Principal Balance of the Subordinated Certificates has been reduced
to zero (giving effect to all distributions on such Distribution Date).

         CUSTODIAL AGREEMENT: An agreement dated as of the Closing Date among
the Depositor, the Seller, the Trustee and the Custodian in substantially the
form of Exhibit K hereto.

         CUSTODIAN: Wells Fargo Bank Minnesota, National Association, or any
successor custodian appointed pursuant to the provisions hereof and the
Custodial Agreement.

         CUT-OFF DATE: The close of business on April 1, 2003.

         CUT-OFF DATE PRINCIPAL BALANCE: As to any Mortgage Loan, the unpaid
principal balance thereof as of the close of business on the Cut-off Date after
application of all Principal Prepayments received prior to the Cut-off Date and
scheduled payments of principal due on or before the Cut-off Date, whether or
not received, but without giving effect to any installments of principal
received in respect of Due Dates after 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

                                      -11-

<PAGE>

such Mortgage Loan that became final and non-appealable, except such a reduction
resulting from a Deficient Valuation or any other reduction that results in a
permanent forgiveness of principal.

         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 such 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 that is final and non-appealable
in a proceeding under the Bankruptcy Code.

         DEFINITIVE CERTIFICATES: As defined in Section 7.06.

         DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.

         DELINQUENT: A Mortgage Loan is "delinquent" if any payment due thereon
is not made pursuant to the terms of such Mortgage Loan by the close of business
on the day such payment is scheduled to be due. A Mortgage Loan is "30 days
delinquent" if such payment has not been received by the close of business on
the corresponding day of the month immediately succeeding the month in which
such payment was due, or, if there is no such corresponding day (e.g., as when a
30-day month follows a 31-day month in which a payment was due on the 31st day
of such month), then on the last day of such immediately succeeding month.
Similarly for "60 days delinquent," "90 days delinquent" and so on.

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

         DEPOSITOR: Bear Stearns Asset Backed Securities, Inc., a Delaware
corporation, or its successor in interest.

         DEPOSITORY: The initial Depository shall be The Depository Trust
Company ("DTC"), the nominee of which is Cede & Co., or any other organization
registered as a "clearing agency" pursuant to Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository shall initially be the
registered Holder of the Book-Entry Certificates. The Depository shall at all
times be a "clearing corporation" as defined in Section 8-102(a)(5) of the
Uniform Commercial Code of the State of New York.

         DEPOSITORY AGREEMENT: With respect to the Class of Book-Entry
Certificates, the agreement among the Depositor, the Trustee and the initial
Depository, dated as of the Closing Date, substantially in the form of Exhibit
I.

         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.

                                      -12-

<PAGE>

         DETERMINATION DATE: With respect to any Distribution Date, the 15th day
of the month of such Distribution Date or, if such 15th day is not a Business
Day, the immediately preceding Business Day.

         DISTRIBUTION ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 5.07 in the name of the Trustee
for the benefit of the Certificateholders and designated "JPMorgan Chase Bank,
in trust for registered holders of Bear Stearns Asset Backed Securities, Inc.,
Asset-Backed Certificates, Series 2003-AC2". 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, on or
before 3:00 p.m. Eastern time on the Business Day immediately preceding such
Distribution Date.

         DISTRIBUTION DATE: The 25th day of each calendar month after the
initial issuance of the Certificates, or if such 25th day is not a Business Day,
the next succeeding Business Day, commencing in May 2003.

         DUE DATE: As to any Mortgage Loan, the date in each month on which the
related Scheduled Payment is due, as set forth in the related Mortgage Note.

         DUE PERIOD: With respect to any Distribution Date, the period from the
second day of the calendar month preceding the calendar month in which such
Distribution Date occurs through close of business on the first day of the
calendar month in which such 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
long-term unsecured debt obligations and 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, so long as Moody's is not a Rating Agency) are rated by each
Rating Agency in one of its two highest long-term and its highest short-term
rating categories respectively, 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
the corporate trust department of a federal or state chartered depository
institution or trust company having capital and surplus of not less than
$50,000,000, acting in its fiduciary capacity or (iv) any other account
acceptable to the Rating Agencies. Eligible Accounts may bear interest, and may
include, if otherwise qualified under this definition, accounts maintained with
the Trustee.

         EMC: EMC Mortgage Corporation, a Delaware corporation.

                                      -13-

<PAGE>

         EMC MORTGAGE LOANS: Shall mean those Mortgage Loans serviced by the
Company pursuant to the terms of this Agreement.

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

         ERISA RESTRICTED CERTIFICATE: Each of the Class C, Class P and Residual
Certificates.

         EVENT OF DEFAULT: As defined in Section 9.01 hereof.

         EXEMPTION: Prohibited Transaction Exemption 90-30, as amended from time
to time.

         EXCESS LIQUIDATION PROCEEDS: To the extent not required by law to be
paid to the related Mortgagor, the excess, if any, of any Liquidation Proceeds
with respect to a Mortgage Loan over the Stated Principal Balance of such
Mortgage Loan and accrued and unpaid interest at the related Mortgage Rate
through the last day of the month in which the Mortgage Loan has been
liquidated.

         EXTRA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date (a) on or prior to the earlier of (1) the first Distribution Date after the
20% Clean-Up Call Date and (2) the Distribution Date in April 2013, the lesser
of (x) the Net Monthly Excess Cashflow for such Distribution Date and (y) the
Overcollateralization Increase Amount for such Distribution Date; and (b)
thereafter, the Net Monthly Excess Cashflow for such Distribution Date.

         FANNIE MAE: Fannie Mae (formerly, Federal National Mortgage
Association), or any successor thereto.

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

         FINAL RECOVERY DETERMINATION: With respect to any defaulted Mortgage
Loan or any REO Property (other than a Mortgage Loan or REO Property purchased
by the Seller or the Class C Certificateholder pursuant to or as contemplated by
Section 2.03(c) or Section 11.01), a determination made by the Company pursuant
to this Agreement or the applicable Servicer pursuant to the related Servicing
Agreement that all Insurance Proceeds, Liquidation Proceeds and other payments
or recoveries which the Company or such Servicer, in its reasonable good faith
judgment, expects to be finally recoverable in respect thereof have been so
recovered. The Master Servicer shall maintain records, based solely on
information provided by each Servicer, of each Final Recovery Determination made
thereby.

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

         FREDDIE MAC: Freddie Mac (formerly The Federal Home Loan Mortgage
Corporation), or any successor thereto.

         INDEMNIFIED PERSONS: The Trustee, the Master Servicer, the Company, the
Trust Fund and the Securities Administrator and their officers, directors,
agents and employees and, with respect to the Trustee, any separate co-trustee
and its officers, directors, agents and employees.

                                      -14-

<PAGE>

         INITIAL CERTIFICATE PRINCIPAL BALANCE: With respect to any Certificate,
the Certificate Principal Balance of such Certificate or any predecessor
Certificate on the Closing Date.

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

         INSURANCE PROCEEDS: Proceeds paid in respect of the Mortgage Loans
pursuant to any Insurance Policy or any other insurance policy covering a
Mortgage Loan, to the extent such proceeds are payable to the mortgagee under
the Mortgage, the Company, the related Servicer or the trustee under the deed of
trust and are not applied to the restoration of the related Mortgaged Property
or released to the Mortgagor in accordance with the procedures that the Company
or the related Servicer would follow in servicing mortgage loans held for its
own account, 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 DETERMINATION DATE: Shall mean the second LIBOR Business Day
preceding the commencement of each Accrual Period.

         INTEREST FUNDS: For any Distribution Date, (i) the sum, without
duplication, of (a) all scheduled interest during the related Due Period with
respect to the related Mortgage Loans less the Servicing Fee, the Master
Servicing Fee and the LPMI Fee, if any, (b) all Advances relating to interest
with respect to the related Mortgage Loans made on or prior to the related
Distribution Account Deposit Date, (c) all Compensating Interest with respect to
the related Mortgage Loans and required to be remitted by the Company or the
Master Servicer pursuant to this Agreement or the related Servicer pursuant to
the related Servicing Agreement with respect to such Distribution Date, (d)
Liquidation Proceeds with respect to the related Mortgage Loans collected during
the related Prepayment Period (to the extent such Liquidation Proceeds relate to
interest), (e) all amounts relating to interest with respect to each Mortgage
Loan repurchased by the Seller pursuant to Sections 2.02 and 2.03 and by EMC
pursuant to Section 4.21 and (f) all amounts in respect of interest paid by the
Master Servicer pursuant to Section 11.01, in each case to the extent remitted
by the Company or the related Servicer, as applicable, to the Distribution
Account pursuant to this Agreement or the related Servicing Agreement minus (ii)
all amounts relating to interest required to be reimbursed pursuant to Sections
5.02, 5.04, 5.06 and 5.08 or as otherwise set forth in this Agreement.

         INTEREST SHORTFALL: With respect to any Distribution Date, means the
aggregate shortfall, if any, in collections of interest (adjusted to the related
Net Mortgage Rates) on Mortgage Loans resulting from (a) Principal Prepayments
in full received during the related Prepayment Period, (b) the partial Principal
Prepayments received during the related Prepayment Period to the extent applied
prior to the Due Date in the month of the Distribution Date and (c) interest
payments on certain of the Mortgage Loans being limited pursuant to the
provisions of the Relief Act or similar state laws.

         LAST SCHEDULED DISTRIBUTION DATE: June 25, 2033.

                                      -15-

<PAGE>

         LATEST POSSIBLE MATURITY DATE: The Distribution Date following the
final scheduled maturity date of the Mortgage Loan in the Trust Fund having the
latest scheduled maturity date as of the Cut- off Date. For purposes of the
Treasury Regulations under Code section 860A through 860G, the latest possible
maturity date of each regular interest issued by REMIC I, REMIC II and REMIC III
shall be the Latest Possible Maturity Date.

         LIBOR BUSINESS DAY: Shall mean a day on which banks are open for
dealing in foreign currency and exchange in London and New York City.

         LIBOR RATE: Shall mean One-Month LIBOR plus 3.25% per annum.

         LIQUIDATED LOAN: With respect to any Distribution Date, a defaulted
Mortgage Loan that has been liquidated through deed-in-lieu of foreclosure,
foreclosure sale, trustee's sale or other realization as provided by applicable
law governing the real property subject to the related Mortgage and any security
agreements and as to which the Company or the related Servicer has made a Final
Recovery Determination with respect thereto.

         LIQUIDATION PROCEEDS: Amounts, other than Insurance Proceeds, received
in connection with the partial or complete liquidation of a Mortgage Loan,
whether through trustee's sale, foreclosure sale or otherwise, or in connection
with any condemnation or partial release of a Mortgaged Property and any other
proceeds received with respect to an REO Property, less the sum of related
unreimbursed Advances, Servicing Fees, Master Servicing Fees and Servicing
Advances and all expenses of liquidation, including property protection expenses
and foreclosure and sale costs, including court and reasonable attorneys fees.

         LOAN-TO-VALUE RATIO: The fraction, expressed as a percentage, the
numerator of which is the original principal balance of the related Mortgage
Loan and the denominator of which is the Appraised Value of the related
Mortgaged Property.

         LOSS ALLOCATION LIMITATION: The meaning specified in Section 6.04A(c)
hereof.

         LPMI FEE: Shall mean the fee payable to the insurer for each Mortgage
Loan subject to an LPMI Policy as set forth in such LPMI Policy.

         LPMI POLICY: A policy of mortgage guaranty insurance issued by an
insurer meeting the requirements of Fannie Mae and Freddie Mac in which the
Company or the related Servicer of the related Mortgage Loan is responsible for
the payment of the LPMI Fee thereunder from collections on the related Mortgage
Loan.

         MAJORITY CLASS C CERTIFICATEHOLDER: Shall mean the Holder of a 50.01%
or greater Percentage Interest in the Class C Certificates.

         MARKER RATE: With respect to the Class C Certificates and any
Distribution Date, a per annum rate equal to two (2) times the weighted average
of the Uncertificated REMIC II Pass-Through Rates for REMIC II Regular Interest
LTII-A1, REMIC II Regular Interest LTII-A2, REMIC II Regular Interest LTII-A3,
REMIC II Regular Interest LTII-A4, REMIC II Regular Interest LTII-M1, REMIC

                                      -16-

<PAGE>

II Regular Interest LTII-M2, REMIC II Regular Interest LTII-B1, REMIC II Regular
Interest LTII- B2 and REMIC II Regular Interest LTII-ZZ, with the rate on REMIC
II Regular Interest LTII-A1 subject to a cap equal to (A) in the case of any
Distribution Date up to and including the Optional Termination Date, the lesser
of (x) 4.461% per annum and (y) the Net WAC Rate Cap and (B) in the case of any
Distribution Date after the Optional Termination Date, the lesser of (x) 4.961%
per annum and (y) the Net WAC Rate Cap for the purpose of this calculation; with
the rate on REMIC II Regular Interest LTII-A2 subject to a cap equal to (A) in
the case of any Distribution Date up to and including the Optional Termination
Date, the lesser of (x) 4.455% per annum and (y) the Net WAC Rate Cap and (B) in
the case of any Distribution Date after the Optional Termination Date, the
lesser of (x) 4.955% per annum and (y) the Net WAC Rate Cap for the purpose of
this calculation; with the rate on REMIC II Regular Interest LTII-A3 subject to
a cap equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 3.500% per annum and (y) the Net
WAC Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 4.000% per annum and (y) the Net WAC Rate
Cap for the purpose of this calculation; with the rate on REMIC II Regular
Interest LTII-A4 subject to a cap equal to (A) in the case of any Distribution
Date up to and including the Optional Termination Date, the lesser of (x) 5.000%
per annum and (y) the Net WAC Rate Cap and (B) in the case of any Distribution
Date after the Optional Termination Date, the lesser of (x) 5.500% per annum and
(y) the Net WAC Rate Cap for the purpose of this calculation; with the rate on
REMIC II Regular Interest LTII-M1 subject to a cap equal to (A) in the case of
any Distribution Date up to and including the Optional Termination Date, the
lesser of (x) 4.958% per annum and (y) the Net WAC Rate Cap and (B) in the case
of any Distribution Date after the Optional Termination Date, the lesser of (x)
5.458% per annum and (y) the Net WAC Rate Cap for the purpose of this
calculation; with the rate on REMIC II Regular Interest LTII-M2 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) 5.459% per annum and (y) the Net
WAC Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) 5.959% per annum and (y) the Net WAC Rate
Cap for the purpose of this calculation; with the rate on REMIC II Regular
Interest LTII-B1 subject to a cap equal to (A) in the case of any Distribution
Date up to and including the Optional Termination Date, the lesser of (x) the
LIBOR Rate and (y) the Net WAC Rate Cap and (B) in the case of any Distribution
Date after the Optional Termination Date, the lesser of (x) the LIBOR Rate plus
0.50% per annum and (y) the Net WAC Rate Cap for the purpose of this
calculation; with the rate on REMIC II Regular Interest LTII-B2 subject to a cap
equal to (A) in the case of any Distribution Date up to and including the
Optional Termination Date, the lesser of (x) the LIBOR Rate and (y) the Net WAC
Rate Cap and (B) in the case of any Distribution Date after the Optional
Termination Date, the lesser of (x) the LIBOR Rate plus 0.50% per annum and (y)
the Net WAC Rate Cap for the purpose of this calculation; and with the rate on
REMIC II Regular Interest LTII-ZZ subject to a cap of zero for the purpose of
this calculation; provided, however, that for this purpose, calculations of the
Uncertificated REMIC II Pass-Through Rate and the related caps with respect to
REMIC II Regular Interest LTII-B1 and REMIC II Regular Interest LTII-B2 shall be
multiplied by a fraction, the numerator of which is the actual number of days in
the Accrual Period and the denominator of which is 30.

         MASTER SERVICER: Wells Fargo Bank Minnesota, National Association, in
its capacity as master servicer, and its successors and assigns.

                                      -17-

<PAGE>

         MASTER SERVICER CERTIFICATION: A written certification covering
servicing of the Mortgage Loans by the Company and all Servicers and signed by
an officer of the Master Servicer that complies with (i) the Sarbanes-Oxley Act
of 2002, as amended from time to time, and (ii) the February 21, 2003 Statement
by the Staff of the Division of Corporation Finance of the Securities and
Exchange Commission Regarding Compliance by Asset-Backed Issuers with Exchange
Act Rules 13a-14 and 15d-14, as in effect from time to time; provided that if,
after the Closing Date (a) the Sarbanes-Oxley Act of 2002 is amended, (b) the
Statement referred to in clause (ii) is modified or superceded by any subsequent
statement, rule or regulation of the Securities and Exchange Commission or any
statement of a division thereof, or (c) any future releases, rules and
regulations are published by the Securities and Exchange Commission from time to
time pursuant to the Sarbanes-Oxley Act of 2002, which in any such case affects
the form or substance of the required certification and results in the required
certification being, in the reasonable judgment of the Master Servicer,
materially more onerous than the form of the required certification as of the
Closing Date, the Master Servicer Certification shall be as agreed to by the
Master Servicer, the Depositor and the Seller following a negotiation in good
faith to determine how to comply with any such new requirements.

         MASTER SERVICER COLLECTION ACCOUNT: The trust accounts or accounts
created and maintained pursuant to Section 5.05 hereof, which shall be entitled
"JPMorgan Chase Bank, as Trustee f/b/o holders of Bear Stearns Asset Backed
Securities, Inc., Asset Backed Certificates, Series 2003-AC2 - Master Servicer
Collection Account".

         MASTER SERVICING FEE: As to each Mortgage Loan and any Distribution
Date, an amount equal to 1/12th of the Master Servicing Fee Rate multiplied by
the Stated Principal Balance of such Mortgage Loan as of the last day of the
related Due Period or, in the event of any payment of interest that accompanies
a Principal Prepayment in full during the related Due Period made by the
Mortgagor immediately prior to such prepayment, interest at the Master Servicing
Fee Rate on the Stated Principal Balance of such Mortgage Loan for the period
covered by such payment of interest.

         MASTER SERVICING FEE RATE: 0.02% per annum.

         MERS: Mortgage Electronic Registration Systems, Inc., a corporation
organized and existing under the laws of the State of Delaware, or any successor
thereto.

         MERS(R) SYSTEM: The system of recording transfers of Mortgages
electronically maintained by MERS.

         MIN: The Mortgage Identification Number for Mortgage Loans registered
with MERS on the MERS(R)System.

         MOM LOAN: With respect to any Mortgage Loan, MERS acting as the
mortgagee of such Mortgage Loan, solely as nominee for the originator of such
Mortgage Loan and its successors and assigns, at the origination thereof.

         MONTHLY INTEREST DISTRIBUTABLE AMOUNT: With respect to the Certificates
(other than the Class P Certificates and Class R Certificates) for any
Distribution Date, means an amount equal to the

                                      -18-

<PAGE>

interest accrued during the related Accrual Period at the applicable
Pass-Through Rate on the Certificate Principal Balance (or Certificate Notional
Balance) of such Certificate immediately prior to such Distribution Date less
(i) in the case of a Senior Certificate, such Certificate's share of any Unpaid
Interest Shortfall, the interest portion of any Realized Losses on the Mortgage
Loans allocated to such Certificate pursuant to Section 1.02, and (ii) in the
case of a Subordinated Certificate, such Certificate's share of any Unpaid
Interest Shortfall and the interest portion of any Realized Losses on the
Mortgage Loans allocated to such Certificate pursuant to Section 1.02. Accrued
Certificate Interest is calculated on the basis of a 360-day year consisting of
twelve 30-day months. No Accrued Certificate Interest will be payable with
respect to any Class of Certificates after the Distribution Date on which the
outstanding Certificate Principal Balance of such Certificate has been reduced
to zero.

         MONTHLY STATEMENT: The statement delivered to the Certificateholders
pursuant to Section 6.05.

         MOODY'S: Moody's Investors Service, Inc.

         MORTGAGE: The mortgage, deed of trust or other instrument creating a
first lien on or first priority ownership interest in an estate in fee simple 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 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. Any mortgage
loan that was intended by the parties hereto to be transferred to the Trust Fund
as indicated by such Mortgage Loan Schedule which is in fact not so transferred
for any reason including, without limitation, a breach of the representation
contained in Section 2.03(b)(v) hereof, shall continue to be a Mortgage Loan
hereunder until the Purchase Price with respect thereto has been paid to the
Trust Fund.

         MORTGAGE LOAN PURCHASE AGREEMENT: Shall mean the Mortgage Loan Purchase
Agreement dated as of April 30, 2003, between the Seller, as seller and the
Depositor, as purchaser.

         MORTGAGE LOAN PURCHASE PRICE: The price, calculated as set forth in
Section 11.01, to be paid in connection with the repurchase of the Mortgage
Loans pursuant to Section 11.01.

         MORTGAGE LOAN SCHEDULE: The list of Mortgage Loans (as from time to
time amended by the Company or the Master Servicer to reflect the deletion of
Deleted Mortgage Loans and the addition of Replacement 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, the initial Mortgage
Loan Schedule being attached hereto as Exhibit B, setting forth the following
information with respect to each Mortgage Loan:

                                      -19-

<PAGE>

                  (i)      the loan number;

                  (ii)     the Mortgage Rate in effect as of the Cut-off Date;

                  (iii)    the Servicer (or the Company, if it services the
                           Mortgage Loan), the Servicing Fee Rate and the Master
                           Servicing Fee Rate;

                  (iv)     the Net Mortgage Rate in effect as of the Cut-off
                           Date;

                  (v)      the maturity date;

                  (vi)     the original principal balance;

                  (vii)    the Cut-off Date Principal Balance;

                  (viii)   the original term;

                  (ix)     the remaining term;

                  (x)      the property type; and

                  (xi)     the MIN with respect to each Mortgage Loan.

Such schedule shall also set forth the aggregate Cut-off Date Principal Balance
for all of the Mortgage Loans.

         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.

         MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.

         MORTGAGOR: The obligors on a Mortgage Note.

         NATIONAL CITY: National City Mortgage Co., and any successor thereto.

         NATIONAL CITY ASSIGNMENT AGREEMENT: The Assignment, Assumption and
Recognition Agreement, dated as of April 30, 2003, by and among the Seller,
National City and the Trustee acknowledging the assignment of the National City
Servicing Agreement to the Trust.

         NATIONAL CITY LOANS: Those Mortgage Loans subject to this Agreement
which were purchased by the Seller from National City pursuant to the National
City Servicing Agreement.

         NATIONAL CITY SERVICING AGREEMENT: Shall mean the Purchase, Warranties
and Servicing Agreement, dated as of October 1, 2001, by and between the Seller
and National City.

                                      -20-

<PAGE>

         NET INTEREST SHORTFALLS: Shall mean Interest Shortfalls net of payments
by the Company, the Servicer or the Master Servicer in respect of Compensating
Interest.

         NET MONTHLY EXCESS CASHFLOW: With respect to any Distribution Date, the
sum of (a) any Overcollateralization Release Amount and (b) the excess of (x)
the Available Funds for such Distribution Date over (y) the sum for such
Distribution Date of (A) the aggregate amount of the Monthly Interest
Distributable Amount for the Offered Certificates and (B) the Principal
Remittance Amount.

         NET MORTGAGE RATE: As to each Mortgage Loan, and at any time, the per
annum rate equal to the related Mortgage Rate less the sum of (i) the Servicing
Fee Rate, (ii) the Master Servicing Fee Rate and (iii) the rate at which the
LPMI Fee is calculated, if any.

         NET WAC RATE CAP: With respect to each Class of Offered Certificates
(other than the Class A-IO, Class B-1 and Class B-2 Certificates) shall mean (i)
through the applicable Interest Accrual Period for each such Class relating to
the Distribution Date in October 2005, the product of (a) the weighted average
of the Net Mortgage Rates of the Mortgage Loans, weighted based on their Stated
Principal Balances as of the first day of the calendar month preceding the month
in which the Distribution Date occurs multiplied by (b) a fraction, the
numerator of which is the Certificate Notional Balance of the Class A-IO
Certificates and the denominator of which is the aggregate Stated Principal
Balance of the Mortgage Loans as of the first day of the calendar month
preceding the month in which the Distribution Date occurs and (ii) thereafter,
the weighted average of the Net Mortgage Rates of the Mortgage Loans.

With respect to the Class B-1 Certificates and Class B-2 Certificates shall mean
the product of (a) (i) through the applicable Interest Accrual Period for each
such Class relating to the Distribution Date in October 2005, the product of (A)
the weighted average of the Net Mortgage Rates of the Mortgage Loans, weighted
based on their Stated Principal Balances as of the first day of the calendar
month preceding the month in which the Distribution Date occurs multiplied by
(B) a fraction, the numerator of which is the Certificate Notional Balance of
the Class A-IO Certificates and the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans as of the first day of the calendar
month preceding the month in which the Distribution Date occurs and (ii)
thereafter, the weighted average of the Net Mortgage Rates of the Mortgage Loans
multiplied by (b) a fraction, the numerator of which is 30 and the denominator
of which is the actual number of days elapsed in the related Interest Accrual
Period.

For federal income tax purposes, the Net WAC Rate Cap, with respect to any
Distribution Date, shall be expressed as the weighted average of the
Uncertificated REMIC II Pass-Through Rates weighted on the basis of the
Uncertificated Principal Balance of the REMIC II Regular Interests. In the case
of the Class B-1 Certificates and Class B-2 Certificates, such Net WAC Rate Cap
shall be multiplied by a fraction, the numerator of which is 30 and the
denominator of which is the actual number of days elapsed in the related Accrual
Period.

         NET WAC RATE CARRYOVER AMOUNT: With respect each Class of Offered
Certificates (other than the Class A-IO Certificates) and any Distribution Date
on which the related Pass-Through Rate is reduced by the Net WAC Rate Cap, an
amount equal to the sum of (i) the excess of (x) the amount

                                      -21-

<PAGE>

of interest such class would have been entitled to receive on such distribution
date if the Pass- Through Rate applicable to such Class would not have been
reduced by the Net WAC Rate Cap on such distribution date over (y) the amount of
interest paid on such distribution date plus (ii) the related Net WAC Rate
Carryover Amount for the previous distribution date not previously distributed
together with interest thereon at a rate equal to the Pass-Through Rate for such
class for the most recently ended Interest Accrual Period.

         NET WAC RESERVE FUND: Shall mean the separate trust account created and
maintained by the Trustee pursuant to Section 6.08 hereof.

         NON-BOOK-ENTRY CERTIFICATE: Any Certificate other than a Book-Entry
Certificate.

         NONRECOVERABLE ADVANCE: Any portion of an Advance previously made or
proposed to be made by the Company or the Master Servicer pursuant to this
Agreement or the related Servicer pursuant to the related Servicing Agreement,
that, in the good faith judgment of the Company, the Master Servicer or the
related Servicer, will not or, in the case of a proposed advance, would not, be
ultimately recoverable by it from the related Mortgagor, related Liquidation
Proceeds or otherwise.

         OFFERED CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class A-4,
Class A-IO, Class M- 1, Class M-2, Class B-1 and Class B-2 Certificates.

         OFFICER'S CERTIFICATE: A certificate (i) signed by the Chairman of the
Board, the Vice Chairman of the Board, the President, 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 any other officer 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 a particular subject) or (ii), if
provided for in this Agreement, signed by a Servicing Officer, as the case may
be, and delivered to the Depositor, the Seller, the Securities Administrator
and/or the Trustee, as the case may be, as required by this Agreement.

         ONE-MONTH LIBOR: With respect to any Accrual Period, the rate
determined by the Securities Administrator on the related Interest Determination
Date on the basis of the rate for U.S. dollar deposits for one month that
appears on Telerate Screen Page 3750 as of 11:00 a.m. (London time) on such
Interest Determination Date; provided that the parties hereto acknowledge that
One- Month LIBOR for the first Accrual Period shall equal 1.31% per annum. If
such rate does not appear on such page (or such other page as may replace that
page on that service, or if such service is no longer offered, such other
service for displaying One-Month LIBOR or comparable rates as may be reasonably
selected by the Securities Administrator), One-Month LIBOR for the applicable
Accrual Period will be the Reference Bank Rate. If no such quotations can be
obtained by the Securities Administrator and no Reference Bank Rate is
available, One-Month LIBOR will be One-Month LIBOR applicable to the preceding
Accrual Period. The establishment of One-Month LIBOR on each Interest
Determination Date by the Securities Administrator and the Securities
Administrator's calculation of the rate of interest applicable to the Class B-1
Certificates and Class B-2 Certificates for the related Accrual Period shall, in
the absence of manifest error, be final and binding.

                                      -22-

<PAGE>

         OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
for the Seller, the Depositor, the Company or the Master Servicer, reasonably
acceptable to each addressee of such opinion; provided that with respect to
Section 2.05, 8.05, 8.07 or 12.01, or the interpretation or application of the
REMIC Provisions, such counsel must (i) in fact be independent of the Seller,
Depositor, the Company and the Master Servicer, (ii) not have any direct
financial interest in the Seller, Depositor, the Company or the Master Servicer
or in any affiliate of either, and (iii) not be connected with the Seller,
Depositor, the Company or the Master Servicer as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.

         OPTIONAL TERMINATION: The termination of the Trust Fund created
hereunder as a result of the purchase of all of the Mortgage Loans and any REO
Property pursuant to the last sentence of Section 11.01 hereof.

         OPTIONAL TERMINATION DATE: The first Distribution Date on which the
Trust Fund may be terminated at the option of the Majority Class C
Certificateholder as described under Section 11.01.

         ORIGINAL VALUE: The value of the property underlying a Mortgage Loan
based, in the case of the purchase of the underlying Mortgaged Property, on the
lower of an appraisal or the sales price of such property or, in the case of a
refinancing, on an appraisal.

         ORIGINATOR: With respect to each Mortgage Loan, shall mean the
originator set forth in the Mortgage Loan Schedule for such Mortgage Loan.

         OTS: The Office of Thrift Supervision.

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

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

                  (b) 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 date of determination, a Mortgage
Loan with a Stated Principal Balance greater than zero that was not the subject
of a Principal Prepayment in full, and that did not become a Liquidated Loan,
prior to the end of the related Prepayment Period.

         OVERCOLLATERALIZED AMOUNT: With respect to any Distribution Date, is
the excess, if any, of (a) the aggregate Stated Principal Balances of the
Mortgage Loans as of the last day of the related Due Period over (b) the
Certificate Principal Balances of the Offered Certificates on such Distribution
Date (after taking into account the payment of principal other than any Extra
Principal Distribution Amount on such Certificates).

         OVERCOLLATERALIZATION INCREASE AMOUNT: As of any Distribution Date, the
excess, if any, of (a) the Overcollateralization Target Amount over (b) the
Overcollateralized Amount on such

                                      -23-

<PAGE>

Distribution Date (after taking into account payments to the Offered
Certificates of the Basic Principal Distribution Amount on such Distribution
Date).

         OVERCOLLATERALIZATION RELEASE AMOUNT: With respect to any Distribution
Date, the lesser of (x) the Principal Remittance Amount for such Distribution
Date and (y) the excess, if any, of (i) the Overcollateralized Amount for such
Distribution Date (assuming that 100% of the Principal Remittance Amount is
applied as a principal payment on such Distribution Date) over (ii) the
Overcollateralization Target Amount for such Distribution Date.

         OVERCOLLATERALIZATION TARGET AMOUNT: With respect to any Distribution
Date, $1,672,812.

         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.

         PASS-THROUGH RATE: With respect to each Class of Certificates, the
applicable Pass-Through Rate for each such Class as set forth in the Preliminary
Statement.

         PERCENTAGE INTEREST: With respect to any Certificate of a specified
Class, the Percentage Interest set forth on the face thereof or the percentage
obtained by dividing the Denomination of such Certificate by the aggregate of
the Denominations of all Certificates of the such Class.

         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) [Reserved];

                  (iv) 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;

                  (v) 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 (including the Trustee in its
         commercial banking capacity), provided that the commercial paper and/or
         long term unsecured debt obligations of such depository institution or
         trust company are then rated one of the two highest long-term and

                                      -24-

<PAGE>

         the highest short-term ratings of each such 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 any
         Rating Agency;

                  (vi) 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;

                  (vii) guaranteed reinvestment agreements issued by any bank,
         insurance company or other corporation containing, at the time of the
         issuance of such agreements, such terms and conditions as will not
         result in the downgrading or withdrawal of the rating then assigned to
         the Certificates by any such Rating Agency;

                  (viii) 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 (v) above;

                  (ix) 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 long term 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 any Rating Agency, as evidenced by a
         signed writing delivered by each Rating Agency;

                  (x) interests in any money market fund (including any such
         fund managed or advised by the Trustee or Master Servicer or any
         affiliate thereof) which at the date of acquisition of the interests in
         such fund and throughout the time such interests are held in such fund
         has the highest applicable long term rating by 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;

                  (xi) short term investment funds sponsored by any trust
         company or banking association incorporated under the laws of the
         United States or any state thereof (including any such fund managed or
         advised by the Trustee or any affiliate thereof) which on the date of
         acquisition has been rated by each Rating Agency in their respective
         highest applicable rating category 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; and

                  (xii) such other investments having a specified stated
         maturity and 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 any Rating Agency, as
         evidenced by a signed writing delivered by each Rating Agency;

                                      -25-

<PAGE>

provided, that no such instrument shall be a Permitted Investment if such
instrument (i) evidences the right to receive interest only payments with
respect to the obligations underlying such instrument, (ii) is purchased at a
premium or (iii) is purchased at a deep discount; provided further that no such
instrument shall be a Permitted Investment (A) if such instrument evidences
principal and interest payments derived from obligations underlying such
instrument and the interest payments with respect to such instrument provide a
yield to maturity of greater than 120% of the yield to maturity at par of such
underlying obligations, or (B) if it may be redeemed at a price below the
purchase price (the foregoing clause (B) not to apply to investments in units of
money market funds pursuant to clause (vii) above); provided further that no
amount beneficially owned by any REMIC may be invested in investments (other
than money market funds) treated as equity interests for federal income tax
purposes, unless the Master Servicer shall receive an Opinion of Counsel, at the
expense of the Master Servicer, to the effect that such investment will not
adversely affect the status of any such REMIC as a REMIC under the Code or
result in imposition of a tax on any such REMIC. Permitted Investments that are
subject to prepayment or call may not be purchased at a price in excess of par.

         PERMITTED TRANSFEREE: Any person other than (i) the United States, any
State or political subdivision thereof, any possession of the United States or
any agency or instrumentality of any of the foregoing, (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) that is exempt from tax
imposed by Chapter 1 of the Code (including the tax imposed by section 511 of
the Code on unrelated business taxable income) on any excess inclusions (as
defined in section 860E(c)(1) of the Code) with respect to any Residual
Certificate, (iv) rural electric and telephone cooperatives described in section
1381(a)(2)(C) of the Code, (v) a Person that is not a citizen or resident of the
United States, a corporation, partnership (other than a partnership that has any
direct or indirect foreign partners) or other entity (treated as a corporation
or a partnership for federal income tax purposes), created or organized in or
under the laws of the United States, any state thereof or the District of
Columbia, an estate 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 persons have authority to control all substantial decisions
of the trustor and (vi) any other Person so designated by the Trustee based upon
an Opinion of Counsel addressed to the Trustee (which shall not be an expense of
the Trustee) that states that the Transfer of an Ownership Interest in a
Residual Certificate to such Person may cause REMIC I, REMIC II or REMIC III to
fail to qualify as a REMIC at any time that any 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 Freddie Mac, 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, limited liability company, trust,
unincorporated organization or government, or any agency or political
subdivision thereof.

                                      -26-

<PAGE>

         PREPAYMENT ASSUMPTION: The applicable rate of prepayment, as described
in the Prospectus Supplement relating to each Class of Offered Certificates.

         PREPAYMENT CHARGE: Any prepayment premium, penalty or charge payable by
a Mortgagor in connection with any Principal Prepayment on a Mortgage Loan
pursuant to the terms of the related Mortgage Note.

         PREPAYMENT INTEREST SHORTFALL: With respect to any Distribution Date,
for each Mortgage Loan that was the subject of a partial Principal Prepayment, a
Principal Prepayment in full, or that became a Liquidated Loan during the
related Prepayment Period, (other than a Principal Prepayment in full resulting
from the purchase of a Mortgage Loan pursuant to Section 2.02, 2.03, 4.21 or
11.01 hereof), the amount, if any, by which (i) one month's interest at the
applicable Net Mortgage Rate on the Stated Principal Balance of such Mortgage
Loan immediately prior to such prepayment (or liquidation) or in the case of a
partial Principal Prepayment on the amount of such prepayment (or liquidation
proceeds) exceeds (ii) the amount of interest paid or collected in connection
with such Principal Prepayment or such liquidation proceeds less the sum of (a)
the related Servicing Fee and (b) the LPMI Fee, if any.

         PREPAYMENT PERIOD: As to any Distribution Date, the calendar month
immediately preceding the month in which such Distribution Date occurs.

         PRIMARY MORTGAGE INSURANCE POLICY: Any primary mortgage guaranty
insurance policy issued in connection with a Mortgage Loan which provides
compensation to a Mortgage Note holder in the event of default by the obligor
under such Mortgage Note or the related security instrument, if any or any
replacement policy therefor through the related Accrual Period for such Class
relating to a Distribution Date.

         PRINCIPAL DISTRIBUTION AMOUNT: With respect to each Distribution Date,
is equal to the sum of the Basic Principal Distribution Amount for such
Distribution Date, plus any Extra Principal Distribution Amount for such
Distribution Date.

         PRINCIPAL FUNDS: With respect to any Distribution Date, (i) the sum,
without duplication, of (a) all scheduled principal collected during the related
Due Period, (b) all Advances relating to principal made on or prior to the
Distribution Account Deposit Date, (c) Principal Prepayments exclusive of
prepayment charges or penalties collected during the related Prepayment Period,
(d) the Stated Principal Balance of each Mortgage Loan that was repurchased by
the Seller pursuant to Sections 2.02, 2.03 or by EMC pursuant to Section 4.21,
(e) the aggregate of all Substitution Adjustment Amounts for the related
Determination Date in connection with the substitution of Mortgage Loans
pursuant to Section 2.03(c), (e) all Liquidation Proceeds collected during the
related Prepayment Period (to the extent such Liquidation Proceeds relate to
principal) and remitted by the Company or the related Servicer to the
Distribution Account pursuant to this Agreement or the related Servicing
Agreement and (f) amounts in respect of principal paid by the Majority Class C
Certificateholder pursuant to Section 11.01 minus (ii) all amounts required to
be reimbursed pursuant to Sections 5.02, 5.04, 5.06 and 5.08 or as otherwise set
forth in this Agreement.

                                      -27-

<PAGE>

         PRINCIPAL REMITTANCE AMOUNT: With respect to each Distribution Date,
the sum of the amounts listed in clauses (a) through (e) of the definition of
Principal Funds.

         PRINCIPAL PREPAYMENT: Any Mortgagor payment or other recovery of (or
proceeds with respect to) principal on a Mortgage Loan (including loans
purchased or repurchased under Sections 2.02, 2.03, 4.21 and 11.01 hereof) that
is received in advance of its scheduled Due Date and is not accompanied by an
amount as to interest 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 Company or the related Servicer, as
appropriate, in accordance with the terms of the related Mortgage Note.

         PRIVATE CERTIFICATE: Each of the Class P, Class C and Residual
Certificates.

         PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated April 25, 2003
relating to the public offering of the Offered Certificates.

         PROTECTED ACCOUNT: Each account established and maintained by the
Company with respect to receipts on the Mortgage Loans and REO Property in
accordance with Section 4.01 hereof or by the related Servicer in accordance
with the related Servicing Agreement.

         PUD: A Planned Unit Development.

         PURCHASE PRICE: With respect to any Mortgage Loan required to be
repurchased by the Seller pursuant to Section 2.02 or 2.03 hereof, an amount
equal to the sum of (i) 100% of the outstanding principal balance of the
Mortgage Loan as of the date of such purchase plus (ii) accrued interest thereon
at the applicable Mortgage Rate through the first day of the month in which the
Purchase Price is to be distributed to Certificateholders, reduced by any
portion of the Servicing Fee, Master Servicing Fee, Servicing Advances and
Advances payable to the purchaser of the Mortgage Loan plus and (iii) any costs
and damages (if any) incurred by the Trust in connection with any violation of
such Mortgage Loan of any predatory or abusive lending laws.

         RATING AGENCY: Each of Moody's and S&P. If any such organization or its
successor is no longer in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization, or other comparable Person,
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.

         REALIZED LOSS: With respect to each Mortgage Loan as to which a Final
Recovery Determination has been made, an amount (not less than zero) equal to
(i) the unpaid principal balance of such Mortgage Loan as of the commencement of
the calendar month in which the Final Recovery Determination was made, plus (ii)
accrued interest from the Due Date as to which interest was last paid by the
Mortgagor through the end of the calendar month in which such Final Recovery
Determination was made, calculated in the case of each calendar month during
such period (A) at an annual rate equal to the annual rate at which interest was
then accruing on such Mortgage Loan and (B) on a principal amount equal to the
Stated Principal Balance of such Mortgage Loan as of the close of business on
the Distribution Date during such calendar month, minus (v) the proceeds, if

                                      -28-

<PAGE>

any, received in respect of such Mortgage Loan during the calendar month in
which such Final Recovery Determination was made, net of amounts that are
payable therefrom to the Company pursuant to this Agreement or the applicable
Servicer pursuant to the related Servicing Agreement.

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

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

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

         RECORD DATE: With respect to the Certificates (other than the Class B-1
Certificates and Class B-2 Certificates) and any Distribution Date, the close of
business on the last Business Day of the month preceding the month in which such
Distribution Date occurs. With respect to any Distribution Date and the Class
B-1 Certificates and Class B-2 Certificates, so long as the Class B-1
Certificates and Class B-2 Certificates are Book-Entry Certificates, the
Business Day preceding such Distribution Date, and otherwise, the close of
business on the last Business Day of the month preceding the month in which such
Distribution Date occurs.

         RATE CHANGE DATE: With respect to a REMIC II Regular Interest
Component, the first month in which the pass-through rate for such component is
equal to 0.00%.

         REFERENCE BANKS: Shall mean leading banks selected by the Securities
Administrator and engaged in transactions in Eurodollar deposits in the
international Eurocurrency market (i) with an established place of business in
London, (ii) which have been designated as such by the Securities Administrator
and (iii) which are not controlling, controlled by, or under common control
with, the Depositor, the Seller or the Master Servicer.

                                      -29-

<PAGE>

         REFERENCE BANK RATE: With respect to any Accrual Period shall mean the
arithmetic mean, rounded upwards, if necessary, to the nearest whole multiple of
0.03125%, of the offered rates for United States dollar deposits for one month
that are quoted by the Reference Banks as of 11:00 a.m., New York City time, on
the related Interest Determination Date to prime banks in the London interbank
market for a period of one month in an amount approximately equal to the
Certificate Principal Balance of the Class B-1 Certificates or Class B-2
Certificates, as applicable, for such Accrual Period, 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, rounded upwards, if
necessary, to the nearest whole multiple of 0.03125% of the rates quoted by one
or more major banks in New York City, selected by the Securities Administrator,
as of 11:00 a.m., New York City time, on such date for loans in United States
dollars to leading European banks for a period of one month in an amount
approximately equal to the Certificate Principal Balance of the Class B-1
Certificates or Class B-2 Certificates, as applicable, for such Accrual Period.

         REGULAR CERTIFICATE: Any Certificate other than a Residual Certificate.

         RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended or any similar state law.

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

         REMIC I: The segregated pool of assets described in Section 6.06(a).

         REMIC I CERTIFICATES: The REMIC I Regular Interests and the Class R-1
Certificate.

         REMIC I REGULAR INTEREST LTI-1: One of the separate non-certificated
beneficial ownership interests in REMIC I issued hereunder and designated as a
Regular Interest in REMIC I. REMIC I Regular Interest LTI-1 shall accrue
interest at the related Uncertificated REMIC I Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

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

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

                                      -30-

<PAGE>

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

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

         REMIC I REGULAR INTERESTS: REMIC I Regular Interest LTI-1, REMIC I
Regular Interest LTI- IO-A, REMIC I Regular Interest LTI-IO-B, REMIC I Regular
Interest LTI-IO-C and, REMIC I Regular Interest LTI-P.

         REMIC II: The segregated pool of assets, described in the Preliminary
Statement, consisting of the REMIC I Regular Interests.

         REMIC II INTEREST LOSS ALLOCATION AMOUNT": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC II Remittance Rate for REMIC II Regular Interest
II-LTAA minus the Marker Rate, divided by (b) 12.

         REMIC II OVERCOLLATERALIZATION AMOUNT: With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Principal Balances of the
REMIC II Regular Interests minus (ii) the aggregate of the Uncertificated
Balances of REMIC II Regular Interest LTII-A1, REMIC II Regular Interest
LTII-A2, REMIC II Regular Interest LTII-A3, REMIC II Regular Interest LTII-A4,
REMIC II Regular Interest LTII-M1, REMIC II Regular Interest LTII-M2, REMIC II
Regular Interest LTII- B1, REMIC II Regular Interest LTII-B2 and REMIC Regular
Interest LTII-P, in each case as of such date of determination.

         REMIC II OVERCOLLATERALIZATION TARGET AMOUNT: 1% of the
Overcollateralization Target Amount.

         REMIC II PRINCIPAL LOSS ALLOCATION AMOUNT: With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) 1 minus a fraction, the numerator of which is two times the
aggregate of the Uncertificated Principal Balances of REMIC II Regular Interest
LTII-A1, REMIC II Regular Interest LTII-A2, REMIC II Regular Interest LTII-A3,
REMIC II Regular Interest LTII-A4, REMIC II Regular Interest LTII-M1, REMIC II
Regular Interest LTII-M2, REMIC II Regular Interest LTII-B1 and REMIC II Regular
Interest LTII-B2 and the denominator of which is the aggregate of the
Uncertificated Balances of REMIC II Regular Interest LTII-A1, REMIC II Regular
Interest LTII-A2, REMIC II Regular Interest LTII-A3, REMIC II Regular Interest
LTII-A4,

                                      -31-

<PAGE>

REMIC II Regular Interest LTII-M1, REMIC II Regular Interest LTII-M2, REMIC II
Regular Interest LTII-B1, REMIC II Regular Interest LTII-B2 and REMIC II Regular
Interest LTII-ZZ.

         REMIC II REGULAR INTERESTS: REMIC II Regular Interest LTII-AA, REMIC II
Regular Interest LTII-A1, REMIC II Regular Interest LTII-A2, REMIC II Regular
Interest LTII-A3, REMIC II Regular Interest LTII-A4, REMIC II Regular Interest
LTII-M1, REMIC II Regular Interest LTII- M2, REMIC II Regular Interest LTII-B1,
REMIC II Regular Interest LTII-B2, REMIC II Regular Interest LTII-IO, REMIC II
Regular Interest LTII-ZZ and REMIC II Regular Interest LTII-P.

         REMIC II REGULAR INTEREST COMPONENT: Any of REMIC II Regular Interest
Component IO-1, REMIC II Regular Interest Component IO-2 or REMIC II Regular
Interest Component IO-3, each of which is deemed to be a component of REMIC II
Regular Interest LTII-IO.

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

         REMIC II REGULAR INTEREST LTII-A1: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-A1 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-A2: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-A2 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-A3: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-A3 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-A4: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-A4 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal,

                                      -32-

<PAGE>

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

         REMIC II REGULAR INTEREST LTII-B1: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-B1 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-B2: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-B2 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-IO: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-IO shall accrue
interest as provided herein and shall not be entitled to distributions of
principal. REMIC II Regular Interest LTII-IO will be deemed to be composed of
three components, IO-1 through IO-3, each of which is a Corresponding Interest
to a REMIC I Regular Interest.

         REMIC II REGULAR INTEREST LTII-M1: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-M1 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

         REMIC II REGULAR INTEREST LTII-M2: One of the separate non-certificated
beneficial ownership interests in REMIC II issued hereunder and designated as a
Regular Interest in REMIC II. REMIC II Regular Interest LTII-M2 shall accrue
interest at the related Uncertificated REMIC II Pass-Through Rate in effect from
time to time, and shall be entitled to distributions of principal, subject to
the terms and conditions hereof, in an aggregate amount equal to its initial
Uncertificated Principal Balance as set forth in the Preliminary Statement
hereto.

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

                                      -33-

<PAGE>

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

         REMIC II REGULAR INTEREST LTII-ZZ MAXIMUM INTEREST DEFERRAL AMOUNT:
With respect to any Distribution Date, the excess of (i) accrued interest at the
Uncertificated REMIC II Pass- Through Rate applicable to REMIC II Regular
Interest LTII-ZZ for such Distribution Date on a balance equal to the
Uncertificated Principal Balance of REMIC II Regular Interest LTII-ZZ minus the
REMIC II Overcollateralization Amount, in each case for such Distribution Date,
over (ii) Uncertificated Accrued Interest on REMIC II Regular Interest LTII-A1,
REMIC II Regular Interest LTII-A2, REMIC II Regular Interest LTII-A3, REMIC II
Regular Interest LTII-A4, REMIC II Regular Interest LTII-M1, REMIC II Regular
Interest LTII-M2, REMIC II Regular Interest LTII-B1 and REMIC II Regular
Interest LTII-B2 for such Distribution Date, with the rate on each such REMIC II
Regular Interest subject to a cap equal to the related Pass-Through Rate.

         REMIC III: The segregated pool of assets described in the Preliminary
Statement, consisting of the REMIC II Regular Interests.

         REMIC III CERTIFICATES: The Regular Certificates and the Class R-3
Certificates.

         REMIC OPINION: Shall mean an Opinion of Counsel to the effect that the
proposed action will not have an adverse affect on any REMIC created hereunder.

         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
proposed, temporary and final regulations and published rulings, notices and
announcements promulgated thereunder, as the foregoing may be in effect from
time to time as well as provisions of applicable state laws.

         REMIC REGULAR INTEREST: A REMIC I Regular Interest, REMIC II Regular
Interest or Regular Certificate.

         REMITTANCE DATE: Shall mean (i) with respect to the Company, the
Business Day immediately preceding the Distribution Account Deposit Date and
(ii) with respect to the related Servicer, the date specified in the related
Servicing Agreement.

         REMITTANCE REPORT: As defined in Section 6.04(d).

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

                                      -34-

<PAGE>

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

         REPLACEMENT MORTGAGE LOAN: A Mortgage Loan or Mortgage Loans in the
aggregate substituted by the Seller for a Deleted Mortgage Loan, which must, on
the date of such substitution, as confirmed in a Request for Release, (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
less than 90% of, the Stated Principal Balance of the Deleted Mortgage Loan;
(ii) have a fixed Mortgage Rate not less than or more than 1% per annum higher
than the Mortgage Rate of the Deleted Mortgage Loan; (iii) have the same or
higher credit quality characteristics than that of the Deleted Mortgage Loan;
(iv) have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage
Loan; (v) have a remaining term to maturity no greater than (and not more than
one year less than) that of the Deleted Mortgage Loan; (vi) not permit
conversion of the Mortgage Rate from a fixed rate to a variable rate; (vii) have
the same lien priority as the Deleted Mortgage Loan; (viii) constitute the same
occupancy type as the Deleted Mortgage Loan or be owner occupied; and (ix)
comply with each representation and warranty set forth in Section 2.03 hereof.

         REPURCHASE PRICE: Shall mean (a) with respect to each EMC Mortgage
Loan, a price equal to (i) the outstanding principal balance of the EMC Mortgage
Loan, plus (ii) interest on such outstanding principal balance at the Mortgage
Rate (net of the Servicing Fee Rate) from the last date through which interest
has been paid to the end of the month of repurchase, less (iii) amounts advanced
by the Company in respect of such repurchased EMC Mortgage Loan which are being
held in the Master Servicer Collection Account for remittance to the Trustee
plus (iv) any costs and damages (if any) incurred by the Trust in connection
with any violation of such Mortgage Loan of any predatory or abusive lending
laws and (b) with respect to any other Mortgage Loan, as defined in the related
Servicing Agreement.

         REQUEST FOR RELEASE: The Request for Release to be submitted by the
Seller, the Company, the related Servicer or the Master Servicer to the
Custodian substantially in the form of Exhibit H. Each Request for Release
furnished to the Custodian by the Seller, the Company, the related Servicer or
the Master Servicer shall be in duplicate and shall be executed by an officer of
such Person or a Servicing Officer (or, if furnished electronically to the
Custodian, shall be deemed to have been sent and executed by an officer of such
Person or a Servicing Officer) of the Company or the related Servicer, as
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 or the related Servicing Agreement.

         RESIDUAL CERTIFICATES: The Class R-1, Class R-2 and Class R-3
Certificates each evidencing the sole class of "residual interests" (within the
meaning of Section 860G(a)(2) of the Code) in the related REMIC.

         RESPONSIBLE OFFICER: With respect to the Trustee, any Vice President,
any Assistant Vice President, the Secretary, any Assistant Secretary, or any
Trust Officer with specific responsibility

                                      -35-

<PAGE>

for the transactions contemplated hereby, any other officer customarily
performing functions similar to those performed by any of the above designated
officers or other officers of the Trustee specified by the Trustee, as 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.

         S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc.

         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.

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

         SECURITIES ADMINISTRATOR: Wells Fargo Bank Minnesota, National
Association, in its capacity as securities administrator hereunder, and its
successors and assigns.

         SELLER: EMC Mortgage Corporation, a Delaware corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans to the
Depositor.

         SENIOR CERTIFICATES: The Class A-1, Class A-2, Class A-3,Class A-4 and
Class A-IO Certificates.

         SERVICER: Shall mean either National City or Union Federal.

         SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses (including reasonable legal fees) incurred in the
performance by the Company or the related Servicer of its servicing obligations
hereunder or under the related Servicing Agreement, including, but not limited
to, the cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures,
and including any expenses incurred in relation to any such proceedings that
result from the Mortgage Loan being registered in the MERS(R) System, (iii) the
management and liquidation of any REO Property (including, without limitation,
realtor's commissions) and (iv) compliance with any obligations under Section
3.07 hereof to cause insurance to be maintained.

         SERVICING AGREEMENT: Shall mean either the National City Servicing
Agreement or the Union Federal Servicing Agreement.

         SERVICING FEE: As to each Mortgage Loan and any Distribution Date, an
amount equal to 1/12th of the Servicing Fee Rate multiplied by the Stated
Principal Balance of such Mortgage Loan as of the last day of the related Due
Period or, in the event of any payment of interest that accompanies a Principal
Prepayment in full during the related Due Period made by the Mortgagor
immediately prior to such prepayment, interest at the Servicing Fee Rate on the
Stated Principal Balance of such Mortgage Loan for the period covered by such
payment of interest.

         SERVICING FEE RATE: 0.25% per annum.

                                      -36-

<PAGE>

         SERVICING MODIFICATION: With respect to any Mortgage Loan that is in
default or, in the reasonable judgment of the Company or the related Servicer,
as to which default is reasonably foreseeable, any modification which is
effected by the Company or the related Servicer in accordance with the terms of
this Agreement or the related Servicing Agreement which results in any change in
the outstanding Stated Principal Balance, any change in the Mortgage Rate or any
extension of the term of such Mortgage Loan.

         SERVICING OFFICER: Any officer of the Company or the related Servicer
involved in, or responsible for, the administration and servicing of the
Mortgage Loans (i) in the case of the Company, whose name and facsimile
signature appear on a list of servicing officers furnished to the Trustee by the
Company on the Closing Date pursuant to this Agreement, as such list may from
time to time be amended and (ii) in the case of the related Servicer, as to
which evidence reasonably acceptable to the Trustee, as applicable, of due
authorization, by such party has been furnished from time to time to the
Trustee.

         STARTUP DAY: The Startup Day for each REMIC formed hereunder shall be
the Closing Date.

         STATED PRINCIPAL BALANCE: With respect to any Mortgage Loan or related
REO Property and any Distribution Date, the Cut-off Date Principal Balance
thereof minus the sum of (i) the principal portion of the Scheduled Payments due
with respect to such Mortgage Loan during each Due Period ending prior to such
Distribution Date (and irrespective of any delinquency in their payment), (ii)
all Principal Prepayments with respect to such Mortgage Loan received prior to
or during the related Prepayment Period, and all Liquidation Proceeds to the
extent applied by the Company or the related Servicer as recoveries of principal
in accordance with Section 3.09 or the related Servicing Agreement with respect
to such Mortgage Loan, that were received by the Company or the Servicer as of
the close of business on the last day of the Prepayment Period related to such
Distribution Date and (iii) any Realized Losses on such Mortgage Loan incurred
during the related Prepayment Period. The Stated Principal Balance of a
Liquidated Loan equals zero.

         SUBORDINATED CERTIFICATES: The Class M-1, Class M-2, Class B-1 and
Class B-2 Certificates.

         SUBSERVICING AGREEMENT: Any agreement entered into between the Company
and a subservicer with respect to the subservicing of any Mortgage Loan
hereunder by such subservicer.

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

         SUCCESSOR MASTER SERVICER: The meaning ascribed to such term pursuant
to Section 9.01.

         TAX MATTERS PERSON: The person designated as "tax matters person" in
the manner provided under Treasury regulation ss. 1.860F-4(d) and temporary
Treasury regulation ss. 301.6231(a)(7)-1T. The holder of the greatest Percentage
Interest in a Class of Residual Certificates shall be the Tax Matters Person for
the related REMIC. The Securities Administrator, or any successor thereto or
assignee thereof shall serve as tax administrator hereunder and as agent for the
related Tax Matters Person.

                                      -37-

<PAGE>

         TRANSFER AFFIDAVIT: As defined in Section 7.02(c).

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

         TRUST FUND: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest accruing and principal due with respect
thereto after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof; (ii) the Net WAC Reserve Fund, the
Distribution Account, the Master Servicer Collection Account maintained by the
Master Servicer and the Protected Accounts maintained by the Company and the
Servicers and all amounts deposited therein pursuant to the applicable
provisions of this Agreement and the Servicing Agreements; (iii) property that
secured a Mortgage Loan and has been acquired by foreclosure, deed in lieu of
foreclosure or otherwise; (iv) the mortgagee's rights under the Insurance
Policies with respect to the Mortgage Loans; (v) the Servicing Agreement and the
Assignment Agreements; (vi) the rights under the Mortgage Loan Purchase
Agreement, and (vii) all proceeds of the foregoing, including proceeds of
conversion, voluntary or involuntary, of any of the foregoing into cash or other
liquid property. The Net WAC Reserve Fund shall constitute an asset of the Trust
Fund but will not be included in REMIC I, REMIC II or REMIC III.

         TRUSTEE: JPMorgan Chase Bank, a New York banking corporation, not in
its individual capacity, but solely in its capacity as trustee for the benefit
of the Certificateholders under this Agreement, and any successor thereto, and
any corporation or national banking association resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee as may from time to time be serving as successor trustee
hereunder.

         20% CLEAN-UP CALL DATE: Shall mean the first Distribution Date in or
after October 2005 upon which the Stated Principal Balance of the Mortgage Loans
as of the end of the related Due Period is less than or equal to 20% of the
Cut-off Date Principal Balance.

         UNCERTIFICATED ACCRUED INTEREST: With respect to each Uncertificated
REMIC Regular Interest on each Distribution Date, an amount equal to one month's
interest at the related Uncertificated Pass- Through Rate on the Uncertificated
Principal Balance or Uncertificated Notional Amount, as applicable, of such
REMIC Regular Interest. In each case, Uncertificated Accrued Interest will be
reduced by any Prepayment Interest Shortfalls and shortfalls resulting from
application of the Relief Act (allocated to such REMIC Regular Interests as set
forth in Section 1.02 and 6.07).

         UNCERTIFICATED NOTIONAL AMOUNT: With respect to REMIC II Regular
Interest LTII-IO and (i) each Distribution Date from and including the
Distribution Date in May 2003 to and including the Distribution Date in October
2004, the aggregate Uncertificated Principal Balances of REMIC I Regular
Interest LTI-IO-A, REMIC I Regular Interest LTI-IO-B and REMIC I Regular
Interest LTI-IO-C, (ii) each Distribution Date from and including the
Distribution Date in November 2004 to and including the Distribution Date in
April 2005, the aggregate Uncertificated Principal Balances of REMIC I Regular
Interest LTI-IO-B and REMIC I Regular Interest LTI-IO-C, (iii) each Distribution
Date from and including the Distribution Date in May 2005 to and including the
Distribution Date in October 2005, the Uncertificated Principal Balance of REMIC
I Regular Interest LTI-IO-C, and (iv) each Distribution Date thereafter, $0.

                                      -38-

<PAGE>

         UNCERTIFICATED PRINCIPAL BALANCE: With respect to each REMIC Regular
Interest (other than REMIC I Regular Interest LTII-IO, the principal amount of
such REMIC Regular Interest outstanding as of any date of determination. As of
the Closing Date, the Uncertificated Principal Balance of each REMIC Regular
Interest (other than REMIC I Regular Interest LTII-IO) shall equal the amount
set forth in the Preliminary Statement hereto as its initial Uncertificated
Principal Balance. On each Distribution Date, the Uncertificated Principal
Balance of each REMIC Regular Interest shall be reduced by all distributions of
principal made on such REMIC Regular Interest on such Distribution Date pursuant
to Sections 6.06 and 6.07 and, if and to the extent necessary and appropriate,
shall be further reduced on such Distribution Date by Realized Losses as
provided in Sections 6.06 and 6.07. The Uncertificated Principal Balance of each
REMIC Regular Interest shall never be less than zero. REMIC I Regular Interest
LTII-IO will not have an Uncertificated Principal Balance.

         UNCERTIFICATED REMIC I PASS-THROUGH RATE: A per annum rate equal to the
average of the Net Mortgage Rates of the Mortgage Loans as of the first day of
the related Due Period, weighted on the basis of the Stated Principal Balances
as of the first day of the related Due Period.

         UNCERTIFICATED REMIC II PASS-THROUGH RATE:

         (a) With respect to REMIC II Regular Interest LTII-AA, REMIC II Regular
Interest LTII-A1, REMIC II Regular Interest LTII-A2, REMIC II Regular Interest
LTII-A3, REMIC II Regular Interest LTII-A4, REMIC II Regular Interest LTII-M1,
REMIC II Regular Interest LTII-M2, REMIC II Regular Interest LTII-B1, REMIC II
Regular Interest LTII-B2 and REMIC II Regular Interest LTII-ZZ, and (i) any
Distribution Date up to and including October 2005, a per annum rate equal to
(1) the weighted average of (x) with respect to REMIC I Regular Interest LTI-1,
the Uncertificated REMIC I Pass-Through Rate for such REMIC I Regular Interest
for such Distribution Date and, (y) with respect to REMIC I Regular Interest
LT-IO-A through REMIC I Regular Interest LT-IO-C the excess, if any, of (1) the
Uncertificated REMIC I Pass-Through Rate with respect to such REMIC I Regular
Interest for such Distribution Date over (2) in the case of each such REMIC I
Regular Interest, (A) from the Closing Date to but not including the Rate Change
Date for the Corresponding Interest relating to such REMIC I Regular Interest,
5.000% per annum and (B) thereafter, 0.00% per annum; weighted on the basis of
the Uncertificated Principal Balance of each REMIC I Regular Interest and (ii)
thereafter, a per annum rate equal to the weighted average of the Uncertificated
REMIC I Pass-Through Rates for the REMIC I Regular Interests, weighted on the
basis of the respective Uncertificated Principal Balances thereof for such
Distribution Date.

         (b) With respect to REMIC II Regular Interest LTII-IO and the first 30
Distribution Dates, 5.00%, and with respect to REMIC II Regular Interest LTII-IO
and any Distribution Date thereafter, 0.00% per annum.

         UNCERTIFICATED REMIC REGULAR INTEREST: The REMIC I Regular Interests
and the REMIC II Regular Interests.

         UNION FEDERAL: Union Federal Bank of Indianapolis.

                                      -39-

<PAGE>

         UNION FEDERAL ASSIGNMENT AGREEMENT: Shall mean the Assignment,
Assumption and Recognition Agreement, dated April 30, 2003, by and among the
Seller, Union Federal and the Trustee acknowledging the assignment of the Union
Federal Servicing Agreement and the Union Federal Loans to the Trust.

         UNION FEDERAL LOANS: Those Mortgage Loans subject to this Agreement
which were purchased by the Seller from Union Federal pursuant to the Union
Federal Servicing Agreement.

         UNION FEDERAL SERVICING AGREEMENT: Shall mean the Forward Commitment
Flow Mortgage Loan Purchase and Servicing Agreement, dated as of December 27,
2001, between the Seller and Union Federal.

         UNPAID INTEREST SHORTFALLS: Shall mean Interest Shortfalls net of
payments by the Company, the related Servicer or the Master Servicer in respect
of Compensating Interest.

         VOTING RIGHTS: The portion of the voting rights of all the Certificates
that is allocated to any Certificate for purposes of the voting provisions
hereunder. Voting Rights shall be allocated (i) 94.50% to the Certificates
(other than the Class A-IO, Class C, Class P and the Residual Certificates),
(ii) 1% to each of the Class A-IO Certificates and Class P Certificates, (iii)
2% to the Class C Certificates until the Class A-IO Certificates have been paid
in full and then 3% and (iv) 0.50% to each Class of Residual Certificates, with
the allocation among the Certificates other than the Class A-IO, Class C, Class
P and Residual Certificates to be in proportion to the Certificate Principal
Balance of each Class relative to the Certificate Principal Balance of all other
such Classes. Voting Rights will be allocated among the Certificates of each
such Class in accordance with their respective Percentage Interests.

         Section 1.02      ALLOCATION OF CERTAIN INTEREST SHORTFALLS.

         For purposes of calculating the amount of the Monthly Interest
Distributable Amount for the Class A-1, Class A-2, Class A-3, Class A-4, Class
A-IO, Class M-1, Class M-2, Class B-1, Class B-2 and the Class C Certificates
for any Distribution Date, (1) the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Company pursuant to
this Agreement, the applicable Servicer pursuant to the related Servicing
Agreement or by the Master Servicer pursuant to Section 6.02 and any shortfalls
resulting from application of the Relief Act in respect of the Mortgage Loans
for any Distribution Date shall be allocated first, to the Class C Certificates
based on, and to the extent of, one month's interest at the then applicable
respective Pass-Through Rate on the Certificate Notional Balance thereof, second
to the Class B-2 Certificates and Class B-1 Certificates, on a pro rata basis,
third to the M-2 Certificates and Class M-1 Certificates, in that order, and
fourth to the Class A-1, Class A-2, Class A-3, Class A-4 and Class A-IO
Certificates, on a pro rata basis, in each case on a PRO RATA basis based on,
and to the extent of, one month's interest at the then applicable respective
Pass-Through Rate on the respective Certificate Principal Balance or Certificate
Notional Balance, as applicable of each such Certificate and (2) the aggregate
amount of any Realized Losses allocated to the Class B-1, Class B-2, Class M-1
and Class M-2 Certificates and Net WAC Rate Carryover Amounts paid to the Class
A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2, Class B-1 and Class
B-2 Certificates incurred for any Distribution Date shall be allocated to the
Class C Certificates on a PRO RATA basis based on, and

                                      -40-

<PAGE>

to the extent of, one month's interest at the then applicable respective
Pass-Through Rate on the respective Certificate Notional Balance thereof.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the REMIC I Regular Interests for any Distribution Date, the
aggregate amount of any Prepayment Interest Shortfalls to the extent not covered
by payments pursuant to Section 6.02 and any shortfalls resulting from the
application of the Relief Act incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to REMIC I Regular Interest LTI-1
and REMIC I Regular Interest LTI- P, to the extent of one month's interest at
the then applicable respective Uncertificated REMIC I Pass-Through Rate on the
Uncertificated Principal Balance of each such REMIC I Regular Interest; and
then, to REMIC I Regular Interest LTI-IO-A, REMIC I Regular Interest LTI-IO-B
and REMIC I Regular Interest LTI-IO-C, in each case to the extent of one month's
interest at the then applicable respective Uncertificated REMIC I Pass-Through
Rate on the respective Uncertificated Principal Balance of each such REMIC I
Regular Interest.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the REMIC II Regular Interests for any Distribution Date, the
aggregate amount of any Prepayment Interest Shortfalls to the extent not covered
by payments pursuant to Section 6.02 and any shortfalls resulting from the
application of the Relief Act incurred in respect of the Mortgage Loans for any
Distribution Date shall be allocated first, to Uncertificated Accrued Interest
payable to REMIC II Regular Interest LTII-AA and REMIC II Regular Interest
LTII-ZZ up to an aggregate amount equal to the REMIC II Interest Loss Allocation
Amount, 98% and 2%, respectively, and thereafter among REMIC II Regular Interest
LTII-A1, REMIC II Regular Interest LTII-A2, REMIC II Regular Interest LTII-A3,
REMIC II Regular Interest LTII-A4, REMIC II Regular Interest LTII-M1, REMIC II
Regular Interest LTII-M2, REMIC II Regular Interest LTII-B1, REMIC II Regular
Interest LTII-B2, and REMIC II Regular Interest LTII-ZZ, pro rata based on, and
to the extent of, one month's interest at the then applicable respective
Uncertificated REMIC II Pass-Through Rate on the respective Uncertificated
Principal Balance of each such REMIC II Regular Interest.

                                      -41-

<PAGE>

                                   ARTICLE II

                            CONVEYANCE OF TRUST FUND
                         REPRESENTATIONS AND WARRANTIES

         Section 2.01      CONVEYANCE OF TRUST FUND.

                  The Seller 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 the assets in the Trust Fund.

                  The Seller has entered into this Agreement in consideration
for the purchase of the Mortgage Loans by the Depositor and has agreed to take
the actions specified herein.

                  The Depositor, concurrently with the execution and delivery
hereof, hereby sells, transfers, assigns, sets over and otherwise conveys to the
Trustee for the use and benefit of the Certificateholders, without recourse, all
the right, title and interest of the Depositor in and to the Trust Fund.

                  In connection with such sale, the Depositor has delivered to,
and deposited with, the Trustee or the Custodian, as its agent, the following
documents or instruments with respect to each Mortgage Loan so assigned: (i) the
original Mortgage Note, including any riders thereto, endorsed without recourse
to the order of "JPMorgan Chase Bank, as Trustee for certificateholders of Bear
Stearns Asset Backed Securities, Inc. Asset Backed Certificates, Series
2003-AC2," and showing to the extent available to the Seller an unbroken chain
of endorsements from the original payee thereof to the Person endorsing it to
the Trustee, (ii) the original Mortgage and, if the related Mortgage Loan is a
MOM Loan, noting the presence of the MIN and language indicating that such
Mortgage Loan is a MOM Loan, which shall have been recorded (or if the original
is not available, a copy), with evidence of such recording indicated thereon (or
if clause (x) in the proviso below applies, shall be in recordable form), (iii)
unless the Mortgage Loan is a MOM Loan, the assignment (either an original or a
copy, which may be in the form of a blanket assignment if permitted in the
jurisdiction in which the Mortgaged Property is located) to the Trustee of the
Mortgage with respect to each Mortgage Loan in the name of "JPMorgan Chase Bank,
as Trustee for certificateholders of Bear Stearns Asset Backed Securities, Inc.
Asset Backed Certificates, Series 2003-AC2," which shall have been recorded (or
if clause (x) in the proviso below applies, shall be in recordable form) (iv) an
original or a copy of all intervening assignments of the Mortgage, if any, to
the extent available to the Seller, with evidence of recording thereon, (v) the
original policy of title insurance or mortgagee's certificate of title insurance
or commitment or binder for title insurance, if available, or a copy thereof,
or, in the event that such original title insurance policy is unavailable, a
photocopy thereof, or in lieu thereof, a current lien search on the related
Mortgaged Property and (vi) originals or copies of all available assumption,
modification or substitution agreements, if any; provided, however, that in lieu
of the foregoing, the Seller may deliver the following documents, under the
circumstances set forth below: (x) if any Mortgage, assignment thereof to the
Trustee or intervening assignments thereof have been delivered or are being
delivered to recording offices for recording and have not been returned in time
to permit their delivery as specified above, the Depositor may deliver

                                      -42-

<PAGE>

a true copy thereof with a certification by the Seller or the title company
issuing the commitment for title insurance, on the face of such copy,
substantially as follows: "Certified to be a true and correct copy of the
original, which has been transmitted for recording"; and (y) in lieu of the
Mortgage Notes relating to the Mortgage Loans identified in the list set forth
in Exhibit J, the Depositor may deliver a lost note affidavit and indemnity and
a copy of the original note, if available; and provided, further, however, that
in the case of Mortgage Loans which have been prepaid in full after the Cut- Off
Date and prior to the Closing Date, the Depositor, in lieu of delivering the
above documents, may deliver to the Trustee and its Custodian a certification of
a Servicing Officer to such effect and in such case shall deposit all amounts
paid in respect of such Mortgage Loans, in the Master Servicer Collection
Account or in the Distribution Account on the Closing Date. In the case of the
documents referred to in clause (x) above, the Depositor shall deliver such
documents to the Trustee or its Custodian promptly after they are received. The
Seller shall cause, at its expense, the Mortgage and intervening assignments, if
any, and to the extent required in accordance with the foregoing, the assignment
of the Mortgage to the Trustee to be submitted for recording promptly after the
Closing Date; provided that the Seller need not cause to be recorded any
assignment (a) in any jurisdiction under the laws of which, as evidenced by an
Opinion of Counsel addressed to the Trustee delivered by the Seller to the
Trustee and the Rating Agencies, the recordation of such assignment is not
necessary to protect the Trustee's interest in the related Mortgage Loan or (b)
if MERS is identified on the Mortgage or on a properly recorded assignment of
the Mortgage as mortgagee of record solely as nominee for Seller and its
successors and assigns. In the event that the Seller, the Depositor or the
Master Servicer gives written notice to the Trustee that a court has
recharacterized the sale of the Mortgage Loans as a financing, the Seller shall
submit or cause to be submitted for recording as specified above or, should the
Seller fail to perform such obligations, the Master Servicer shall cause each
such previously unrecorded assignment to be submitted for recording as specified
above at the expense of the Trust. In the event a Mortgage File is released to
the Company or the Servicer as a result of such Person having completed a
Request for Release, the Custodian shall, if not so completed, complete the
assignment of the related Mortgage in the manner specified in clause (iii)
above.

                  In connection with the assignment of any Mortgage Loan
registered on the MERS(R) System, the Seller further agrees that it will cause,
at the Seller's own expense, within 30 days after the Closing Date, the MERS(R)
System to indicate that such Mortgage Loans have been assigned by the Seller to
the Depositor and by the Depositor to the Trustee in accordance with this
Agreement for the benefit of the Certificateholders by including (or deleting,
in the case of Mortgage Loans which are repurchased in accordance with this
Agreement) in such computer files (a) the code in the field which identifies the
specific Trustee and (b) the code in the field "Pool Field" which identifies the
series of the Certificates issued in connection with such Mortgage Loans. The
Seller further agrees that it will not, and will not permit the Company, the
Servicer or the Master Servicer to, and the Master Servicer agrees that it will
not, alter the codes referenced in this paragraph with respect to any Mortgage
Loan during the term of this Agreement unless and until such Mortgage Loan is
repurchased in accordance with the terms of this Agreement or the Mortgage Loan
Purchase Agreement.

         Section 2.02      ACCEPTANCE OF THE MORTGAGE LOANS.

                                      -43-

<PAGE>

                  (a) Based on the Initial Certification received by it from the
Custodian, the Trustee acknowledges receipt of, subject to the further review
and exceptions reported by the Custodian pursuant to the procedures described
below, the documents (or certified copies thereof) delivered to the Trustee or
the Custodian on its behalf pursuant to Section 2.01 and declares that it holds
and will continue to hold directly or through a custodian those documents and
any amendments, replacements or supplements thereto and all other assets of the
Trust Fund delivered to it in trust for the use and benefit of all present and
future Holders of the Certificates. On the Closing Date, the Trustee or the
Custodian on its behalf will deliver an Initial Certification in the form
annexed hereto as Exhibit C-1 confirming whether or not it has received the
Mortgage File for each Mortgage Loan, but without review of such Mortgage File,
except to the extent necessary to confirm whether such Mortgage File contains
the original Mortgage Note or a lost note affidavit and indemnity in lieu
thereof. No later than 90 days after the Closing Date, the Trustee or the
Custodian on its behalf shall, for the benefit of the Certificateholders, review
each Mortgage File delivered to it and execute and deliver to the Seller and, if
reviewed by the Custodian, the Trustee, an Interim Certification substantially
in the form annexed hereto as Exhibit C-2. In conducting such review, the
Trustee or the Custodian on its behalf will ascertain whether all required
documents have been executed and received and whether those documents relate,
determined on the basis of the Mortgagor name, original principal balance and
loan number, to the Mortgage Loans identified in Exhibit B to this Agreement, as
supplemented (provided, however, that with respect to those documents described
in subclauses (iv) and (vi) of Section 2.01, such obligations shall extend only
to documents actually delivered pursuant to such subclauses). In performing any
such review, the Trustee and the Custodian may conclusively rely on the
purported due execution and genuineness of any such document and on the
purported genuineness of any signature thereon. If the Trustee or the Custodian
on its behalf finds any document constituting part of the Mortgage File not to
have been executed or received, or to be unrelated to the Mortgage Loans
identified in Exhibit B or to appear to be defective on its face, the Trustee or
the Custodian on its behalf shall include such information in the exception
report attached to Exhibit C-2. The Seller shall correct or cure any such defect
or, if prior to the end of the second anniversary of the Closing Date, the
Seller may substitute for the related Mortgage Loan a Replacement Mortgage Loan,
which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.03 or shall deliver to the Trustee an Opinion
of Counsel addressed to the Trustee to the effect that such defect does not
materially or adversely affect the interests of the Certificateholders in such
Mortgage Loan within 60 days from the date of notice from the Trustee of the
defect and if the Seller fails to correct or cure the defect or deliver such
opinion within such period, the Seller will, subject to Section 2.03, within 90
days from the notification of the Trustee purchase such Mortgage Loan at the
Purchase Price; provided, however, that if such defect relates solely to the
inability of the Seller to deliver the Mortgage, assignment thereof to the
Trustee, or intervening assignments thereof with evidence of recording thereon
because such documents have been submitted for recording and have not been
returned by the applicable jurisdiction, the Seller shall not be required to
purchase such Mortgage Loan if the Seller delivers such documents promptly upon
receipt, but in no event later than 360 days after the Closing Date.

                  (b) No later than 180 days after the Closing Date, the Trustee
or the Custodian on its behalf will review, for the benefit of the
Certificateholders, the Mortgage Files and will execute and deliver or cause to
be executed and delivered to the Seller and, if reviewed by the Custodian, the
Trustee, a Final Certification substantially in the form annexed hereto as
Exhibit C-3.

                                      -44-

<PAGE>

In conducting such review, the Trustee or the Custodian on its behalf will
ascertain whether each document required to be recorded has been returned from
the recording office with evidence of recording thereon and the Trustee or the
Custodian on its behalf has received either an original or a copy thereof, as
required in Section 2.01 (provided, however, that with respect to those
documents described in subclauses (iv) and (vi) of Section 2.01, such
obligations shall extend only to documents actually delivered pursuant to such
subclauses). If the Trustee or the Custodian on its behalf finds any document
with respect to a Mortgage Loan has not been received, or to be unrelated,
determined on the basis of the Mortgagor name, original principal balance and
loan number, to the Mortgage Loans identified in Exhibit B or to appear
defective on its face, the Trustee or the Custodian on its behalf shall note
such defect in the exception report attached to the Final Certification and
shall promptly notify the Seller. The Seller shall correct or cure any such
defect or, if prior to the end of the second anniversary of the Closing Date,
the Seller may substitute for the related Mortgage Loan a Replacement Mortgage
Loan, which substitution shall be accomplished in the manner and subject to the
conditions set forth in Section 2.03 or shall deliver to the Trustee an Opinion
of Counsel addressed to the Trustee to the effect that such defect does not
materially or adversely affect the interests of Certificateholders in such
Mortgage Loan within 60 days from the date of notice from the Trustee of the
defect and if the Seller is unable within such period to correct or cure such
defect, or to substitute the related Mortgage Loan with a Replacement Mortgage
Loan or to deliver such opinion, the Seller shall, subject to Section 2.03,
within 90 days from the notification of the Trustee, purchase such Mortgage Loan
at the Purchase Price; provided, however, that if such defect relates solely to
the inability of the Seller to deliver the Mortgage, assignment thereof to the
Trustee or intervening assignments thereof with evidence of recording thereon,
because such documents have not been returned by the applicable jurisdiction,
the Seller shall not be required to purchase such Mortgage Loan, if the Seller
delivers such documents promptly upon receipt, but in no event later than 360
days after the Closing Date.

                  (c) In the event that a Mortgage Loan is purchased by the
Seller in accordance with subsections 2.02(a) or (b) above or Section 2.03, the
Seller shall remit the applicable Purchase Price to the Master Servicer for
deposit in the Master Servicer Collection Account and shall provide written
notice to the Trustee detailing the components of the Purchase Price, signed by
a Servicing Officer. Upon deposit of the Purchase Price in the Master Servicer
Collection Account and upon receipt of a Request for Release with respect to
such Mortgage Loan, the Trustee or the Custodian will release to the Seller the
related Mortgage File and the Trustee shall execute and deliver all instruments
of transfer or assignment, without recourse, representation or warranty
furnished to it by the Seller, as are necessary to vest in the Seller title to
and rights under the Mortgage Loan. Such purchase shall be deemed to have
occurred on the date on which the deposit into the Master Servicer Collection
Account was made. The Trustee shall promptly notify the Rating Agencies of such
repurchase. The obligation of the Seller to cure, repurchase or substitute for
any Mortgage Loan as to which a defect in a constituent document exists shall be
the sole remedies respecting such defect available to the Certificateholders or
to the Trustee on their behalf.

                  (d) The Seller shall deliver to the Trustee, and Trustee
agrees to accept the Mortgage Note and other documents constituting the Mortgage
File with respect to any Replacement Mortgage Loan, which the Trustee or the
Custodian will review as provided in subsections 2.02(a) and 2.02(b), provided,
that the Closing Date referred to therein shall instead be the date of delivery
of the Mortgage File with respect to each Replacement Mortgage Loan.

                                      -45-

<PAGE>

         Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
AND THE SELLER.

                  (a) The Company hereby represents and warrants to the Master
Servicer, the Depositor, the Securities Administrator and the Trustee as
follows, as of the Closing Date:

                  (i) It is duly organized and is validly existing and in good
         standing under the laws of the State of Delaware and is duly authorized
         and qualified to transact any and all business contemplated by this
         Agreement to be conducted by it 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 this Agreement and to
         perform any of its other obligations under this Agreement in accordance
         with the terms hereof.

                  (ii) It has the full corporate power and authority to service
         each Mortgage Loan, and to execute, deliver and perform, and to enter
         into and consummate the transactions contemplated by this Agreement and
         has duly authorized by all necessary corporate action on its part the
         execution, delivery and performance of this Agreement; and this
         Agreement, assuming the due authorization, execution and delivery
         hereof by the other parties hereto, constitutes its legal, valid and
         binding obligation, enforceable against it in accordance with its
         terms, except that (a) the enforceability hereof 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.

                  (iii) The execution and delivery of this Agreement by it, the
         servicing of the EMC Mortgage Loans by it under this Agreement, the
         consummation of any other of the transactions contemplated by this
         Agreement, and the fulfillment of or compliance with the terms hereof
         are in its ordinary course of business and will not (A) result in a
         material breach of any term or provision of its charter or by-laws or
         (B) materially conflict with, result in a material breach, violation or
         acceleration of, or result in a material default under, the terms of
         any other material agreement or instrument to which it is a party or by
         which it may be bound, or (C) constitute a material violation of any
         statute, order or regulation applicable to it of any court, regulatory
         body, administrative agency or governmental body having jurisdiction
         over it; and it 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 its ability to perform
         or meet any of its obligations under this Agreement.

                  (iv) It is an approved servicer of conventional mortgage loans
         for Fannie Mae or Freddie Mac and is a mortgagee approved by the
         Secretary of Housing and Urban Development pursuant to sections 203 and
         211 of the National Housing Act.

                                      -46-

<PAGE>

                  (v) No litigation is pending or, to the best of its knowledge,
         threatened, against it that would materially and adversely affect the
         execution, delivery or enforceability of this Agreement or its ability
         to service the EMC Mortgage Loans or to perform any of its other
         obligations under this Agreement in accordance with the terms hereof.

                  (vi) No consent, approval, authorization or order of any court
         or governmental agency or body is required for its execution, delivery
         and performance of, or compliance with, this Agreement or the
         consummation of the transactions contemplated hereby, or if any such
         consent, approval, authorization or order is required, it has obtained
         the same.

                  (b) The Seller hereby represents and warrants to the
Depositor, the Securities Administrator, the Master Servicer and the Trustee as
follows, as of the Closing Date:

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

                  (ii) The Seller has the full corporate power and authority to
         sell each Mortgage Loan, and to execute, deliver and perform, and to
         enter into and consummate the transactions contemplated by this
         Agreement and has duly authorized by all necessary corporate action on
         the part of the Seller the execution, delivery and performance of this
         Agreement; and this Agreement, assuming the due authorization,
         execution and delivery hereof by the other parties hereto, constitutes
         a legal, valid and binding obligation of the Seller, enforceable
         against the Seller in accordance with its terms, except that (a) the
         enforceability hereof 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.

                  (iii) The execution and delivery of this Agreement by the
         Seller, the sale of the Mortgage Loans by the Seller under this
         Agreement, the consummation of any other of the transactions
         contemplated by this Agreement, and the fulfillment of or compliance
         with the terms hereof are in the ordinary course of business of the
         Seller and will not (A) result in a material breach of any term or
         provision of the charter or by-laws of the Seller or (B) materially
         conflict with, result in a material breach, violation or acceleration
         of, or result in a material default under, the terms of any other
         material agreement or instrument to which the Seller is a party or by
         which it may be bound, or (C) constitute a material violation of any
         statute, order or regulation applicable to the Seller of any court,
         regulatory body, administrative agency or governmental body having
         jurisdiction over the Seller; and the Seller is not in breach or
         violation of any material indenture or other material agreement or

                                      -47-

<PAGE>

         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 the Seller's ability to perform or meet any of its obligations
         under this Agreement.

                  (iv) The Seller is an approved seller of conventional mortgage
         loans for Fannie Mae or Freddie Mac and is a mortgagee approved by the
         Secretary of Housing and Urban Development pursuant to sections 203 and
         211 of the National Housing Act.

                  (v) No litigation is pending or, to the best of the Seller's
         knowledge, threatened, against the Seller that would materially and
         adversely affect the execution, delivery or enforceability of this
         Agreement or the ability of the Seller to sell the Mortgage Loans or to
         perform any of its other obligations under this Agreement in accordance
         with the terms hereof.

                  (vi) No consent, approval, authorization or order of any court
         or governmental agency or body is required for the execution, delivery
         and performance by the Seller of, or compliance by the Seller with,
         this Agreement or the consummation of the transactions contemplated
         hereby, or if any such consent, approval, authorization or order is
         required, the Seller has obtained the same.

                  (vii) With respect to each Mortgage Loan as of the Cut-off
         Date (unless otherwise expressly provided):

                  (A) The information set forth in the Mortgage Loan Schedule on
the Closing Date is complete, true and correct.

                  (B) All payments required to be made prior to the Cut-off Date
with respect to each Mortgage Loan have been made and no Mortgage Loan is
delinquent sixty or more days; and the Seller has not advanced funds, or
induced, solicited or knowingly received any advance of funds from a party other
than the owner of the Mortgaged Property subject to the Mortgage, directly or
indirectly, for the payment of any amount required under any Mortgage Loan.

                  (C) Except with respect to taxes, insurance and other amounts
previously advanced by a prior servicer with respect to any Mortgage Loan, to
the best of Seller's knowledge, there are no delinquent taxes, water charges,
sewer rents, assessments, insurance premiums, leasehold payments, including
assessments payable in future installments, or other outstanding charges
affecting the related Mortgaged Property.

                  (D) The terms of the Mortgage Note and the Mortgage have not
been impaired, waived, altered or modified in any respect, except by written
instruments which in the case of the Mortgage Loans are in the Mortgage File and
have been or will be recorded, if necessary to protect the interests of the
Trustee, and which have been or will be delivered to the Trustee, all in
accordance with this Agreement. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by
the related policy. No Mortgagor has been released, in whole or in part, except
in connection with an assumption agreement approved by the

                                      -48-

<PAGE>

title insurer, to the extent required by the policy, and which assumption
agreement in the case of the Mortgage Loans is part of the Mortgage File.

                  (E) The Mortgage Note and the Mortgage are not subject to any
right of rescission, set-off, counterclaim or defense, including the defense of
usury, nor will the operation of any of the terms of the Mortgage Note and the
Mortgage, or the exercise of any right thereunder, render the Mortgage
unenforceable, in whole or in part, or subject to any right of rescission,
set-off, counterclaim or defense, including the defense of usury and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto.

                  (F) All buildings upon, or comprising part of, the Mortgaged
Property are insured by an insurer acceptable to Fannie Mae and Freddie Mac
against loss by fire, hazards of extended coverage and such other hazards as are
customary in the area where the Mortgaged Property is located, and such insurer
is licensed to do business in the state where the Mortgaged Property is located.
All such insurance policies contain a standard mortgagee clause naming the
originator, its successors and assigns as mortgagee and Seller has received no
notice that all premiums thereon have not been paid. If upon origination of the
Mortgage Loan, the Mortgaged Property was, or was subsequently deemed to be, 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), which require under applicable law that a flood insurance policy
meeting the requirements of the current guidelines of the Federal Insurance
Administration (or any successor thereto) be obtained, such flood insurance
policy is in effect which policy is with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the Stated Principal
Balance of the related Mortgage Loan, (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis, or (C) the maximum
amount of insurance that is available under the Flood Disaster Protection Act of
1973. The Mortgage obligates the Mortgagor thereunder to maintain all such
insurance at Mortgagor's cost and expense and, on the Mortgagor's failure to do
so, authorizes the holder of the Mortgage to maintain such insurance at
Mortgagor's cost and expense and to obtain reimbursement therefor from the
Mortgagor.

                  (G) Any and all requirements of any federal, state or local
law including, usury, truth in lending, real estate settlement procedures
including, the Real Estate Settlement Procedures Act of 1974, as amended,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the Mortgage Loan have been complied with in all material
respects.

                  (H) The Mortgage has not been satisfied, canceled,
subordinated, or rescinded, in whole or in part, and the Mortgaged Property has
not been released from the lien of the Mortgage, in whole or in part, nor has
any instrument been executed that would effect any such release, cancellation,
subordination or rescission.

                  (I) The Mortgage is a valid, existing and enforceable first on
the Mortgaged Property, including all improvements on the Mortgaged Property, if
any, subject only to (1) the lien of current real property taxes and assessments
not yet due and payable, (2) covenants, conditions and restrictions, rights of
way, easements and other matters of the public record as of the date of
recording being acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and which do not

                                      -49-

<PAGE>

adversely affect the Appraised Value of the Mortgaged Property and (3) other
matters to which like properties are commonly subject which do not materially
interfere with the benefits of the security intended to be provided by the
Mortgage. The Seller has full right to sell and assign the Mortgage to the
Depositor.

                  (J) 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, except as the enforceability thereof
may be limited by bankruptcy, insolvency or reorganization or general principles
of equity.

                  (K) All parties to the Mortgage Note and the Mortgage had the
legal capacity to enter into the Mortgage Loan transaction and to execute and
deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the
Mortgage have been duly and properly executed by such parties.

                  (L) The proceeds of the Mortgage Loan have been fully
disbursed and there is no requirement for future advances thereunder and any and
all requirements as to completion of any on- site or off-site improvement and as
to disbursements of any escrow funds therefor have been complied with. All
costs, fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage.

                  (M) Immediately prior to the conveyance of the Mortgage Loans
by the Seller to the Depositor hereunder, the Seller was the sole owner and
holder of the Mortgage Loan; the related Originator or the Seller or the
Servicer was the custodian of the related escrow account, if applicable; the
Mortgage Loan had neither been assigned nor pledged, and the Seller had good and
marketable title thereto, and had full right to transfer and sell the Mortgage
Loan and the related servicing rights to the Depositor free and clear of any
encumbrance, equity, lien, pledge, charge, claim or security interest subject to
the related Servicing Agreement, if applicable, and had full right and authority
subject to no interest or participation of, or agreement with, any other party,
to sell and assign the Mortgage Loan and the related servicing rights to the
Depositor pursuant to the terms of this Agreement.

                  (N) All parties which have had any interest in the Mortgage,
whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period
in which they held and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of the state wherein
the Mortgaged Property is located, and (2) organized under the laws of such
state, qualified to do business in such state, a federal savings and loan
association or national bank having principal offices in such state or not
deemed to be doing business in such state under applicable law.

                  (O) The Mortgage Loan is covered by an ALTA lender's title
insurance policy or equivalent form acceptable to the Department of Housing and
Urban Development, or any successor thereto, and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring (subject to the
exceptions contained in clause (I) above) the Seller (as assignee), its
successors and assigns as to the first priority lien of the Mortgage in the
original principal amount

                                      -50-

<PAGE>

of the Mortgage Loan and against any loss by reason of the invalidity or
unenforceability of the lien resulting from the provisions of the Mortgage Note
and/or Mortgage providing for adjustment in the Mortgage Rate and monthly
payment. Additionally, such lender's title insurance policy affirmatively
insures ingress and egress, and against encroachments by or upon the Mortgaged
Property or any interest therein. With respect to each Mortgage Loan, the Seller
(as assignee) is the sole insured of such lender's title insurance policy, and
such lender's title insurance policy is in full force and effect. No claims have
been made under such lender's title insurance policy, and no prior holder of the
related Mortgage, including the Seller in the case of a Mortgage Loan, has done,
by act or omission, anything which would impair the coverage of such lender's
title insurance policy. (P) Except as provided in clause (B), immediately prior
to the Cut-off Date, there was no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and there was no
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of
acceleration, and the Seller has not waived any default, breach, violation or
event of acceleration.

                  (Q) There are no mechanics' or similar liens or claims which
have been filed for work, labor or material (and no rights are outstanding that
under law could give rise to such lien) affecting the related Mortgaged Property
which are or may be liens prior to or equal with, the lien of the related
Mortgage.

                  (R) All improvements which were considered in any appraisal
which was used in determining the Appraised Value of the related Mortgaged
Property lay wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach upon
the Mortgaged Property.

                  (S) [Reserved]

                  (T) The origination, servicing and collection practices with
respect to each Mortgage Note and Mortgage including, the establishment,
maintenance and servicing of the escrow accounts and escrow payments, if any,
since origination, have been conducted in all respects in accordance with the
terms of Mortgage Note and in compliance with all applicable laws and
regulations and, unless otherwise required by law or Fannie Mae/Freddie Mac
standard, in accordance with the proper, prudent and customary practices in the
mortgage origination and servicing business. With respect to the escrow accounts
and escrow payments, if any, and any EMC Mortgage Loan all such payments are in
the possession or under the control of the Seller and there exists no
deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. Any interest required to be paid pursuant
to state and local law has been properly paid and credited.

                  (U) The Mortgaged Property is free of material damage and
waste and there is no proceeding pending for the total or partial condemnation
thereof.

                  (V) The Mortgage contains customary and enforceable provisions
to render the rights and remedies of the holder thereof adequate for the
realization against the Mortgaged Property of the benefits of the security
intended to be provided thereby, including, (1) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (2) otherwise by judicial
foreclosure.

                                      -51-

<PAGE>

There is no other exemption available to the Mortgagor which would interfere
with the right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage. The Mortgagor has not notified the Seller and the
Seller has no knowledge of any relief requested or allowed to the Mortgagor
under the Relief Act.

                  (W) The Mortgage Note is not and has not been secured by any
collateral except the lien of the applicable Mortgage.

                  (X) [Reserved]

                  (Y) In the event the Mortgage constitutes 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 the Mortgage, and no fees or
expenses are or will become payable by the Certificateholders to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor.

                  (Z) No Mortgage Loan contains a permanent or temporary
"buydown" provision. The Mortgage Loan is not a graduated payment mortgage loan.

                  (AA) The Mortgagor has received all disclosure materials
required by applicable law with respect to the making of the Mortgage Loan.

                  (BB) No Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged Property.

                  (CC) To the best of Seller's knowledge, the Mortgaged Property
is lawfully occupied under applicable law and all inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy, have been made or
obtained from the appropriate authorities.

                  (DD) The assignment of Mortgage with respect to a Mortgage
Loan is in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.

                  (EE)     [Reserved].

                  (FF)     [Reserved].

                  (GG) The Mortgaged Property consists of a single parcel of
real property with or without a detached single family residence erected
thereon, or an individual condominium unit, or a 2-4 family dwelling, or an
individual unit in a planned unit development as defined by Fannie Mae or a
manufactured dwelling which conforms with Fannie Mae and Freddie Mac
requirements regarding such dwellings, or a townhouse, each structure of which
is permanently affixed to the Mortgaged Property, and is legally classified as
real estate.

                                      -52-

<PAGE>

                  (HH) [Reserved]

                  (II) [Reserved]

                  (JJ) Each Mortgage Loan at the time of origination was
underwritten in general in accordance with guidelines not inconsistent with the
guidelines set forth in the Prospectus Supplement and generally accepted prime
credit underwriting guidelines.

                  (KK) No error, omission, misrepresentation, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of the
Seller or the related Originator.

                  (LL) None of the Mortgage Loans are (i) loans subject to 12
CFR Part 226.31, 12 CFR Part 226.32 or 12 CFR Part 226.34 of Regulation Z, the
regulation implementing the Truth-in- Lending Act, which implements the Home
Ownership and Equity Protection Act of 1994, as amended or (b) classified and
/or defined as a "high cost", "covered", or "predatory" loan under any other
state, federal or local law or regulation or ordinance, including, but not
limited to, the States of Georgia or North Carolina, or the City of New York.

                  (c) Upon discovery by any of the parties hereto of a breach of
a representation or warranty set forth in Section 2.03(b)(vii) that materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan, the party discovering such breach shall give prompt written notice thereof
to the other parties. Any breach of a representation or warranty contained in
clause (LL) above, shall be automatically deemed to affect materially and
adversely the interests of the Certificateholders. The Seller hereby covenants
with respect to the representations and warranties set forth in Section
2.03(b)(vii), that within 90 days of the discovery of a breach of any
representation or warranty set forth therein that 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,
(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 Replacement 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 that any such substitution pursuant to
(i) above or repurchase pursuant to (ii) above shall not be effected prior to
the delivery to the Trustee of an Opinion of Counsel if required by Section 2.05
hereof 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. 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. To enable the Securities Administrator
to amend the Mortgage Loan Schedule, the Seller shall, unless it cures such
breach in a timely fashion pursuant to this Section 2.03, promptly notify the
Securities Administrator whether it intends either to repurchase, or to
substitute for, the Mortgage Loan affected by such breach. With respect to the
representations and warranties in Section 2.03(b)(vii) that are made to the best
of the Seller's knowledge, if it is discovered by any of the Depositor, the
Master Servicer, the Seller, the Securities Administrator 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, notwithstanding the Seller's lack of knowledge with respect to the
substance of such representation or warranty, the Seller shall

                                      -53-

<PAGE>

nevertheless be required to cure, substitute for or repurchase the affected
Mortgage Loan in accordance with the foregoing.

                  With respect to any Replacement Mortgage Loan or Loans, the
Seller shall deliver to the Trustee for the benefit of the Certificateholders
such documents and agreements as are required by Section 2.01. No substitution
will be made in any calendar month after the Determination Date for such month.
Scheduled Payments due with respect to Replacement Mortgage Loans in the Due
Period related to the Distribution Date on which such proceeds are to be
distributed shall not be part of the Trust Fund and will be retained by the
Seller. For the month of substitution, distributions to Certificateholders will
include the Scheduled Payment due on any Deleted Mortgage Loan for the related
Due Period and thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Mortgage Loan. The Securities Administrator
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
Replacement Mortgage Loan or Loans and the Securities Administrator shall
deliver the amended Mortgage Loan Schedule to the Trustee and the Custodian.
Upon such substitution, the Replacement 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 Replacement Mortgage Loan or Loans, as of the
date of substitution, the representations and warranties set forth in Section
2.03(b)(vii) with respect to such Mortgage Loan. Upon any such substitution and
the deposit into the Master Servicer Collection Account of the amount required
to be deposited therein in connection with such substitution as described in the
following paragraph and receipt by the Trustee of a Request for Release for such
Mortgage Loan, the Trustee or the Custodian shall release to the Seller the
Mortgage File relating to such Deleted Mortgage Loan and held for the benefit of
the Certificateholders and the Trustee shall execute and deliver at the Seller's
direction such instruments of transfer or assignment as have been prepared by
the Seller, in each case without recourse, representation or warranty as shall
be necessary to vest in the Seller, or its respective designee, title to 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
Replacement Mortgage Loans for a Deleted Mortgage Loan, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
the Replacement Mortgage Loans as of the date of substitution is less than the
Stated Principal Balance (after application of the principal portion of the
Scheduled Payment due in the month of substitution) of such Deleted Mortgage
Loan. An amount equal to the aggregate of such deficiencies, described in the
preceding sentence for any Distribution Date (such amount, the "Substitution
Adjustment Amount") shall be deposited into the Master Servicer Collection
Account, by the Seller delivering such Replacement Mortgage Loan on the
Determination Date for the Distribution Date relating to the Prepayment Period
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 into the Master Servicer
Collection Account maintained by the Master Servicer, on the Determination Date
for the Distribution Date in the month following the month during which the
Seller became obligated to repurchase or replace such Mortgage Loan and upon
such deposit of the Purchase Price, the delivery of an Opinion of Counsel if
required by Section 2.05 and the receipt of a Request for Release, the Trustee
or the Custodian shall release the related

                                      -54-

<PAGE>

Mortgage File held for the benefit of the Certificateholders to the Seller, and
the Trustee shall execute and deliver at such Person's direction the related
instruments of transfer or assignment prepared by the Seller, in each case
without recourse, representation or warranty as shall be necessary to transfer
title from the Trustee for the benefit of the Certificateholders and transfer
the Trustee's interest to the Seller to any Mortgage Loan purchased pursuant to
this Section 2.03. It is understood and agreed that the obligation under this
Agreement of the Seller to cure, repurchase or replace any Mortgage Loan as to
which a breach has occurred and is continuing shall constitute the sole remedies
against the Seller respecting such breach available to Certificateholders, the
Depositor or the Trustee.

                  (d) The representations and warranties set forth in Section
2.03 hereof shall survive delivery of the respective Mortgage Loans and Mortgage
Files to the Trustee or the Custodian for the benefit of the Certificateholders.

         Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

                  The Depositor hereby represents and warrants to the Master
Servicer, the Securities Administrator and the Trustee as follows, as of the
date hereof and as of the Closing Date:

                  (i) The Depositor is duly organized and is validly existing as
         a corporation in good standing under the laws of the State of Delaware
         and has full power and authority (corporate and other) necessary to own
         or hold its properties and to conduct its business as now conducted by
         it and to enter into and perform its obligations under this Agreement.

                  (ii) The Depositor has the full corporate power and authority
         to execute, deliver and perform, and to enter into and consummate the
         transactions contemplated by, this Agreement and has duly authorized,
         by all necessary corporate action on its part, the execution, delivery
         and performance of this Agreement; and this Agreement, assuming the due
         authorization, execution and delivery hereof by the other parties
         hereto, constitutes a legal, valid and binding obligation of the
         Depositor, enforceable against the Depositor in accordance with its
         terms, subject, as to enforceability, to (i) bankruptcy, insolvency,
         reorganization, moratorium and other similar laws affecting creditors'
         rights generally and (ii) general principles of equity, regardless of
         whether enforcement is sought in a proceeding in equity or at law.

                  (iii) The execution and delivery of this Agreement by the
         Depositor, the consummation of the transactions contemplated by this
         Agreement, and the fulfillment of or compliance with the terms hereof
         are in the ordinary course of business of the Depositor and will not
         (A) result in a material breach of any term or provision of the charter
         or by-laws of the Depositor or (B) materially conflict with, result in
         a material breach, violation or acceleration of, or result in a
         material default under, the terms of any other material agreement or
         instrument to which the Depositor is a party or by which it may be
         bound or (C) constitute a material violation of any statute, order or
         regulation applicable to the Depositor of any court, regulatory body,
         administrative agency or governmental body having jurisdiction over the
         Depositor; and the Depositor is not in breach or violation of any
         material indenture or other material agreement or instrument, or in
         violation of any statute,

                                      -55-

<PAGE>

         order or regulation of any court, regulatory body, administrative
         agency or governmental body having jurisdiction over it which breach or
         violation may materially impair the Depositor's ability to perform or
         meet any of its obligations under this Agreement.

                  (iv) No litigation is pending, or, to the best of the
         Depositor's knowledge, threatened, against the Depositor that would
         materially and adversely affect the execution, delivery or
         enforceability of this Agreement or the ability of the Depositor to
         perform its obligations under this Agreement in accordance with the
         terms hereof.

                  (v) No consent, approval, authorization or order of any court
         or governmental agency or body is required for the execution, delivery
         and performance by the Depositor of, or compliance by the Depositor
         with, this Agreement or the consummation of the transactions
         contemplated hereby, or if any such consent, approval, authorization or
         order is required, the Depositor has obtained the same.

                  The Depositor hereby represents and warrants to the Trustee as
of the Closing Date, following the transfer of the Mortgage Loans to it by the
Seller, the Depositor had good title to the Mortgage Loans and the related
Mortgage Notes were subject to no offsets, claims, defenses or counterclaims.

                  It is understood and agreed that the representations and
warranties set forth in the immediately preceding paragraph shall survive
delivery of the Mortgage Files to the Trustee or the Custodian for the benefit
of the Certificateholders. Upon discovery by the Depositor or the Trustee of a
breach of such representations and warranties, 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 AND REPURCHASES.

                  (a) Notwithstanding any contrary provision of this Agreement,
with respect to any Mortgage Loan that is not in default or as to which default
is not imminent, no repurchase or substitution pursuant to Sections 2.02 or 2.03
shall be made unless the Seller delivers to the Trustee an Opinion of Counsel,
addressed to the Trustee, to the effect that such repurchase or substitution
would not (i) result in the imposition of the tax on "prohibited transactions"
of REMIC I, REMIC II or REMIC III or contributions after the Closing Date, as
defined in sections 860F(a)(2) and 860G(d) of the Code, respectively or (ii)
cause any of REMIC I, REMIC II or REMIC III to fail to qualify as a REMIC at any
time that any Certificates are outstanding. Any Mortgage Loan as to which
repurchase or substitution was delayed pursuant to this paragraph shall be
repurchased or the substitution therefor shall occur (subject to compliance with
Sections 2.02 or 2.03) upon the earlier of (a) the occurrence of a default or
imminent default with respect to such Mortgage Loan and (b) receipt by the
Trustee of an Opinion of Counsel addressed to the Trustee to the effect that
such repurchase or substitution, as applicable, will not result in the events
described in clause (i) or clause (ii) of the preceding sentence.

                  (b) Upon discovery by the Depositor, the Seller or the Master
Servicer that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of section 860G(a)(3)

                                      -56-

<PAGE>

of the Code, the party discovering such fact shall promptly (and in any event
within 5 Business Days of discovery) give written notice thereof to the other
parties and the Trustee. 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 Replacement
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 contained in Section
2.03. The Trustee shall reconvey to the Seller the Mortgage Loan to be released
pursuant hereto (and the Custodian shall deliver the related Mortgage File) 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 COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES.

                  The Trustee acknowledges the sale, transfer and assignment to
it of the Trust Fund and, concurrently with such transfer and assignment, has
executed, countersigned and delivered, to or upon the order of the Depositor,
the Certificates in authorized denominations evidencing the entire ownership of
the Trust Fund. The Trustee agrees to hold the Trust Fund and exercise the
rights referred to above for the benefit of all present and future Holders of
the Certificates and to perform the duties set forth in this Agreement in
accordance with its terms.

                                      -57-

<PAGE>

                                   ARTICLE III

          ADMINISTRATION AND SERVICING OF EMC MORTGAGE LOANS BY COMPANY

         Section 3.01 THE COMPANY.

                  The Company shall service and administer the EMC Mortgage
Loans in accordance with customary and usual standards of practice of prudent
mortgage loan servicers in the respective states in which the related Mortgaged
Properties are located. In connection with such servicing and administration,
the Company shall have full power and authority, acting alone and/or through
subservicers as provided in Section 3.03, 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 related Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided herein), (iii) to collect any Insurance Proceeds and
other Liquidation Proceeds, and (iv) subject to Section 3.09, to effectuate
foreclosure or other conversion of the ownership of the Mortgaged Property
securing any EMC Mortgage Loan; provided that the Company shall take no action
that is inconsistent with or prejudices the interests of the Trust Fund or the
Certificateholders in any EMC Mortgage Loan or the rights and interests of the
Depositor and the Trustee under this Agreement.

                  Without limiting the generality of the foregoing, the Company,
in its own name or in the name of the Trust, the Depositor or the Trustee, is
hereby authorized and empowered by the Trust, the Depositor and the Trustee,
when the Company believes it appropriate in its reasonable judgment, to execute
and deliver, 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 EMC Mortgage Loans, and with respect to the related Mortgaged
Properties held for the benefit of the Certificateholders. The Company shall
prepare and deliver to the Depositor and/or the Trustee such documents requiring
execution and delivery by any or all of them as are necessary or appropriate to
enable the Company to service and administer the EMC Mortgage Loans. Upon
receipt of such documents, the Depositor and/or the Trustee shall execute such
documents and deliver them to the Company.

                  In accordance with the standards of the first paragraph of
this Section 3.01, the Company 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 relating to the EMC Mortgage Loans, which advances
shall be reimbursable in the first instance from related collections from the
Mortgagors pursuant to Section 5.03, and further as provided in Section 5.02.
All costs incurred by the Company, if any, in effecting the timely payments of
taxes and assessments on the Mortgaged Properties relating to the EMC Mortgage
Loans and related insurance premiums shall not, for the purpose of calculating
monthly distributions to the Certificateholders, be added to the Stated
Principal Balance under the related EMC Mortgage Loans, notwithstanding that the
terms of such Mortgage Loans so permit.

                                      -58-

<PAGE>

         Section 3.02      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS.

                  (a) Except as otherwise provided in this Section 3.02, when
any property subject to a Mortgage has been or is about to be conveyed by the
Mortgagor, the Company 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 Company is not required to exercise such
rights with respect to an EMC 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 Company 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 Company is authorized, subject to Section 3.02(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 Company
enters such agreement) by the applicable Required Insurance Policies. The
Company, subject to Section 3.02(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 Company shall not be deemed to be in default under this Section
3.02(a) by reason of any transfer or assumption that the Company reasonably
believes it is restricted by law from preventing.

                  (b) Subject to the Company's duty to enforce any due-on-sale
clause to the extent set forth in Section 3.02(a), 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 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 related EMC Mortgage Loan, the Company 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
(including, but not limited to, the Mortgage Rate, the amount of the Scheduled
Payment and any other term affecting the amount or timing of payment on the
Mortgage Loan) may be changed. In addition, the substitute Mortgagor and the
Mortgaged Property must be acceptable to the Company in accordance with its
servicing standards as then in effect. The Company 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

                                      -59-

<PAGE>

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 Company for
entering into an assumption or substitution of liability agreement will be
retained by the Company as additional servicing compensation.

         Section 3.03 SUBSERVICERS.

                  The Company shall perform all of its servicing
responsibilities hereunder or may cause a subservicer to perform any such
servicing responsibilities on its behalf, but the use by the Company of a
subservicer shall not release the Company from any of its obligations hereunder
and the Company shall remain responsible hereunder for all acts and omissions of
each subservicer as fully as if such acts and omissions were those of the
Company. The Company shall pay all fees of each subservicer from its own funds,
and a subservicer's fee shall not exceed the Servicing Fee payable to the
Company hereunder.

                  At the cost and expense of the Company, without any right of
reimbursement from its Protected Account, the Company shall be entitled to
terminate the rights and responsibilities of a subservicer and arrange for any
servicing responsibilities to be performed by a successor subservicer; provided,
however, that nothing contained herein shall be deemed to prevent or prohibit
the Company, at the Company's option, from electing to service the related EMC
Mortgage Loans itself. In the event that the Company's responsibilities and
duties under this Agreement are terminated pursuant to Section 9.03, the Company
shall at its own cost and expense terminate the rights and responsibilities of
each subservicer effective as of the date of termination of the Company. The
Company shall pay all fees, expenses or penalties necessary in order to
terminate the rights and responsibilities of each subservicer from the Company's
own funds without reimbursement from the Trust Fund.

                  Notwithstanding the foregoing, the Company shall not be
relieved of its obligations hereunder and shall be obligated to the same extent
and under the same terms and conditions as if it alone were servicing and
administering the EMC Mortgage Loans. The Company shall be entitled to enter
into an agreement with a subservicer for indemnification of the Company by the
subservicer and nothing contained in this Agreement shall be deemed to limit or
modify such indemnification.

                  Any subservicing agreement and any other transactions or
services relating to the EMC Mortgage Loans involving a subservicer shall be
deemed to be between such subservicer and the Company alone, and neither the
Master Servicer nor the Trustee shall have any obligations, duties or
liabilities with respect to such subservicer including any obligation, duty or
liability of either the Master Servicer or the Trustee to pay such subservicer's
fees and expenses. For purposes of remittances to the Master Servicer pursuant
to this Agreement, the Company shall be deemed to have received a payment on an
EMC Mortgage Loan when a subservicer has received such payment.

         Section 3.04 DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF COMPANY TO
                      BE HELD FOR TRUSTEE.

                  Notwithstanding any other provisions of this Agreement, the
Company shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of an EMC

                                      -60-

<PAGE>

Mortgage Loan coming into the possession of the Company from time to time and
shall account fully to the Trustee for any funds received by the Company or that
otherwise are collected by the Company as Liquidation Proceeds or Insurance
Proceeds in respect of any such Mortgage Loan. All Mortgage Files and funds
collected or held by, or under the control of, the Company in respect of any EMC
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 Protected Account maintained by the Company, shall be held by the Company
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 Company also agrees that it shall not create, incur or subject any Mortgage
File or any funds that are deposited in the Protected Account maintained by the
Company or the Master Servicer Collection Account or in 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 set off against any Mortgage File or
any funds collected on, or in connection with, an EMC Mortgage Loan, except,
however, that the Company shall be entitled to set off against and deduct from
any such funds any amounts that are properly due and payable to the Company
under this Agreement.

         Section 3.05 MAINTENANCE OF HAZARD INSURANCE.

                  The Company shall cause to be maintained, for each EMC
Mortgage Loan, hazard insurance on buildings upon, or comprising part of, the
Mortgaged Property against loss by fire, hazards of extended coverage and such
other hazards as are customary in the area where the related Mortgaged Property
is located with an insurer which is licensed to do business in the state where
the related Mortgaged Property is located. Each such policy of standard hazard
insurance shall contain, or have an accompanying endorsement that contains, a
standard mortgagee clause. The Company shall also cause flood insurance to be
maintained on property acquired upon foreclosure or deed in lieu of foreclosure
of any EMC Mortgage Loan, to the extent described below. Pursuant to Section
5.01, any amounts collected by the Company under any such policies (other than
the amounts to be applied to the restoration or repair of the related Mortgaged
Property or property thus acquired or amounts released to the Mortgagor in
accordance with the Company's normal servicing procedures) shall be deposited in
the Protected Account maintained by the Company. Any cost incurred by the
Company 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 EMC Mortgage Loan so permit. Such
costs shall be recoverable by the Company out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section
5.02. 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. If the Mortgaged Property is located at the time of
origination of the EMC Mortgage Loan in a federally designated special flood
hazard area and such area is participating in the national flood insurance
program, the Company shall cause flood insurance to be maintained with respect
to such Mortgage Loan. Such flood insurance shall be in an amount equal to the
least of (i) the Stated Principal Balance of the related Mortgage Loan, (ii)
minimum amount required to compensate for damage or

                                      -61-

<PAGE>

loss on a replacement cost basis or (iii) the maximum amount of such insurance
available for the related Mortgaged Property under the Flood Disaster Protection
Act of 1973, as amended.

                  In the event that the Company shall obtain and maintain a
blanket policy insuring against hazard losses on all of the Mortgage Loans, it
shall conclusively be deemed to have satisfied its obligations as set forth in
the first sentence of this Section 3.05, it being understood and agreed that
such policy may contain a deductible clause on terms substantially equivalent to
those commercially available and maintained by comparable servicers. If such
policy contains a deductible clause, the Company shall, in the event that there
shall not have been maintained on the related Mortgaged Property a policy
complying with the first sentence of this Section 3.05, and there shall have
been a loss that would have been covered by such policy, deposit in the
Protected Account maintained by the Company the amount not otherwise payable
under the blanket policy because of such deductible clause. Such deposit shall
be from the Company's own funds without reimbursement therefor. In connection
with its activities as administrator and servicer of the EMC Mortgage Loans, the
Company 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 3.06 PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.

                  The Company shall prepare and present on behalf of the Trustee
and the Certificateholders all claims under the Insurance Policies and take such
actions (including the negotiation, settlement, compromise or enforcement of the
insured's claim) as shall be necessary to realize recovery under such Insurance
Policies. Any proceeds disbursed to the Company in respect of such Insurance
Policies shall be promptly deposited in the Protected Account maintained by the
Company upon receipt, except that any amounts realized that are to be applied to
the repair or restoration of the related Mortgaged Property as a condition
precedent to the presentation of claims on the related Mortgage Loan to the
insurer under any applicable Insurance Policy need not be so deposited (or
remitted).

         Section 3.07 MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.

                  (a) The Company shall not take any action that would result in
noncoverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Company would have been covered thereunder.
The Company shall use its best efforts to keep in force and effect (to the
extent that the Mortgage Loan requires the Mortgagor to maintain such
insurance), Primary Mortgage Insurance applicable to each EMC Mortgage Loan. The
Company shall not cancel or refuse to renew any such Primary Mortgage Insurance
Policy that is in effect at the date of the initial issuance of the Mortgage
Note and is required to be kept in force hereunder.

                  (b) The Company agrees to present on behalf of the Trustee and
the Certificateholders, claims to the insurer under any Primary Mortgage
Insurance Policies and, in this regard, to take such reasonable action as shall
be necessary to permit recovery under any Primary Mortgage Insurance Policies
respecting defaulted Mortgage Loans. Pursuant to Section 5.01, any amounts
collected by the Company under any Primary Mortgage Insurance Policies shall be
deposited in the Protected Account maintained by the Company, subject to
withdrawal pursuant to Section 5.02 hereof.

                                      -62-

<PAGE>

         Section 3.08 FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE.

                  The Company shall maintain, at its own expense, a blanket
fidelity bond and an errors and omissions insurance policy, with broad coverage
with responsible companies on all officers, employees or other persons acting in
any capacity with regard to the EMC Mortgage Loans and who handle funds, money,
documents and papers relating to the EMC Mortgage Loans. The fidelity bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Company against losses, including
forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of
such persons. Such fidelity bond shall also protect and insure the Company
against losses in connection with the failure to maintain any insurance policies
required pursuant to this Agreement and the release or satisfaction of an EMC
Mortgage Loan which is not in accordance with Accepted Servicing Practices. No
provision of this Section 3.08 requiring the fidelity bond and errors and
omissions insurance shall diminish or relieve the Company from its duties and
obligations as set forth in this Agreement. The minimum coverage under any such
bond and insurance policy shall be at least equal to the corresponding amounts
required by Accepted Servicing Practices. The Company shall deliver to the
Master Servicer a certificate from the surety and the insurer as to the
existence of the fidelity bond and errors and omissions insurance policy and
shall obtain a statement from the surety and the insurer that such fidelity bond
or insurance policy shall in no event be terminated or materially modified
without thirty days prior written notice to the Master Servicer and the Trustee.
The Company shall notify the Master Servicer and the Trustee within five
business days of receipt of notice that such fidelity bond or insurance policy
will be, or has been, materially modified or terminated. The Trustee for the
benefit of the Certificateholders must be named as loss payees on the fidelity
bond and as additional insured on the errors and omissions policy.

         Section 3.09 REALIZATION UPON DEFAULTED MORTGAGE LOANS; DETERMINATION
                      OF EXCESS LIQUIDATION PROCEEDS AND REALIZED LOSSES;
                      REPURCHASES OF CERTAIN MORTGAGE LOANS.

                  (a) The Company shall use reasonable efforts to foreclose upon
or otherwise comparably convert the ownership of properties securing such of the
EMC Mortgage Loans as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments. In
connection with such foreclosure or other conversion, the Company shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general mortgage servicing activities and the
requirements of the insurer under any Required Insurance Policy; provided that
the Company shall not be required to expend its own funds in connection with any
foreclosure or towards the restoration of any property unless it shall determine
(i) that such restoration and/or foreclosure will increase the proceeds of
liquidation of the EMC 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 Protected Account maintained by the Company pursuant to
Section 5.02). If the Company reasonably believes that Liquidation Proceeds with
respect to any such Mortgage Loan would not be increased as a result of such
foreclosure or other action, such Mortgage Loan will be charged-off and will
become a Liquidated Loan. The Company will give notice of any such charge-off to
the Trustee and the Securities Administrator. The Company shall be responsible
for all other costs and expenses incurred by it in any such proceedings;
provided that

                                      -63-

<PAGE>

such costs and expenses shall be Servicing Advances and that it shall be
entitled to reimbursement thereof from the proceeds of liquidation of the
related Mortgaged Property, as contemplated in Section 5.02. If the Company has
knowledge that a Mortgaged Property that the Company is contemplating acquiring
in foreclosure or by deed- in-lieu of foreclosure is located within a one-mile
radius of any site with environmental or hazardous waste risks known to the
Company, the Company 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 the Trustee's 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
Company shall ensure that the title to such REO Property references this
Agreement and the Trustee's capacity hereunder. Pursuant to its efforts to sell
such REO Property, the Company shall either itself or through an agent selected
by the Company protect and conserve such REO Property in the same manner and to
such extent as is customary in the locality where such REO Property is located
and may, incident to its conservation and protection of the interests of the
Certificateholders, rent the same, or any part thereof, as the Company deems to
be in the best interest of the Company and the Certificateholders for the period
prior to the sale of such REO Property. The Company shall prepare for and
deliver to the Trustee and the Securities Administrator 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 Protected Account maintained by the Company no later than the close of
business on each Determination Date. The Company shall perform the tax reporting
and withholding related to foreclosures, abandonments and cancellation of
indebtedness income as specified by Sections 1445, 6050J and 6050P of the Code
by preparing and filing such tax and information returns, as may be required.

                  In the event that the Trust Fund acquires any Mortgaged
Property as aforesaid or otherwise in connection with a default or imminent
default on an EMC Mortgage Loan, the Company shall dispose of such Mortgaged
Property prior to three years after its acquisition by the Trust Fund or, at the
expense of the Trust Fund, request more than 60 days prior to the day on which
such three-year period would otherwise expire, an extension of the three-year
grace period unless the Trustee shall have been supplied with an Opinion of
Counsel addressed to the Trustee (such opinion not to be an expense of the
Trustee) 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 REMIC I, REMIC II or REMIC III as
defined in section 860F of the Code or cause either REMIC I, REMIC II or REMIC
III 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 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 any of REMIC I, REMIC II or REMIC
III to the

                                      -64-

<PAGE>

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 Company has agreed to indemnify and hold harmless the Trust Fund with
respect to the imposition of any such taxes.

                  The decision of the Company to foreclose on a defaulted EMC
Mortgage Loan shall be subject to a determination by the Company that the
proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any Mortgaged
Properties acquired through foreclosure or other judicial proceeding, net of
reimbursement to the Company for expenses incurred (including any property or
other taxes) in connection with such management and net of unreimbursed
Servicing Fees, Advances, Servicing Advances and any management fee paid or to
be paid with respect to the management of such Mortgaged Property, shall be
applied to the payment of principal of, and interest on, the related defaulted
EMC Mortgage Loans (with interest accruing as though such Mortgage Loans were
still current) and all such income shall be deemed, for all purposes in the
Agreement, to be payments on account of principal and interest on the related
Mortgage Notes and shall be deposited into the Protected Account maintained by
the Company. To the extent the income received during a Prepayment Period is in
excess of the amount attributable to amortizing principal and accrued interest
at the related Mortgage Rate on the related EMC Mortgage Loan, such excess shall
be considered to be a partial Principal Prepayment for all purposes hereof.

                  The Liquidation Proceeds from any liquidation of a Mortgage
Loan, net of any payment to the Company as provided above, shall be deposited in
the Protected Account maintained by the Company on the next succeeding
Determination Date following receipt thereof for distribution on the related
Distribution Date, except that any Excess Liquidation Proceeds shall be retained
by the Company as additional servicing compensation.

                  The proceeds of any Liquidated Loan, as well as any recovery
resulting from a partial collection of Liquidation Proceeds or any income from
an REO Property, will be applied in the following order of priority: first, to
reimburse the Company for any related unreimbursed Servicing Advances and
Servicing Fees, pursuant to Section 5.02 or this Section 3.09; second, to
reimburse the Company for any unreimbursed Advances, pursuant to Section 5.02 or
this Section 3.09; third, to accrued and unpaid interest (to the extent no
Advance has been made for such amount) on the EMC Mortgage Loan or related REO
Property, at the Net Mortgage Rate to the first day of the month in which such
amounts are required to be distributed; and fourth, as a recovery of principal
of the Mortgage Loan.

                  (b) On each Determination Date, the Company shall determine
the respective aggregate amounts of Excess Liquidation Proceeds and Realized
Losses, if any, for the related Prepayment Period.

                  (c) The Company has no intent to foreclose on any EMC Mortgage
Loan based on the delinquency characteristics as of the Closing Date; provided,
that the foregoing does not prevent the Company from initiating foreclosure
proceedings on any date hereafter if the facts and circumstances of such
Mortgage Loans including delinquency characteristics in the Company's discretion
so warrant such action.

                                      -65-

<PAGE>

         Section 3.10 SERVICING COMPENSATION.

                  As compensation for its activities hereunder, the Company
shall be entitled to retain or withdraw from its Protected Account out of each
payment of interest on an EMC Mortgage Loan included in the Trust Fund an amount
equal to the Servicing Fee.

                  Additional servicing compensation in the form of any Excess
Liquidation Proceeds, assumption fees, late payment charges, all income and gain
net of any losses realized from Permitted Investments with respect to funds in
or credited to the Protected Account maintained by the Company shall be retained
by the Company to the extent not required to be deposited in the Protected
Account maintained by the Company pursuant to Section 5.02. The Company shall be
required to pay all expenses incurred by it in connection with its servicing
activities hereunder (including payment of any premiums for hazard insurance, as
required by Section 3.05 and maintenance of the other forms of insurance
coverage required by Section 3.07) and shall not be entitled to reimbursement
therefor except as specifically provided in Section 5.02.

         Section 3.11 REO PROPERTY.

                  (a) In the event the Trust Fund acquires ownership of any REO
Property in respect of any related EMC Mortgage Loan, the deed or certificate of
sale shall be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders. The Company shall sell any REO Property as expeditiously as
possible and in accordance with the provisions of this Agreement. Pursuant to
its efforts to sell such REO Property, the Company shall protect and conserve
such REO Property in the manner and to the extent required herein, in accordance
with the REMIC Provisions.

                  (b) The Company shall deposit all funds collected and received
in connection with the operation of any REO Property into the Protected Account
maintained by the Company.

                  (c) The Company, upon the final disposition of any REO
Property, shall be entitled to reimbursement for any related unreimbursed
Advances, unreimbursed Servicing Advances or Servicing Fees from Liquidation
Proceeds received in connection with the final disposition of such REO Property;
provided, that any such unreimbursed Advances or Servicing Fees as well as any
unpaid Servicing Fees may be reimbursed or paid, as the case may be, prior to
final disposition, out of any net rental income or other net amounts derived
from such REO Property.

         Section 3.12 LIQUIDATION REPORTS.

                  Upon the foreclosure of any Mortgaged Property relating to an
EMC Mortgage Loan or the acquisition thereof by the Trust Fund pursuant to a
deed-in-lieu of foreclosure, the Company shall submit a liquidation report to
the Master Servicer containing such information as shall be mutually acceptable
to the Company and the Master Servicer with respect to such Mortgaged Property.

         Section 3.13 ANNUAL CERTIFICATE AS TO COMPLIANCE.

                                      -66-

<PAGE>

                  (a) The Company will deliver to the Master Servicer not later
than March 1, 2004 and not later than March 1 of each year thereafter, a
certificate of a Servicing Officer stating, as to each signatory thereof, that
(i) a review of the activities of the Company during the preceding calendar year
and of performance under this Agreement has been made under such officers'
supervision, and (ii) to the best of such officers' knowledge, based on such
review, the Company has fulfilled all of its obligations under this Agreement
throughout such year, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof except for such defaults as such officer in its good
faith judgment believe to be immaterial.

                  (b) (i) The Company will deliver to the Master Servicer, on or
before March 1 of each year beginning March 1, 2004 (or, if any such day is not
a Business Day, the immediately preceding Business Day), or on any alternative
date specified by the Master Servicer upon thirty (30) days written request, a
certification containing the information set forth in Exhibit L. Such
certification shall be signed by the senior officer in charge of servicing of
the Company. In addition, the Company shall provide such other information with
respect to the EMC Mortgage Loans and the servicing and administration thereof
within the control of the Company which shall be required to enable the Master
Servicer to comply with the reporting requirements of the Securities and
Exchange Act of 1934, as amended.

                           (ii) The Company shall indemnify and hold harmless
the Master Servicer and its officers, directors, agents and affiliates from and
against any losses, damages, penalties, fines, forfeitures, reasonable legal
fees and related costs, judgments and other costs and expenses arising out of or
based upon a breach by the Company or any of its officers, directors, agents or
affiliates of its obligations under this Section 3.13(b) or the Company's
negligence, bad faith or willful misconduct in connection therewith. If the
indemnification provided for herein is unavailable or insufficient to hold
harmless the Master Servicer, then the Company agrees that it shall contribute
to the amount paid or payable by the Master Servicer as a result of the losses,
claims, damages or liabilities of the Master Servicer in such proportion as is
appropriate to reflect the relative fault of the Master Servicer on the one hand
and the Company on the other in connection with a breach of the Company's
obligations under this Section 3.13(b).

         Section 3.14 ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING
                      REPORT.

                  Not later than March 1, 2004 and not later than March 1 of
each year thereafter, the Company at its expense shall cause a firm of
independent public accountants which is a member of the American Institute of
Certified Public Accountants to furnish a statement to the Master Servicer to
the effect that, with respect to the preceding calendar year such firm has
examined certain documents and records relating to the Company's servicing of
mortgage loans of the same type as the EMC Mortgage Loans pursuant to servicing
agreements substantially similar to this Agreement, which agreements may include
this Agreement, and that, on the basis of such an examination, conducted
substantially in compliance with the Uniform Single Attestation Program for
Mortgage Bankers, such firm is of the opinion that the Company's servicing has
been conducted in compliance with the agreements examined pursuant to this
Section 3.14, except for (i) such exceptions as such firm shall believe to be
immaterial,(ii) such other exceptions as shall be set forth in such statement

                                      -67-

<PAGE>

and (iii) such exceptions that the Uniform Single Attestation Program for
Mortgage Bankers requires it to report.

         Section 3.15 BOOKS AND RECORDS.

                  The Company shall be responsible for maintaining, and shall
maintain, a complete set of books and records for the EMC Mortgage Loans which
shall be appropriately identified in the Company's computer system to clearly
reflect the ownership of the EMC Mortgage Loans by the Trust. In particular, the
Company shall maintain in its possession, available for inspection by the Master
Servicer and the Trustee and shall deliver to Master Servicer and the Trustee
upon demand, evidence of compliance with all federal, state and local laws,
rules and regulations. To the extent that original documents are not required
for purposes of realization of Liquidation Proceeds or Insurance Proceeds,
documents maintained by the Company may be in the form of microfilm or
microfiche or such other reliable means of recreating original documents,
including, but not limited to, optical imagery techniques so long as the Company
complies with the requirements of Accepted Servicing Practices.

                  The Company shall maintain with respect to each EMC Mortgage
Loan and shall make available for inspection by the Master Servicer and the
Trustee the related servicing file during the time such EMC Mortgage Loan is
subject to this Agreement and thereafter in accordance with applicable law.

                                      -68-

<PAGE>

                                   ARTICLE IV

         ADMINISTRATION AND MASTER SERVICING OF MORTGAGE LOANS BY MASTER
                                    SERVICER

         Section 4.01 MASTER SERVICER. The Master Servicer shall supervise,
monitor and oversee the obligation of the Company and the related Servicer to
service and administer their respective Mortgage Loans in accordance with the
terms of this Agreement and the related Servicing Agreement and shall have full
power and authority to do any and all things which it may deem necessary or
desirable in connection with such master servicing and administration. In
performing its obligations hereunder, the Master Servicer shall act in a manner
consistent with Accepted Master Servicing Practices. Furthermore, the Master
Servicer shall oversee and consult with the Company and the related Servicer as
necessary from time-to-time to carry out the Master Servicer's obligations
hereunder, shall receive, review and evaluate all reports, information and other
data provided to the Master Servicer by the Company and the related Servicer and
shall cause the Company and related Servicer to perform and observe the
covenants, obligations and conditions to be performed or observed by such Person
under this Agreement and the related Servicing Agreement. The Master Servicer
shall independently and separately monitor the Company and the related
Servicer's servicing activities with respect to each related Mortgage Loan,
reconcile the results of such monitoring with such information provided in the
previous sentence on a monthly basis and coordinate corrective adjustments to
the Company's, the related Servicer's and Master Servicer's records, and based
on such reconciled and corrected information, prepare the statements specified
in Section 6.05 and any other information and statements required hereunder. The
Master Servicer shall reconcile the results of its Mortgage Loan monitoring with
the actual remittances of the Company and the Servicer to the Protected Accounts
pursuant to this Agreement and the related Servicing Agreement.

         The Trustee shall furnish the Company, the Servicers and the Master
Servicer with any powers of attorney and other documents in form as provided to
it necessary or appropriate to enable the Company, the Servicer and the Master
Servicer to service and administer the related Mortgage Loans and REO Property.

         The Trustee and the Securities Administrator shall provide access to
the records and documentation in possession of the Trustee or the Securities
Administrator regarding the related Mortgage Loans and REO Property and the
servicing thereof to the Certificateholders, the FDIC, and the supervisory
agents and examiners of the FDIC, such access being afforded only upon
reasonable prior written request and during normal business hours at the office
of the Trustee or the Securities Administrator; provided, however, that, unless
otherwise required by law, neither the Trustee nor the Securities Administrator
shall be required to provide access to such records and documentation if the
provision thereof would violate the legal right to privacy of any Mortgagor. The
Trustee and the Securities Administrator shall allow representatives of the
above entities to photocopy any of the records and documentation and shall
provide equipment for that purpose at a charge that covers the Trustee's or the
Securities Administrator's actual costs.

                                      -69-

<PAGE>

         The Trustee shall execute and deliver to the Company or the related
Servicer and the Master Servicer any court pleadings, requests for trustee's
sale or other documents necessary or desirable to (i) the foreclosure or
trustee's sale with respect to a Mortgaged Property; (ii) any legal action
brought to obtain judgment against any Mortgagor on the Mortgage Note or
Security Instrument; (iii) obtain a deficiency judgment against the Mortgagor;
or (iv) enforce any other rights or remedies provided by the Mortgage Note or
Security Instrument or otherwise available at law or equity.

         Section 4.02 REMIC-RELATED COVENANTS. For as long as each REMIC shall
exist, the Trustee and the Securities Administrator shall act in accordance
herewith to assure continuing treatment of such REMIC as a REMIC, and the
Trustee and the Securities Administrator shall comply with any directions of the
Seller, the Company, the Servicers or the Master Servicer to assure such
continuing treatment. In particular, the Trustee shall not (a) sell or permit
the sale of all or any portion of the Mortgage Loans or of any investment of
deposits in an Account unless such sale is as a result of a repurchase of the
Mortgage Loans pursuant to this Agreement or the Trustee has received a REMIC
Opinion addressed to the Trustee prepared at the expense of the Trust Fund; and
(b) other than with respect to a substitution pursuant to the Mortgage Loan
Purchase Agreement or Section 2.04 of this Agreement, as applicable, accept any
contribution to any REMIC after the Startup Day without receipt of a REMIC
Opinion.

         Section 4.03 MONITORING OF COMPANY AND SERVICER. (a) The Master
Servicer shall be responsible for reporting to the Trustee and the Seller the
compliance by the Company and the related Servicer with its duties under this
Agreement and the related Servicing Agreement. In the review of the Company's
and the related Servicer's activities, the Master Servicer may rely upon an
Officer's Certificate of the Company and the related Servicer with regard to
such Person's compliance with the terms of this Agreement or the related
Servicing Agreement. In the event that the Master Servicer, in its judgment,
determines that the Company or the related Servicer should be terminated in
accordance with this Agreement or the related Servicing Agreement, or that a
notice should be sent pursuant to this Agreement or the related Servicing
Agreement with respect to the occurrence of an event that, unless cured, would
constitute grounds for such termination, the Master Servicer shall notify the
Seller and the Trustee thereof and the Master Servicer shall issue such notice
or take such other action as it deems appropriate.

         (b) The Master Servicer, for the benefit of the Trustee and the
Certificateholders, shall enforce the obligations of the Company under this
Agreement and the related Servicer under the related Servicing Agreement, and
shall, in the event that the Company or the related Servicer fails to perform
its obligations in accordance with this Agreement or the related Servicing
Agreement, subject to the preceding paragraph, terminate the rights and
obligations of such Person thereunder and act as servicer of the related
Mortgage Loans or to cause the Trustee to enter in to a new Servicing Agreement
with a successor Servicer selected by the Master Servicer; provided, however, it
is understood and acknowledged by the parties hereto that there will be a period
of transition (not to exceed 90 days) before the actual servicing functions can
be fully transferred to such successor Servicer. Such enforcement, including,
without limitation, the legal prosecution of claims, termination of the related
Servicing Agreement and the pursuit of other appropriate remedies, shall be in
such form and carried out to such an extent and at such time as the Master
Servicer, in its good faith business judgment, would require were it the owner
of the related Mortgage Loans. The Master Servicer shall pay the costs of such
enforcement at its own expense, subject to its right of

                                      -70-

<PAGE>

reimbursement pursuant to the provisions of this Agreement or the related
Servicing Agreement, provided that the Master Servicer shall not be required to
prosecute or defend any legal action except to the extent that the Master
Servicer shall have received reasonable indemnity for its costs and expenses in
pursuing such action.

         (c) To the extent that the costs and expenses of the Master Servicer
related to any termination of the Company or the related Servicer, appointment
of a successor Servicer or the transfer and assumption of servicing by the
Master Servicer with respect to this Agreement or the related Servicing
Agreement (including, without limitation, (i) all legal costs and expenses and
all due diligence costs and expenses associated with an evaluation of the
potential termination of the Company or the related Servicer as a result of an
event of default by such Person and (ii) all costs and expenses associated with
the complete transfer of servicing, including all servicing files and all
servicing data and the completion, correction or manipulation of such servicing
data as may be required by the successor servicer to correct any errors or
insufficiencies in the servicing data or otherwise to enable the successor
service to service the Mortgage Loans in accordance with this Agreement or the
related Servicing Agreement) are not fully and timely reimbursed by the Company
or the terminated Servicer, the Master Servicer shall be entitled to
reimbursement of such costs and expenses from the Master Servicer Collection
Account.

         (d) The Master Servicer shall require the Company and the related
Servicer to comply with the remittance requirements and other obligations set
forth in this Agreement or the related Servicing Agreement, as applicable.

         (e) If the Master Servicer acts as a servicer, it will not assume
liability for the representations and warranties of the Company or the related
Servicer, if any, that it replaces.

         Section 4.04 FIDELITY BOND. The Master Servicer, at its expense, shall
maintain in effect a blanket fidelity bond and an errors and omissions insurance
policy, affording coverage with respect to all directors, officers, employees
and other Persons acting on such Master Servicer's behalf, and covering errors
and omissions in the performance of the Master Servicer's obligations hereunder.
The errors and omissions insurance policy and the fidelity bond shall be in such
form and amount generally acceptable for entities serving as master servicers or
trustees.

         Section 4.05 POWER TO ACT; PROCEDURES. The Master Servicer shall master
service the Mortgage Loans and shall have full power and authority, subject to
the REMIC Provisions and the provisions of Article XI hereof, to do any and all
things that it may deem necessary or desirable in connection with the master
servicing and administration of the Mortgage Loans, including but not limited to
the power and authority (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, (iii) to
collect any Insurance Proceeds and Liquidation Proceeds, and (iv) to effectuate
foreclosure or other conversion of the ownership of the Mortgaged Property
securing any Mortgage Loan, in each case, in accordance with the provisions of
this Agreement and the related Servicing Agreement, as applicable; provided,
however, that the Master Servicer shall not (and, consistent with its
responsibilities under Section 4.03, shall not permit the Company or the related
Servicer to) knowingly or intentionally take any action, or fail to take (or
fail to cause to be taken) any action

                                      -71-

<PAGE>

reasonably within its control and the scope of duties more specifically set
forth herein, that, under the REMIC Provisions, if taken or not taken, as the
case may be, would cause REMIC I, REMIC II or REMIC III to fail to qualify as a
REMIC or result in the imposition of a tax upon the Trust Fund (including but
not limited to the tax on prohibited transactions as defined in Section
860F(a)(2) of the Code and the tax on contributions to a REMIC set forth in
Section 860G(d) of the Code) unless the Master Servicer has received an Opinion
of Counsel (but not at the expense of the Master Servicer) to the effect that
the contemplated action will not would cause REMIC I, REMIC II or REMIC III to
fail to qualify as a REMIC or result in the imposition of a tax upon REMIC I,
REMIC II or REMIC III, as the case may be. The Trustee shall furnish the Master
Servicer, upon written request from a Servicing Officer, with any powers of
attorney empowering the Master Servicer, the Company or the related Servicer to
execute and deliver instruments of satisfaction or cancellation, or of partial
or full release or discharge, and to foreclose upon or otherwise liquidate
Mortgaged Property, and to appeal, prosecute or defend in any court action
relating to the Mortgage Loans or the Mortgaged Property, in accordance with the
related Servicing Agreement and this Agreement, and the Trustee shall execute
and deliver such other documents, as the Master Servicer may request, to enable
the Master Servicer to master service and administer the Mortgage Loans and
carry out its duties hereunder, in each case in accordance with Accepted Master
Servicing Practices (and the Trustee shall have no liability for misuse of any
such powers of attorney by the Master Servicer, the Company or the related
Servicer). If the Master Servicer or the Trustee has been advised that it is
likely that the laws of the state in which action is to be taken prohibit such
action if taken in the name of the Trustee or that the Trustee would be
adversely affected under the "doing business" or tax laws of such state if such
action is taken in its name, the Master Servicer shall join with the Trustee in
the appointment of a co-trustee pursuant to Section 10.11 hereof. In the
performance of its duties hereunder, the Master Servicer shall be an independent
contractor and shall not, except in those instances where it is taking action in
the name of the Trustee, be deemed to be the agent of the Trustee.

         Section 4.06 DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS. To the extent
provided in this Agreement or the related Servicing Agreement, to the extent
Mortgage Loans contain enforceable due-on-sale clauses, the Master Servicer
shall cause the Company and the related Servicer to enforce such clauses in
accordance with this Agreement or the related Servicing Agreement. If applicable
law prohibits the enforcement of a due-on-sale clause or such clause is
otherwise not enforced in accordance with this Agreement or the related
Servicing Agreement, and, as a consequence, a Mortgage Loan is assumed, the
original Mortgagor may be released from liability in accordance with this
Agreement or the related Servicing Agreement.

         Section 4.07 RELEASE OF MORTGAGE FILES. (a) Upon becoming aware of the
payment in full of any Mortgage Loan, or the receipt by the Company or the
related Servicer of a notification that payment in full has been escrowed in a
manner customary for such purposes for payment to Certificateholders on the next
Distribution Date, the Company or the related Servicer will, if required under
the related Servicing Agreement, promptly furnish to the Custodian, on behalf of
the Trustee, two copies of a certification substantially in the form of Exhibit
H hereto 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 (which certification shall include a statement to the effect
that all amounts received in connection with such payment that are required to
be deposited in the Protected Account maintained by the Company or the Servicer
pursuant to Article V or by the related Servicer

                                      -72-

<PAGE>

pursuant to the related Servicing Agreement have been or will be so deposited)
and shall request that the Custodian, on behalf of the Trustee, deliver to the
Company or the related Servicer the related Mortgage File. Upon receipt of such
certification and request, the Custodian, on behalf of the Trustee, shall
promptly release the related Mortgage File to the Company or the related
Servicer and the Trustee and Custodian shall have no further responsibility with
regard to such Mortgage File. Upon any such payment in full, the Company or the
related Servicer is authorized, to give, as agent for the Trustee, as the
mortgagee under the Mortgage that secured the Mortgage Loan, an instrument of
satisfaction (or assignment of mortgage without recourse, representation or
warranty) regarding the Mortgaged Property subject to the Mortgage, which
instrument of satisfaction or assignment, as the case may be, shall be delivered
to the Person or Persons entitled thereto against receipt therefor of such
payment, it being understood and agreed that no expenses incurred in connection
with such instrument of satisfaction or assignment, as the case may be, shall be
chargeable to the Protected Account.

         (b) From time to time and as appropriate for the servicing or
foreclosure of any Mortgage Loan and in accordance with this Agreement or the
related Servicing Agreement, the Trustee shall execute such documents as shall
be prepared and furnished to the Trustee by the Company, the related Servicer or
the Master Servicer (in form reasonably acceptable to the Trustee) and as are
necessary to the prosecution of any such proceedings. The Custodian, on behalf
of the Trustee, shall, upon the request of the Company, the related Servicer or
the Master Servicer, and delivery to the Custodian, on behalf of the Trustee, of
two copies of a request for release signed by a Servicing Officer substantially
in the form of Exhibit H (or in a mutually agreeable electronic format which
will, in lieu of a signature on its face, originate from a Servicing Officer),
release the related Mortgage File held in its possession or control to the
Company, the related Servicer or the Master Servicer, as applicable. Such trust
receipt shall obligate the Company, the related Servicer or the Master Servicer
to return the Mortgage File to the Custodian on behalf of the Trustee, when the
need therefor by such Person no longer exists unless the Mortgage Loan shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
similar to that hereinabove specified, the Mortgage File shall be released by
the Custodian, on behalf of the Trustee, to the Company, the related Servicer or
the Master Servicer.

         Section 4.08 DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF MASTER
                      SERVICER, COMPANY AND SERVICER TO BE HELD FOR TRUSTEE.

         (a) The Master Servicer shall transmit and the Company or the related
Servicer (to the extent required by this Agreement or the related Servicing
Agreement) shall transmit to the Trustee or Custodian such documents and
instruments coming into the possession of such Person from time to time as are
required by the terms hereof, or in the case of the related Servicer, the
related Servicing Agreement, to be delivered to the Trustee or Custodian. Any
funds received by the Master Servicer, the Company or by the related Servicer in
respect of any Mortgage Loan or which otherwise are collected by the Master
Servicer, the Company or by the related Servicer as Liquidation Proceeds or
Insurance Proceeds in respect of any Mortgage Loan shall be held for the benefit
of the Trustee and the Certificateholders subject to the Master Servicer's right
to retain or withdraw from the Master Servicer Collection Account the Master
Servicing Fee and other amounts provided in this Agreement, and to the right of
the Company and the related Servicer to retain its Servicing Fee and other
amounts as provided in this Agreement or the related Servicing Agreement.

                                      -73-

<PAGE>

The Master Servicer shall, and (to the extent provided in this Agreement or the
related Servicing Agreement) shall cause the Company and the related Servicer
to, provide access to information and documentation regarding the Mortgage Loans
to the Trustee, its agents and accountants at any time upon reasonable request
and during normal business hours, and to Certificateholders that are savings and
loan associations, banks or insurance companies, the Office of Thrift
Supervision, the FDIC and the supervisory agents and examiners of such Office
and Corporation or examiners of any other federal or state banking or insurance
regulatory authority if so required by applicable regulations of the Office of
Thrift Supervision or other regulatory authority, such access to be afforded
without charge but only upon reasonable request in writing and during normal
business hours at the offices of the Master Servicer designated by it. In
fulfilling such a request the Master Servicer shall not be responsible for
determining the sufficiency of such information.

         (b) 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
or Insurance Proceeds, shall be held by the Master Servicer for and on behalf of
the Trustee and the Certificateholders and shall be and remain the sole and
exclusive property of the Trustee; provided, however, that the Master Servicer,
the Company and the related Servicer shall be entitled to setoff against, and
deduct from, any such funds any amounts that are properly due and payable to the
Master Servicer or such Servicer under this Agreement or the related Servicing
Agreement.

         Section 4.09 STANDARD HAZARD INSURANCE AND FLOOD INSURANCE POLICIES.

         (a) For each Mortgage Loan, the Master Servicer shall enforce any
obligation of the Company and the related Servicer under this Agreement or the
related Servicing Agreement to maintain or cause to be maintained standard fire
and casualty insurance and, where applicable, flood insurance, all in accordance
with the provisions of this Agreement or the related Servicing Agreement. It is
understood and agreed that such insurance shall be with insurers meeting the
eligibility requirements set forth in this Agreement and the related Servicing
Agreement and that no earthquake or other additional insurance is to be required
of any Mortgagor or to be maintained on property acquired in respect of a
defaulted loan, other than pursuant to such applicable laws and regulations as
shall at any time be in force and as shall require such additional insurance.

         (b) Pursuant to Sections 5.01, 5.03 and 5.04 any amounts collected by
the Company, the Servicers or the Master Servicer, or by the Company or the
Servicers, under any insurance policies (other than amounts to be applied to the
restoration or repair of the property subject to the related Mortgage or
released to the Mortgagor in accordance with this Agreement or the Servicing
Agreements) shall be deposited by the Company in its Protected Account or by the
related Servicer or the Master Servicer into the Master Servicer Collection
Account, subject to withdrawal pursuant to Sections 5.02, 5.03, 5.04 and 5.06,
as applicable. Any cost incurred by the Master Servicer, the Company or the
related Servicer in maintaining any such insurance if the Mortgagor defaults in
its obligation to do so shall be added to the amount owing under the Mortgage
Loan where the terms of the Mortgage Loan so permit; provided, however, that the
addition of any such cost shall not be taken into account for purposes of
calculating the distributions to be made to Certificateholders and shall be
recoverable by the Master Servicer, the Company or the related Servicer pursuant
to Sections 5.02, 5.03, 5.04 and 5.06, as applicable.

                                      -74-

<PAGE>

         Section 4.10 PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS. The
Master Servicer shall (to the extent provided in this Agreement and the related
Servicing Agreement) cause the Company or the Servicer to, prepare and present
on behalf of the Trustee and the Certificateholders all claims under the
Insurance Policies and take such actions (including the negotiation, settlement,
compromise or enforcement of the insured's claim) as shall be necessary to
realize recovery under such policies. Any proceeds disbursed to the Master
Servicer (or disbursed to the Company or the related Servicer and remitted to
the Master Servicer) in respect of such policies, bonds or contracts shall be
promptly deposited in the Master Servicer Collection Account upon receipt,
except that any amounts realized that are to be applied to the repair or
restoration of the related Mortgaged Property as a condition precedent to the
presentation of claims on the related Mortgage Loan to the insurer under any
applicable Insurance Policy need not be so deposited (or remitted).

         Section 4.11 MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.

         (a) The Master Servicer shall not take, or permit the Company or the
related Servicer (to the extent such action is prohibited under this Agreement
or the related Servicing Agreement) to take, any action that would result in
noncoverage under any applicable Primary Mortgage Insurance Policy of any loss
which, but for the actions of the Master Servicer, the Company or the related
Servicer, would have been covered thereunder. The Master Servicer shall use its
best reasonable efforts to cause the Company and the related Servicer (to the
extent required under this Agreement and the related Servicing Agreement) to
keep in force and effect (to the extent that the Mortgage Loan requires the
Mortgagor to maintain such insurance), primary mortgage insurance applicable to
each Mortgage Loan (including any LPMI Policy) in accordance with the provisions
of this Agreement and the related Servicing Agreement, as applicable. The Master
Servicer shall not, and shall not permit the Company or the related Servicer (to
the extent required under this Agreement or the related Servicing Agreement) to,
cancel or refuse to renew any such Primary Mortgage Insurance Policy that is in
effect at the date of the initial issuance of the Mortgage Note and is required
to be kept in force hereunder except in accordance with the provisions of this
Agreement and the related Servicing Agreement, as applicable.

         (b) The Master Servicer agrees to cause the Company and the related
Servicer (to the extent required under this Agreement and the related Servicing
Agreement) to present, on behalf of the Trustee and the Certificateholders,
claims to the insurer under any Primary Mortgage Insurance Policies and, in this
regard, to take such reasonable action as shall be necessary to permit recovery
under any Primary Mortgage Insurance Policies respecting defaulted Mortgage
Loans. Pursuant to Sections 5.01, 5.03 and 5.04, any amounts collected by the
Company or the related Servicer under any Primary Mortgage Insurance Policies
shall be deposited by the Company in its Protected Account or by the related
Servicer in the Master Servicer Collection Account, subject to withdrawal
pursuant to Section 5.03 or 5.04, as applicable.

         Section 4.12 TRUSTEE TO RETAIN POSSESSION OF CERTAIN INSURANCE POLICIES
                      AND DOCUMENTS.

         The Trustee (or the Custodian, as directed by the Trustee), shall
retain possession and custody of the originals (to the extent available) of any
Primary Mortgage Insurance Policies, or certificate of insurance if applicable,
and any certificates of renewal as to the foregoing as may be issued from time
to time as contemplated by this Agreement. Until all amounts distributable in

                                      -75-

<PAGE>

respect of the Certificates have been distributed in full and the Master
Servicer otherwise has fulfilled its obligations under this Agreement, the
Trustee (or its Custodian, if any, as directed by the Trustee) shall also retain
possession and custody of each Mortgage File in accordance with and subject to
the terms and conditions of this Agreement. The Master Servicer shall promptly
deliver or cause to be delivered to the Trustee (or the Custodian, as directed
by the Trustee), upon the execution or receipt thereof the originals of any
Primary Mortgage Insurance Policies, any certificates of renewal, and such other
documents or instruments that constitute portions of the Mortgage File that come
into the possession of the Master Servicer from time to time.

         Section 4.13 REALIZATION UPON DEFAULTED MORTGAGE LOANS. The Master
Servicer shall cause the Company and the related Servicer (to the extent
required under this Agreement and the related Servicing Agreement) to foreclose
upon, repossess or otherwise comparably convert the ownership of Mortgaged
Properties securing such of the Mortgage Loans as come into and continue in
default and as to which no satisfactory arrangements can be made for collection
of delinquent payments, all in accordance with this Agreement or the related
Servicing Agreement.

         Section 4.14 COMPENSATION FOR THE MASTER SERVICER.

         The Master Servicer shall be entitled to the Master Servicing Fee on
each Distribution Date as compensation for the performance of its obligations
hereunder. In addition, pursuant to Article V all income and gain realized from
any investment of funds in the Distribution Account and the Master Servicer
Collection Account shall be for the benefit of the Master Servicer as additional
compensation. The Master Servicer will be entitled to retain, as additional
compensation, any interest remitted by the related Servicer in connection with a
Principal Prepayment in full or otherwise in excess of amounts required to be
remitted to the Master Servicer Collection Account. The Master Servicer shall be
required to pay all expenses incurred by it in connection with its activities
hereunder and shall not be entitled to reimbursement therefor except as provided
in this Agreement.

         Section 4.15 REO PROPERTY.

         (a) In the event the Trust Fund acquires ownership of any REO Property
in respect of any related Mortgage Loan, the deed or certificate of sale shall
be issued to the Trustee, or to its nominee, on behalf of the related
Certificateholders. The Master Servicer shall, to the extent provided in this
Agreement or the related Servicing Agreement, cause the Company or the related
Servicer to sell, any REO Property as expeditiously as possible and in
accordance with the provisions of this Agreement and the related Servicing
Agreement, as applicable. Pursuant to its efforts to sell such REO Property, the
Master Servicer shall cause the Company or the related Servicer to protect and
conserve, such REO Property in the manner and to the extent required by this
Agreement or the related Servicing Agreement, in accordance with the REMIC
Provisions and in a manner that does not result in a tax on "net income from
foreclosure property" or cause such REO Property to fail to qualify as
"foreclosure property" within the meaning of Section 860G(a)(8) of the Code.

         (b) The Master Servicer shall, to the extent required by this Agreement
or the related Servicing Agreement, cause the Company or the related Servicer to
deposit all funds collected and received in connection with the operation of any
REO Property in the Protected Account.

                                      -76-

<PAGE>

         (c) The Master Servicer and the Company or the related Servicer, upon
the final disposition of any REO Property, shall be entitled to reimbursement
for any related unreimbursed Advances and other unreimbursed advances as well as
any unpaid Servicing Fees from Liquidation Proceeds received in connection with
the final disposition of such REO Property; provided, that any such unreimbursed
Monthly Advances as well as any unpaid Servicing Fees may be reimbursed or paid,
as the case may be, prior to final disposition, out of any net rental income or
other net amounts derived from such REO Property.

         (d) To the extent provided in this Agreement or the related Servicing
Agreement, the Liquidation Proceeds from the final disposition of the REO
Property, net of any payment to the Master Servicer and the Company or the
related Servicer as provided above shall be deposited in the Protected Account
on or prior to the Determination Date in the month following receipt thereof and
be remitted by wire transfer in immediately available funds to the Master
Servicer for deposit into the related Master Servicer Collection Account on the
next succeeding Remittance Date.

         Section 4.16 ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.

         (a) The Master Servicer shall deliver to the Securities Administrator,
the Trustee and the Rating Agencies on or before March 1 of each year,
commencing on March 1, 2004, an Officer's Certificate, certifying that with
respect to the period ending December 31 of the prior year: (i) such Servicing
Officer has reviewed the activities of such Master Servicer during the preceding
calendar year or portion thereof and its performance under this Agreement, (ii)
to the best of such Servicing Officer's knowledge, based on such review, such
Master Servicer has performed and fulfilled its duties, responsibilities and
obligations under this Agreement in all material respects throughout such year,
or, if there has been a default in the fulfillment of any such duties,
responsibilities or obligations, specifying each such default known to such
Servicing Officer and the nature and status thereof, (iii) nothing has come to
the attention of such Servicing Officer to lead such Servicing Officer to
believe that the Company or any Servicer has failed to perform any of its
duties, responsibilities and obligations under this Agreement or the related
Servicing Agreement in all material respects throughout such year, or, if there
has been a material default in the performance or fulfillment of any such
duties, responsibilities or obligations, specifying each such default known to
such Servicing Officer and the nature and status thereof.

         (b) Copies of such statements shall be provided to any
Certificateholder upon request, by the Master Servicer or by the Trustee at the
Master Servicer's expense if the Master Servicer failed to provide such copies
(unless (i) the Master Servicer shall have failed to provide the Trustee with
such statement or (ii) the Trustee shall be unaware of the Master Servicer's
failure to provide such statement).

         Section 4.17 ANNUAL INDEPENDENT ACCOUNTANT'S SERVICING REPORT. If the
Master Servicer has, during the course of any fiscal year, directly serviced any
of the Mortgage Loans, then the Master Servicer at its expense shall cause a
nationally recognized firm of independent certified public accountants to
furnish a statement to the Securities Administrator, the Trustee, the Rating
Agencies and the Seller on or before March 1 of each year, commencing on March
1, 2004 to the effect that, with respect to the most recently ended fiscal year,
such firm has examined certain records and documents relating to the Master
Servicer's performance of its servicing obligations

                                      -77-

<PAGE>

under this Agreement and pooling and servicing and trust agreements in material
respects similar to this Agreement and to each other and that, on the basis of
such examination conducted substantially in compliance with the audit program
for mortgages serviced for Freddie Mac or the Uniform Single Attestation Program
for Mortgage Bankers, such firm is of the opinion that the Master Servicer's
activities have been conducted in compliance with this Agreement, or that such
examination has disclosed no material items of noncompliance except for (i) such
exceptions as such firm believes to be immaterial, (ii) such other exceptions as
are set forth in such statement and (iii) such exceptions that the Uniform
Single Attestation Program for Mortgage Bankers or the Audit Program for
Mortgages Serviced by Freddie Mac requires it to report. Copies of such
statements shall be provided to any Certificateholder upon request by the Master
Servicer, or by the Trustee at the expense of the Master Servicer if the Master
Servicer shall fail to provide such copies (unless (i) the Master Servicer shall
have failed to provide the Trustee with such statement or (ii) the Trustee shall
be unaware of the Master Servicer's failure to provide such statement). If such
report discloses exceptions that are material, the Master Servicer shall advise
the Trustee whether such exceptions have been or are susceptible of cure, and
will take prompt action to do so.

         Section 4.18 REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION.
Within 15 days after each Distribution Date, the Securities Administrator shall,
in accordance with industry standards, file with the Commission via the
Electronic Data Gathering and Retrieval System ("EDGAR"), a Form 8-K with a copy
of the statement to the Trustee who shall make available a copy of the monthly
statement to the Certificateholders for such Distribution Date as an exhibit
thereto. Prior to January 30 in each year, the Securities Administrator shall,
in accordance with industry standards and only if instructed by the Depositor,
file a Form 15 Suspension Notice with respect to the Trust Fund, if applicable.
Prior to (i) March 15, 2004 and (ii) unless and until a Form 15 Suspension
Notice shall have been filed, prior to March 15 of each year thereafter, the
Master Servicer shall provide the Securities Administrator with a Master
Servicer Certification, together with a copy of the annual independent
accountant's servicing report and annual statement of compliance of the Company
to be delivered pursuant to this Agreement and each Servicer, in each case,
required to be delivered pursuant to the related Servicing Agreement, and, if
applicable, the annual independent accountant's servicing report and annual
statement of compliance to be delivered by the Master Servicer pursuant to
Sections 4.16 and 4.17. Prior to (i) March 31, 2004 and (ii) unless and until a
Form 15 Suspension Notice shall have been filed, March 31 of each year
thereafter, the Securities Administrator shall file a Form 10-K, in substance
conforming to industry standards, with respect to the Trust. Such Form 10-K
shall include the Master Servicer Certification and other documentation provided
by the Master Servicer pursuant to the second preceding sentence. The Depositor
hereby grants to the Securities Administrator a limited power of attorney to
execute and file each such document on behalf of the Depositor. Such power of
attorney shall continue until either the earlier of (i) receipt by the
Securities Administrator from the Depositor of written termination of such power
of attorney and (ii) the termination of the Trust Fund. The Depositor agrees to
promptly furnish to the Securities Administrator, from time to time upon
request, such further information, reports and financial statements within its
control related to this Agreement, the Mortgage Loans as the Securities
Administrator reasonably deems appropriate to prepare and file all necessary
reports with the Commission. The Securities Administrator shall have no
responsibility to file any items other than those specified in this Section
4.18; provided, however, the Securities Administrator will cooperate with the
Depositor in connection with any additional filings with respect to the Trust
Fund as the Depositor deems necessary under the Securities Exchange Act of

                                      -78-

<PAGE>

1934, as amended (the "Exchange Act"). Copies of all reports filed by the
Securities Administrator under the Exchange Act shall be sent to: the Depositor
c/o Bear, Stearns & Co. Inc., Attn: Managing Director-Analysis and Control, One
Metrotech Center North, Brooklyn, New York 11202-3859. Fees and expenses
incurred by the Securities Administrator in connection with this Section 4.18
shall not be reimbursable from the Trust Fund.

         Section 4.19 EMC. On the Closing Date, EMC will receive from the Seller
a payment of $5,000.

         Section 4.20 UCC. The Trustee agrees to file continuation statements
for any Uniform Commercial Code financing statements which the Seller has
informed the Trustee were filed on the Closing Date in connection with the
Trust. The Seller shall file any financing statements or amendments thereto
required by any change in the Uniform Commercial Code.

         Section 4.21 OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS.

         With respect to any Mortgage Loans which as of the first day of a
Calendar Quarter is delinquent in payment by 90 days or more or is an REO
Property, EMC shall have the right to purchase any Mortgage Loan from the Trust
which becomes 90 days or more delinquent or becomes an REO Property at a price
equal to the Repurchase Price; provided however (i) that such Mortgage Loan is
still 90 days or more delinquent or is an REO Property as of the date of such
purchase and (ii) this purchase option, if not theretofore exercised, shall
terminate on the date prior to the last day of the related Calendar Quarter.
This purchase option, if not exercised, shall not be thereafter reinstated
unless the delinquency is cured and the Mortgage Loan thereafter again becomes
90 days or more delinquent or becomes an REO Property, in which case the option
shall again become exercisable as of the first day of the related Calendar
Quarter.

         In addition, EMC shall, at its option, purchase any Mortgage Loan from
the Trust if the first Due Date for such Mortgage Loan is subsequent to the
Cut-off Date and the initial Monthly Payment is not made within thirty (30) days
of such Due Date. Such purchase shall be made at a price equal to the Repurchase
Price.

         If at any time EMC remits to the Master Servicer a payment for deposit
in the Master Servicer Collection Account covering the amount of the Repurchase
Price for such a Mortgage Loan, and EMC provides to the Trustee a certification
signed by a Servicing Officer stating that the amount of such payment has been
deposited in the Master Servicer Collection Account, then the Trustee shall
execute the assignment of such Mortgage Loan prepared and delivered to the
Trustee, at the request of EMC, without recourse, representation or warranty, to
EMC which shall succeed to all the Trustee's right, title and interest in and to
such Mortgage Loan, and all security and documents relative thereto. Such
assignment shall be an assignment outright and not for security. EMC will
thereupon own such Mortgage, and all such security and documents, free of any
further obligation to the Trustee or the Certificateholders with respect
thereto.

                                      -79-

<PAGE>

                                    ARTICLE V

                                    ACCOUNTS

         Section 5.01 COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT.

                  (a) The Company shall make reasonable efforts in accordance
with customary and usual standards of practice of prudent mortgage lenders in
the respective states in which the Mortgaged Properties are located 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 Company may in its discretion (i) waive any late payment charge
and (ii) extend the due dates for payments due on a Mortgage Note for a period
not greater than 125 days. In the event of any such arrangement, the Company
shall make Advances on the related Mortgage Loan during the scheduled period in
accordance with the amortization schedule of such Mortgage Loan without
modification thereof by reason of such arrangements, and shall be entitled to
reimbursement therefor in accordance with Section 6.01. The Company 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. In addition, if (x) a Mortgage Loan is in default or default is
imminent or (y) the Company delivers to the Trustee a certification addressed to
the Trustee, based on the advice of counsel or certified public accountants, in
either case, that have a national reputation with respect to taxation of REMICs,
that a modification of such Mortgage Loan will not result in the imposition of
taxes on or disqualify any of REMIC I, REMIC II or REMIC III, the Company may,
(A) amend the related Mortgage Note to reduce the Mortgage Rate applicable
thereto, provided that such reduced Mortgage Rate shall in no event be lower
than 5.00% with respect to any Mortgage Loan and (B) amend any Mortgage Note to
extend to the maturity thereof.

                  (b) The Company shall establish and maintain a Protected
Account (which shall at all times be an Eligible Account) with a depository
institution in the name of the Company for the benefit of the Trustee on behalf
of the Certificateholders and designated "JPMorgan Chase Bank , in trust for
registered holders of Bear Stearns Asset Backed Securities, Inc., Asset-Backed
Certificates Series 2003-AC2". The Company shall deposit or cause to be
deposited into the Protected Account on a daily basis within one Business Day of
receipt, except as otherwise specifically provided herein, the following
payments and collections remitted by subservicers or received by it in respect
of the EMC Mortgage Loans subsequent to the Cut-off Date (other than in respect
of principal and interest due on the EMC 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, including Principal
         Prepayments, on the EMC Mortgage Loans;

                                      -80-

<PAGE>

                  (ii) all payments on account of interest on the EMC Mortgage
         Loans net of the related Servicing Fee permitted under Section 3.10 and
         LPMI Fees, if any;

                  (iii) all 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 Company's normal
         servicing procedures;

                  (iv) any amount required to be deposited by the Company
         pursuant to Section 5.01(c) in connection with any losses on Permitted
         Investments;

                  (v) any amounts required to be deposited by the Company
         pursuant to Section 3.05;

                  (v) any Prepayment Charges collected on the EMC Mortgage
         Loans; and

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

                  The foregoing requirements for remittance by the Company into
the Protected Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of late
payment charges or assumption fees, if collected, need not be remitted by the
Company. In the event that the Company shall remit any amount not required to be
remitted and not otherwise subject to withdrawal pursuant to Section 5.02, it
may at any time withdraw or direct the institution maintaining the Protected
Account, to withdraw such amount from the Protected Account, any provision
herein to the contrary notwithstanding. Such withdrawal or direction may be
accomplished by delivering written notice thereof to the institution maintaining
the Protected Account, that describes the amounts deposited in error in the
Protected Account. The Company shall maintain adequate records with respect to
all withdrawals made pursuant to this Section. All funds deposited in the
Protected Account shall be held in trust for the Certificateholders until
withdrawn in accordance with Section 5.02.

                  (c) The institution that maintains the Protected Account shall
invest the funds in the Protected Account, in the manner directed by the
Company, in Permitted Investments which shall mature not later than the
Remittance 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 shall be for the benefit of the Company as
servicing compensation and shall be remitted to it monthly as provided herein.
The amount of any losses incurred in the Protected Account in respect of any
such investments shall be deposited by the Company into the Protected Account,
out of the Company's own funds.

                  (d) The Company shall give at least 30 days advance notice to
the Trustee, the Seller, the Master Servicer, each Rating Agency and the
Depositor of any proposed change of location of the Protected Account prior to
any change thereof.

         Section 5.02 PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.

                                      -81-

<PAGE>

                  (a) The Company may from time to time make withdrawals from
the Protected Account for the following purposes:

                  (i) to pay itself (to the extent not previously paid to or
         withheld by the Company), as servicing compensation in accordance with
         Section 3.10, that portion of any payment of interest that equals the
         Servicing Fee for the period with respect to which such interest
         payment was made, and, as additional servicing compensation, those
         other amounts set forth in Section 3.10;

                  (ii) to reimburse the Company for Advances made by it with
         respect to the Mortgage Loans, provided, however, that the Company's
         right of reimbursement pursuant to this subclause (ii) shall be limited
         to amounts received on particular Mortgage Loan(s) (including, for this
         purpose, Liquidation Proceeds) that represent late recoveries of
         payments of principal and/or interest on such particular Mortgage
         Loan(s) in respect of which any such Advance was made;

                  (iii) to reimburse the Company for any previously made portion
         of a Servicing Advance or an Advance made by the Company that, in the
         good faith judgment of the Company, will not be ultimately recoverable
         by it from the related Mortgagor, any related Liquidation Proceeds or
         otherwise (a "Nonrecoverable Advance"), to the extent not reimbursed
         pursuant to clause (ii) or clause (v);

                  (iv) to reimburse the Company from Insurance Proceeds for
         Insured Expenses covered by the related Insurance Policy;

                  (v) to pay the Company any unpaid Servicing Fees and to
         reimburse it for any unreimbursed Servicing Advances, provided,
         however, that the Company's right to reimbursement for Servicing
         Advances pursuant to this subclause (v) with respect to any Mortgage
         Loan shall be limited to amounts received on particular Mortgage
         Loan(s) (including, for this purpose, Liquidation Proceeds and purchase
         and repurchase proceeds) that represent late recoveries of the payments
         for which such Servicing Advances were made;

                  (vi) to pay to the Seller, the Depositor or itself, as
         applicable, with respect to each Mortgage Loan or property acquired in
         respect thereof that has been purchased pursuant to Section 2.02, 2.03
         or 4.21 of this Agreement, all amounts received thereon and not taken
         into account in determining the related Stated Principal Balance of
         such repurchased Mortgage Loan;

                  (vii) to pay any expenses recoverable by the Company pursuant
         to Section 8.04 of this Agreement;

                  (viii) to withdraw pursuant to Section 5.01 any amount
         deposited in the Protected Account and not required to be deposited
         therein; and

                  (ix) to clear and terminate the Protected Account upon
         termination of this Agreement pursuant to Section 11.01 hereof.

                                      -82-

<PAGE>

                  In addition, no later than 1:00 p.m. Eastern time on the
Remittance Date, the Company shall withdraw from the Protected Account and remit
to the Master Servicer the amount required to be withdrawn therefrom pursuant to
Section 5.04 hereof. In addition, on or before the Remittance Date, the Company
shall remit to the Master Servicer for deposit in the Master Servicer Collection
Account any Advances or any payments of Compensating Interest required to be
made by the Company with respect to the EMC Mortgage Loans.

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

         Section 5.02A REPORTS TO MASTER SERVICER.

         On or before the tenth calendar day of each month, the Company shall
furnish to the Master Servicer electronically in a format acceptable to the
Master Servicer loan accounting reports in the investor's assigned loan number
order to document the payment activity on each EMC Mortgage Loan on an
individual mortgage loan basis. With respect to each month, such loan accounting
reports shall contain the following:

                  (i) With respect to each Scheduled Payment (on both an actual
         and scheduled basis with respect to mortgage loan balances and on an
         actual basis with respect to paid-through dates), the amount of such
         remittance allocable to principal (including a separate breakdown of
         any Principal Prepayment, including the amount of any Prepayment
         Interest Shortfall);

                  (ii) with respect to each Monthly Payment, the amount of such
         remittance allocable to scheduled interest;

                  (iii) the amount of servicing compensation received by the
         Company during the prior calendar month;

                  (iv) the aggregate scheduled principal balance of the EMC
         Mortgage Loans;

                  (v) the aggregate amount of Advances made by the Company
         pursuant to Section 6.01;

                  (vi) the aggregate of any expenses reimbursed to the Company
         during the prior calender month pursuant to Section 5.02;

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

                                      -83-

<PAGE>

                  (viii) the amount of any Prepayment Charges collected by the
         Company.

         Section 5.03 COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW
                      ACCOUNTS.

         With respect to each EMC Mortgage Loan, to the extent required by the
related Mortgage Note, the Company shall establish and maintain one or more
accounts (each, an "Escrow Account") and deposit and retain therein all
collections from the Mortgagors (or advances by the Company) for the payment of
taxes, assessments, hazard insurance premiums or comparable items for the
account of the Mortgagors. Nothing herein shall require the Company to compel a
Mortgagor to establish an Escrow Account in violation of applicable law.

         Withdrawals of amounts so collected from the Escrow Accounts may be
made only to effect timely payment of taxes, assessments, hazard insurance
premiums, condominium or PUD association dues, or comparable items, to reimburse
the Company out of related collections for any payments made with respect to
each EMC Mortgage Loan pursuant to Section 3.01 (with respect to taxes and
assessments and insurance premiums) and Section 3.05 (with respect to hazard
insurance), to refund to any Mortgagors for any EMC Mortgage Loans any sums as
may be determined to be overages, to pay interest, if required by law or the
terms of the related Mortgage or Mortgage Note, to such 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 11.01 thereof. The
Escrow Account shall not be a part of the Trust Fund.

         Section 5.04 SERVICER PROTECTED ACCOUNTS. (a) The Master Servicer shall
enforce the obligation of the Company and the Servicers to establish and
maintain a Protected Account in accordance with this Agreement and the Servicing
Agreements, with records to be kept with respect thereto on a Mortgage Loan by
Mortgage Loan basis, into which accounts shall be deposited within one Business
Day (or as of such other time specified in the Servicing Agreements) of receipt
all collections of principal and interest on any Mortgage Loan and with respect
to any REO Property received by the Company or the related Servicer, including
Principal Prepayments, Insurance Proceeds, Liquidation Proceeds, and advances
made from the Company's or such Servicer's own funds (less servicing
compensation as permitted by this Agreement or the related Servicing Agreement)
and all other amounts to be deposited in the Protected Accounts. Each of the
Company and the Servicers are hereby authorized to make withdrawals from and
deposits to the related Protected Account for purposes required or permitted by
this Agreement. To the extent provided in this Agreement or any Servicing
Agreement, the Protected Account shall be held in a Designated Depository
Institution and segregated on the books of such institution in the name of the
Trustee for the benefit of Certificateholders.

         (b) To the extent provided in this Agreement or any Servicing
Agreement, amounts on deposit in a Protected Account may be invested in
Permitted Investments in the name of the Trustee for the benefit of
Certificateholders and, except as provided in the preceding paragraph, not
commingled with any other funds, such Permitted Investments to mature, or to be
subject to redemption or withdrawal, no later than the date on which such funds
are required to be withdrawn for deposit in the Master Servicer Collection
Account, and shall be held until required for such deposit. The income earned
from Permitted Investments made pursuant to this Section 5.04 shall be paid to
the Company or the related Servicer under this Agreement or the related
Servicing

                                      -84-

<PAGE>

Agreement, and the risk of loss of moneys required to be distributed to the
Certificateholders resulting from such investments shall be borne by and be the
risk of the Company or the related Servicer, as the case may be. The Company or
the related Servicer (to the extent provided in this Agreement or the related
Servicing Agreement) shall deposit the amount of any such loss in the Protected
Account within two Business Days of receipt of notification of such loss but not
later than the second Business Day prior to the Distribution Date on which the
moneys so invested are required to be distributed to the Certificateholders.

         (c) To the extent provided in this Agreement or the related Servicing
Agreement and subject to this Article V, on or before each Remittance Date, the
Company or the related Servicer shall withdraw or shall cause to be withdrawn
from its Protected Account and shall immediately deposit or cause to be
deposited in the Master Servicer Collection Account amounts representing the
following collections and payments (other than with respect to principal of or
interest on the Mortgage Loans due on or before the Cut-off Date):

                  (i) Scheduled Payments on the Mortgage Loans received or any
related portion thereof advanced by the Company or the related Servicer pursuant
to the related Servicing Agreement which were due on or before the related Due
Date, net of the amount thereof comprising the Servicing Fees;

                  (ii) Full Principal Prepayments and any Liquidation Proceeds
received by the Company or the related Servicer with respect to such Mortgage
Loans in the related Prepayment Period, with interest to the date of prepayment
or liquidation, net of the amount thereof comprising the Servicing Fees and LPMI
Fees, if any;

                  (iii) Partial Principal Prepayments received by the Company or
the related Servicer for such Mortgage Loans in the related Prepayment Period;

                  (iv) Any amount to be used as an Advance; and

                  (v) The amount of any Prepayment Charges collected with
respect to the Mortgage Loans.

         (d) Withdrawals may be made from a Protected Account by the Company as
described in Section 5.02 hereof and by the Master Servicer or the related
Servicer only to make remittances as provided in Section 5.04(c), 5.05 and 5.06;
to reimburse the Master Servicer or the Servicer for Advances which have been
recovered by subsequent collection from the related Mortgagor; to remove amounts
deposited in error; to remove fees, charges or other such amounts deposited on a
temporary basis; or to clear and terminate the account at the termination of
this Agreement in accordance with Section 11.01. As provided in Sections 5.04(c)
and 5.05(b) certain amounts otherwise due to the related Servicer may be
retained by the related Servicer and need not be deposited in the Master
Servicer Collection Account.

         Section 5.05 MASTER SERVICER COLLECTION ACCOUNT. (a) The Master
Servicer shall establish and maintain in the name of the Trustee, for the
benefit of the Certificateholders, the Master Servicer Collection Account which
shall be an Eligible Account. The Master Servicer will deposit in the

                                      -85-

<PAGE>

Master Servicer Collection Account as identified by the Master Servicer and as
received by the Master Servicer, the following amounts:

                  (i) Any amounts withdrawn from a Protected Account;

                  (ii) Any Advance and any Compensating Interest Payments;

                  (iii) Any Insurance Proceeds or Liquidation Proceeds received
by or on behalf of the Master Servicer or which were not deposited in a
Protected Account;

                  (iv) The Repurchase Price with respect to any Mortgage Loans
purchased by the Seller or Section 2.02 or 2.03, any amounts which are to be
treated pursuant to Section 2.04 of this Agreement as the payment of such a
Repurchase Price, the Repurchase Price with respect to any Mortgage Loans
purchased by EMC pursuant to Section 4.21, and all proceeds of any Mortgage
Loans or property acquired with respect thereto repurchased by the Seller or its
designee pursuant to Section 11.01;

                  (v) Any amounts required to be deposited with respect to
losses on investments of deposits in an Account; and

                  (vi) Any other amounts received by or on behalf of the Master
Servicer or the Trustee and required to be deposited in the Master Servicer
Collection Account pursuant to this Agreement.

         (b) All amounts deposited to the Master Servicer Collection Account
shall be held by the Master Servicer in the name of the Trustee in trust for the
benefit of the Certificateholders in accordance with the terms and provisions of
this Agreement. The requirements for crediting the Master Servicer Collection
Account or the Distribution Account shall be exclusive, it being understood and
agreed that, without limiting the generality of the foregoing, payments in the
nature of late payment charges or assumption, tax service, statement account or
payoff, substitution, satisfaction, release and other like fees and charges,
need not be credited by the Master Servicer or the related Servicer to the
Distribution Account or the Master Servicer Collection Account, as applicable.
In the event that the Master Servicer shall deposit or cause to be deposited to
the Distribution Account any amount not required to be credited thereto, the
Trustee, upon receipt of a written request therefor signed by a Servicing
Officer of the Master Servicer, shall promptly transfer such amount to the
Master Servicer, any provision herein to the contrary notwithstanding.

         (c) The amount at any time credited to the Master Servicer Collection
Account may be invested, in the name of the Trustee, or its nominee, for the
benefit of the Certificateholders, in Permitted Investments or be held in cash
as directed by Master Servicer. All Permitted Investments shall mature or be
subject to redemption or withdrawal on or before, and shall be held until, the
next succeeding Distribution Account Deposit Date. Any and all investment
earnings from the Master Servicer Collection Account shall be paid to the Master
Servicer. The risk of loss of moneys required to be distributed to the
Certificateholders resulting from such investments shall be borne by and be the
risk of the Master Servicer. The Master Servicer shall deposit the amount of any
such loss in the Master Servicer Collection Account within two Business Days of
receipt of notification of such loss

                                      -86-

<PAGE>

but not later than the second Business Day prior to the Distribution Date on
which the moneys so invested are required to be distributed to the
Certificateholders.

         Section 5.06 PERMITTED WITHDRAWALS AND TRANSFERS FROM THE MASTER
SERVICER COLLECTION ACCOUNT. (a) The Master Servicer will, from time to time on
demand of the Master Servicer or the Securities Administrator, make or cause to
be made such withdrawals or transfers from the Master Servicer Collection
Account as the Master Servicer has designated for such transfer or withdrawal
pursuant to this Agreement and the related Servicing Agreement. The Master
Servicer may clear and terminate the Master Servicer Collection Account pursuant
to Section 11.01 and remove amounts from time to time deposited in error.

         (b) On an ongoing basis, the Master Servicer shall withdraw from the
Master Servicer Collection Account to pay itself as provided in Section 4.14 and
to pay any expenses recoverable by the Trustee, the Master Servicer, the
Custodian or the Securities Administrator pursuant to Sections 4.03, 8.03, 8.04
and 10.05.

         (c) In addition, on or before each Distribution Account Deposit Date,
the Master Servicer shall deposit in the Distribution Account (or remit to the
Trustee for deposit therein) any Advances required to be made by the Master
Servicer with respect to the Mortgage Loans.

         (d) No later than 3:00 p.m. New York time on each Distribution Account
Deposit Date, the Master Servicer will transfer all available funds on deposit
in the Master Servicer Collection Account with respect to the related
Distribution Date to the Trustee for deposit in the Distribution Account.

         Section 5.07 DISTRIBUTION ACCOUNT.

                  (a) The Trustee shall establish and maintain in the name of
the Trustee, for the benefit of the Certificateholders, the Distribution Account
as a segregated trust account or accounts.

                  (b) All amounts deposited to the Distribution Account shall be
held by the Trustee in the name of the Trustee in trust for the benefit of the
Certificateholders in accordance with the terms and provisions of this
Agreement.

                  (c) The Distribution Account shall constitute an Eligible
Account of the Trust Fund segregated on the books of the Trustee and held by the
Trustee and the Distribution Account and the funds deposited therein shall not
be subject to, and shall be protected from, all claims, liens, and encumbrances
of any creditors or depositors of the Trustee (whether made directly, or
indirectly through a liquidator or receiver of the Trustee). The amount at any
time credited to the Distribution Account may be, as directed by the Master
Servicer, held either uninvested in a trust or deposit account of the Trustee
with no liability for interest or other compensation thereof, except as
otherwise agreed in writing with the Master Servicer, or invested in the name of
the Trustee, in such Permitted Investments which mature not later than the
Business Day next preceding the succeeding Distribution Date, except if such
Permitted Investment is an obligation of or is managed by the institution that
maintains such fund or account, then such Permitted Investment shall mature not
later than such Distribution Date. Permitted Investments in respect of the
Distribution Account shall not

                                      -87-

<PAGE>

be sold or disposed of prior to their maturity. All investment earnings on
amounts on deposit in the Distribution Account or benefit from funds uninvested
therein from time to time shall be for the account of the Master Servicer. The
Master Servicer shall be permitted to receive distribution of any and all
investment earnings from the Distribution Account on each Distribution Date. If
there is any loss on a Permitted Investment or demand deposit, the Master
Servicer shall deposit the amount of the loss in the Distribution Account. With
respect to the Distribution Account and the funds deposited therein, the Trustee
shall take such action as may be necessary to ensure that the Certificateholders
shall be entitled to the priorities afforded to such a trust account (in
addition to a claim against the estate of the Trustee) as provided by 12 U.S.C.
ss. 92a(e), and applicable regulations pursuant thereto, if applicable, or any
applicable comparable state statute applicable to state chartered banking
corporations.

         Section 5.08 PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION
                      ACCOUNT.

         (a) The Trustee will, from time to time on demand of the Master
Servicer or the Securities Administrator, make or cause to be made such
withdrawals or transfers from the Distribution Account as the Master Servicer
has designated for such transfer or withdrawal pursuant to this Agreement or any
Servicing Agreement or as the Securities Administrator has instructed hereunder
for the following purposes (limited in the case of amounts due the Master
Servicer to those not withdrawn from the Master Servicer Collection Account in
accordance with the terms of this Agreement; provided that the Trustee shall not
be responsible for such determination and may rely on the Master Servicer's or
the Securities Administrator's instructions under this Section 5.08):

                  (i) to reimburse the Master Servicer, the Company or the
related Servicer for any Advance or Servicing Advance of its own funds, the
right of the Master Servicer, the Company or the related Servicer to
reimbursement pursuant to this subclause (i) being limited to amounts received
on a particular Mortgage Loan (including, for this purpose, the Repurchase Price
therefor, Insurance Proceeds and Liquidation Proceeds) which represent late
payments or recoveries of the principal of or interest on such Mortgage Loan
respecting which such Advance or Servicing Advance was made;

                  (ii) to reimburse the Master Servicer, the Company or the
related Servicer from Insurance Proceeds or Liquidation Proceeds relating to a
particular Mortgage Loan for amounts expended by the Master Servicer, the
Company or the related Servicer in good faith in connection with the restoration
of the related Mortgaged Property which was damaged by an uninsured cause or in
connection with the liquidation of such Mortgage Loan;

                  (iii) to reimburse the Master Servicer, the Company or the
related Servicer from Insurance Proceeds relating to a particular Mortgage Loan
for insured expenses incurred with respect to such Mortgage Loan and to
reimburse the Master Servicer, the Company or the related Servicer from
Liquidation Proceeds from a particular Mortgage Loan for Liquidation Expenses
incurred with respect to such Mortgage Loan; provided that the Master Servicer
shall not be entitled to reimbursement for Liquidation Expenses with respect to
a Mortgage Loan to the extent that (i) any amounts with respect to such Mortgage
Loan were paid as Excess Liquidation Proceeds pursuant to clause (x) of this
Subsection (a) to the Master Servicer; and (ii) such Liquidation Expenses were
not included in the computation of such Excess Liquidation Proceeds;

                                      -88-

<PAGE>

                  (iv)     reserved;

                  (v)      reserved;

                  (vi) to reimburse the Master Servicer, the Company or a
Servicer for advances of funds pursuant to this Agreement or the related
Servicing Agreement, and the right to reimbursement pursuant to this subclause
being limited to amounts received on the related Mortgage Loan (including, for
this purpose, the Repurchase Price therefor, Insurance Proceeds and Liquidation
Proceeds) which represent late recoveries of the payments for which such
advances were made;

                  (vii) to reimburse the Master Servicer, the Company or a
Servicer for any Advance or advance, after a Realized Loss has been allocated
with respect to the related Mortgage Loan if the Advance or advance has not been
reimbursed pursuant to clauses (i) and (vi);

                  (viii) to pay the Master Servicer as set forth in Section
4.14;

                  (ix) to reimburse the Master Servicer for expenses, costs and
liabilities incurred by and reimbursable to it pursuant to Sections 4.03,
8.04(c) and (d) and 12.02 or otherwise reimbursable to it pursuant to this
Agreement;

                  (x) to pay to the Master Servicer, as additional servicing
compensation, any Excess Liquidation Proceeds to the extent not retained by the
Company or the related Servicer;

                  (xi) to reimburse or pay the Company or the related Servicer
any such amounts as are due thereto under this Agreement or the related
Servicing Agreement and have not been retained by or paid to the Company or the
related Servicer, to the extent provided herein and in the related Servicing
Agreement;

                  (xii) to reimburse the Trustee, the Custodian or the
Securities Administrator for expenses, costs and liabilities incurred by or
reimbursable to it pursuant to this Agreement (to the extent not reimbursed from
the Master Servicer Collection Account in accordance with Section 5.06);

                  (xiii) to remove amounts deposited in error; and

                  (xiv) to clear and terminate the Distribution Account pursuant
to Section 11.01.

                  (b) The Master Servicer shall keep and maintain separate
accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
accounting for any reimbursement from the Distribution Account pursuant to
subclauses (i) through (vi), inclusive, and (viii) or with respect to any such
amounts which would have been covered by such subclauses had the amounts not
been retained by the Master Servicer without being deposited in the Distribution
Account under Section 5.06.

                                      -89-

<PAGE>

                  (c) On each Distribution Date, the Trustee shall distribute
the Available Funds to the extent of funds on deposit in the Distribution
Account to the holders of the Certificates in accordance with the Remittance
Report upon which the Trustee may conclusively rely.

                                      -90-

<PAGE>

                                   ARTICLE VI

                           DISTRIBUTIONS AND ADVANCES

         Section 6.01      ADVANCES.

         (a) The Company shall make an Advance with respect to any EMC Mortgage
Loan and deposit such Advance in the Master Servicer Collection Account no later
than 1:00 p.m. Eastern time on the Remittance Date in immediately available
funds. The Master Servicer shall cause the related Servicer to remit any such
Advance required pursuant to the terms of the related Servicing Agreement. The
Company or the related Servicer, as applicable, shall be obligated to make any
such Advance only to the extent that such advance would not be a Nonrecoverable
Advance. If the Company or the related Servicer shall have determined that it
has made a Nonrecoverable Advance or that a proposed Advance or a lesser portion
of such Advance would constitute a Nonrecoverable Advance, the Company or the
related Servicer, as the case may be, shall deliver (i) to the Trustee for the
benefit of the Certificateholders funds constituting the remaining portion of
such Advance, if applicable, and (ii) to the Depositor, the Master Servicer,
each Rating Agency and the Trustee an Officer's Certificate setting forth the
basis for such determination.

                  In lieu of making all or a portion of such Advance from its
own funds, the Company may (i) cause to be made an appropriate entry in its
records relating to the Protected Account that any Amounts Held for Future
Distribution has been used by the Company in discharge of its obligation to make
any such Advance and (ii) transfer such funds from the Protected Account to the
Distribution Account. Any funds so applied and transferred shall be replaced by
the Company by deposit in the Distribution Account, no later than the close of
business on the Remittance Date immediately preceding the Distribution Date on
which such funds are required to be distributed pursuant to this Agreement.

                  The Company shall be entitled to be reimbursed from the
Protected Account for all Advances of its own funds made pursuant to this
Section as provided in Section 5.02. The obligation to make Advances with
respect to any Mortgage Loan shall continue until such Mortgage Loan is paid in
full or the related Mortgaged Property or related REO Property has been
liquidated or until the purchase or repurchase thereof (or substitution
therefor) from the Trust Fund pursuant to any applicable provision of this
Agreement, except as otherwise provided in this Section 6.01.

         (b) If the Scheduled Payment on a Mortgage Loan that was due on a
related Due Date and is delinquent other than as a result of application of the
Relief Act and for which the Company or the related Servicer was required to
make an Advance pursuant to this Agreement or the related Servicing Agreement
exceeds the amount deposited in the Master Servicer Collection Account which
will be used for an Advance with respect to such Mortgage Loan, the Master
Servicer will deposit in the Master Servicer Collection Account not later than
the Distribution Account Deposit Date immediately preceding the related
Distribution Date an amount equal to such deficiency, net of the Master
Servicing Fee and Servicing Fee for such Mortgage Loan except to the extent the
Master Servicer determines any such Advance to be nonrecoverable from
Liquidation Proceeds,

                                      -91-

<PAGE>

Insurance Proceeds or future payments on the Mortgage Loan for which such
Advance was made. Subject to the foregoing, the Master Servicer shall continue
to make such Advances through the date that the Company or the related Servicer
is required to do so under this Agreement or the related Servicing Agreement, as
applicable. If applicable, on the Distribution Account Deposit Date, the Master
Servicer shall present an Officer's Certificate to the Trustee (i) stating that
the Master Servicer elects not to make an Advance in a stated amount and (ii)
detailing the reason it deems the advance to be nonrecoverable.

                  Subject to and in accordance with the provisions of Article IX
hereof, in the event the Master Servicer fails to make such Advance, then the
Trustee, as Successor Master Servicer, shall be obligated to make such Advance,
subject to the provisions of this Section 6.01.

         Section 6.02      COMPENSATING INTEREST PAYMENTS.

         (a) In the event that there is a Prepayment Interest Shortfall arising
from a voluntary Principal Prepayment in part or in full by the Mortgagor with
respect to any EMC Mortgage Loan, the Company shall, to the extent of the
Servicing Fee for such Distribution Date, deposit into the Master Servicer
Collection Account, as a reduction of the Servicing Fee for such Distribution
Date, no later than the close of business on the Remittance Date immediately
preceding such Distribution Date, an amount equal to the Prepayment Interest
Shortfall; and in case of such deposit, the Company shall not be entitled to any
recovery or reimbursement from the Depositor, the Trustee, the Seller, the
Securities Administrator, the Trust Fund or the Certificateholders.

         (b) The Master Servicer shall cause each Servicer under the related
Servicing Agreement to remit any required Compensating Interest Payments to the
Master Servicer Collection Account on the Remittance Date.

         (c) The Master Servicer shall be required to remit the amount of any
such Prepayment Interest Shortfalls, to the extent of the Master Servicing Fee
for such Distribution Date, in the event the Company or the related Servicer is
required to make such payment but fails to do so.

         Section 6.03      REMIC DISTRIBUTIONS.

                  On each Distribution Date the Securities Administrator, as
agent for the Trustee, shall be deemed to allocate distributions (i) to the
REMIC I Regular Interests in accordance with Section 6.06 hereof and (ii) to the
REMIC II Regular Interests in accordance with Section 6.07 hereof.

         Section 6.04      DISTRIBUTIONS.

                  (a) On each Distribution Date, the Available Funds for such
Distribution Date shall be withdrawn by the Trustee to the extent of funds on
deposit in the Distribution Account and distributed as directed in accordance
with the Remittance Report for such Distribution Date, in the following order of
priority:

                  FIRST, to pay accrued and unpaid interest on the Offered
Certificates as follows:

                                                       -92-

<PAGE>

                  1. To the holders of the Senior Certificates, the Monthly
         Interest Distributable Amount for each such Class for such Distribution
         Date, on a pro rata basis;

                  2. To the holders of the Class M-1 Certificates, the Monthly
         Interest Distributable Amount for such Class for such Distribution
         Date;

                  3. To the holders of the Class M-2 Certificates, the Monthly
         Interest Distributable Amount for such Class for such Distribution
         Date; and

                  4. To the holders of the Class B-1 Certificates and Class B-2
         Certificates, the Monthly Interest Distributable Amount for each such
         Class for such Distribution Date, on a pro rata basis.

         On any Distribution Date, any shortfalls resulting from the application
of the Relief Act or similar state law and any Prepayment Interest Shortfalls to
the extent not covered by Compensating Interest will be allocated as set forth
in the definition of "Monthly Interest Distributable Amount" herein.

                  SECOND, to pay principal on the Certificates as follows:

                  1. for each Distribution Date prior to the Distribution Date
         in May 2006, the Principal Distribution Amount shall be distributed
         concurrently (i) to the holders of the Class A-1, Class A-2, Class M-1,
         Class M-2 and Class B-1 Certificates and (ii) sequentially, in the
         following order, to the holders of the Class A-3 Certificates and Class
         A-4 Certificates, in each case allocated on a pro rata basis, based on
         the Certificate Principal Balance of each such Class, until the
         Certificate Principal Balance thereof has been reduced to zero;

                  2. for each Distribution Date on and after the Distribution
         Date in May 2006 (other than the Distribution Date in June 2008), the
         Principal Distribution Amount shall be distributed to the holders of
         the Offered Certificates (other than the Class A-IO Certificates),
         allocated on a pro rata basis, based on the Certificate Principal
         Balance of each such Class, until the Certificate Principal Balance of
         each such Class has been reduced to zero; and

                  3. on the Distribution Date in June 2008, the Principal
         Distribution Amount shall be distributed (i) to the Holders of the
         Class P Certificates, until the Certificate Principal Balance thereof
         has been reduced to zero and then (ii) to the holders of the Offered
         Certificates (other than the Class A-IO Certificates), allocated on a
         pro rata basis, based on the Certificate Principal Balance of each such
         Class, until the Certificate Principal Balance of each such Class has
         been reduced to zero.

                  THIRD, after the payment of interest and principal to the
Certificates as described in clauses FIRST and SECOND above, any Net Monthly
Excess Cashflow for such Distribution Date will be distributed as follows:

                                      -93-

<PAGE>

                  1. To the holders of the Offered Certificates then entitled to
         payments of principal, in an amount equal to any Extra Principal
         Distribution Amount, payable to such holders as part of the Principal
         Distribution Amount pursuant to clause SECOND above;

                  2. To the holders of the Class A-1, Class A-2, Class A-3,
         Class A-4 and Class A-IO Certificates, pro rata, then to the holders of
         the Class M-1 Certificates and the Class M-2 Certificates, in that
         order, and then to the holders of the Class B-1 Certificates and the
         Class B-2 Certificates, pro rata, any Unpaid Interest Shortfall for
         such Classes of Certificates on such Distribution Date, to the extent
         not previously reimbursed;

                  3. To the holders of the Class M-1 Certificates, in an amount
         equal to the Applied Realized Loss Amount for the Class M-1
         Certificates;

                  4. To the holders of the Class M-2 Certificates, in an amount
         equal to the Applied Realized Loss Amount for the Class M-2
         Certificates;

                  5. To the holders of the Class B-1 Certificates and Class B-2
         Certificates, on a pro rata basis, in an amount equal to the Applied
         Realized Loss Amount for each such Class;

                  6. To the Net WAC Reserve Fund, in respect to the Class A-1,
         Class A-2, Class A-3 and Class A-4 Certificates, the Net WAC Rate
         Carryover Amount for each such Class for such Distribution Date or any
         prior Distribution Dates to the extent unpaid;

                  7. To the Net WAC Reserve Fund, in respect to the Class M-1
         Certificates, the Net WAC Rate Carryover Amount for such Class for such
         Distribution Date or any prior Distribution Dates to the extent unpaid;

                  8. To the Net WAC Reserve Fund, in respect to the Class M-2
         Certificates, the Net WAC Rate Carryover Amount for such Class for such
         Distribution Date or any prior Distribution Dates to the extent unpaid;

                  9. To the Net WAC Reserve Fund, in respect to the Class B-1
         Certificates and Class B-2 Certificates, on a pro rata basis, the Net
         WAC Rate Carryover Amount for each such Class for such Distribution
         Date or any prior Distribution Dates to the extent unpaid;

                  10. To the holders of the Class C Certificates, the Class C
         Distribution Amount;

                  11. To the holders of the Class R-3 Certificates, any amount
of Net Monthly Excess Cashflow remaining after distributions pursuant to items 1
through 10 of this clause THIRD.

                  (b) On each Distribution Date, all amounts representing
Prepayment Charges in respect of the Mortgage Loans received during the related
Prepayment Period and deposited in the Distribution Account will be withdrawn
from the Distribution Account and distributed by the Trustee in accordance with
the Remittance Report to the Class P Certificates and shall not be available for
distribution to the holders of any other Class of Certificates. The payment of
such Prepayment Charges shall not reduce the Certificate Principal Balance of
the Class P Certificates.

                                      -94-

<PAGE>

                  (c) Subject to Section 11.02 hereof respecting the final
distribution, on each Distribution Date the Trustee shall make distributions to
each Certificateholder of record on the preceding Record Date either 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 5 Business Days prior to the related Record
Date and (ii) such Holder shall hold Regular Certificates with aggregate
principal denominations of not less than $1,000,000 or evidencing a Percentage
Interest aggregating 10% or more with respect to such Class or, if not, by check
mailed by first class mail to such Certificateholder at the address of such
holder appearing in the Certificate Register. Notwithstanding the foregoing, but
subject to Section 11.02 hereof respecting the final distribution, distributions
with respect to Certificates registered in the name of a Depository shall be
made to such Depository in immediately available funds.

                  (d) On or before 5:00 p.m. Eastern time on the fifth Business
Day immediately preceding each Distribution Date, the Master Servicer shall
deliver a report to the Securities Administrator in the form of a computer
readable magnetic tape (or by such other means as the Master Servicer and the
Securities Administrator may agree from time to time) containing such data and
information, as agreed to by the Master Servicer and the Securities
Administrator such as to permit the Securities Administrator to prepare the
Monthly Statement to Certificateholders and to direct the Trustee in writing to
make the required distributions for the related Distribution Date (the
"Remittance Report"). The Securities Administrator shall deliver a Remittance
Report to the Trustee on or before 5:00 p.m. Eastern time on the Business Day
immediately preceding each Distribution Date.

         Section 6.04A     ALLOCATION OF REALIZED LOSSES.

         (a) On or prior to each Determination Date, the Master Servicer shall
determine the amount of any Realized Loss in respect of each Mortgage Loan that
occurred during the immediately preceding calendar month.

         (b)      The interest portion of Realized Losses shall be allocated to
                  the Certificates as described in Section 1.02 hereof.

         (c)      The principal portion of all Realized Losses on the Mortgage
                  Loans allocated to any REMIC I Regular Interest pursuant to
                  Section 6.04(A)(c) shall be allocated on each Distribution
                  Date as follows: first, to Net Monthly Excess Cashflow;
                  second, to the Class C Certificates, until the Certificate
                  Principal Balance thereof has been reduced to zero; third, to
                  the Class B-1 Certificates and Class B-2 Certificates, on a
                  pro rata basis, until the Certificate Principal Balances
                  thereof have been reduced to zero; fourth, to the Class M-2
                  Certificates, until the Certificate Principal Balance thereof
                  has been reduced to zero; and fifth, to the Class M-1
                  Certificates, until the Certificate Principal Balance thereof
                  has been reduced to zero. All such Realized Losses to be
                  allocated to the Certificate Principal Balances of all Classes
                  on any Distribution Date shall be so allocated after the
                  actual distributions to be made on such date as provided
                  above. All references above to the Certificate Principal
                  Balance of any Class of Certificates shall be to the
                  Certificate Principal Balance of such Class immediately prior
                  to the relevant Distribution Date, before reduction thereof by
                  any Realized

                                      -95-

<PAGE>

                  Losses, in each case to be allocated to such Class of
                  Certificates, on such Distribution Date.

                  Any allocation of the principal portion of Realized Losses to
a Subordinate Certificate on any Distribution Date shall be made by reducing the
Certificate Principal Balance thereof by the amount so allocated; any allocation
of Realized Losses to a Class C Certificates shall be made by reducing the
amount otherwise payable in respect thereof pursuant to Section 6.04(a) clause
THIRD. No allocations of any Realized Losses shall be made to the Certificate
Principal Balances of the Class A-1, Class A-2, Class A-3, Class A-4 or Class P
Certificates.

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

         (d) The principal portion of all Realized Losses on the Mortgage Loans
shall be allocated on each Distribution Date first, to REMIC I Regular Interest
LTI-1 and REMIC I Regular Interest LTI-P, until the Uncertificated Principal
Balances have been reduced to zero and then to REMIC I Regular Interest
LTI-IO-A, REMIC I Regular Interest LTI-IO-B and REMIC I Regular Interest LTI-
IO-C, until the Uncertificated Principal Balances have been reduced to zero.

         (e) All Realized Losses on the REMIC I Regular Interests shall be
allocated on each Distribution Date to the following REMIC II Regular Interests
in the specified percentages, as follows: first, to Uncertificated Accrued
Interest payable to the REMIC II Regular Interest LTII-AA and REMIC II Regular
Interest LTII-ZZ up to an aggregate amount equal to the REMIC II Interest Loss
Allocation Amount, 98% and 2%, respectively; second, to the Uncertificated
Principal Balances of the REMIC II Regular Interest LTII-AA and REMIC II Regular
Interest LTII-ZZ up to an aggregate amount equal to the REMIC II Principal Loss
Allocation Amount, 98% and 2%, respectively; third, to the Uncertificated
Principal Balances of REMIC II Regular Interest LTII-AA, REMIC II Regular
Interest LTII-B1, REMIC II Regular Interest LTII-B2 and REMIC II Regular
Interest LTII-ZZ, 98%, 0.50%, 0.50% and 1%, respectively, until the
Uncertificated Principal Balances of REMIC II Regular Interest LTII-B1and REMIC
II Regular Interest LTII-B2 have been reduced to zero; fourth, to the
Uncertificated Principal Balances of REMIC II Regular Interest LTII-AA, REMIC II
Regular Interest LTII-M2 and REMIC II Regular Interest LTII-ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC II Regular
Interest LTII-M2 has been reduced to zero; and fifth, to the Uncertificated
Principal Balances of REMIC II Regular Interest LTII-AA, REMIC II Regular
Interest LTII-M1 and REMIC II Regular Interest LTII-ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC II Regular
Interest LTII-M1 has been reduced to zero.

         Section 6.05      MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

                                      -96-

<PAGE>

                  (a) Not later than each Distribution Date, the Securities
Administrator shall prepare and make available to each Holder of Certificates,
the Trustee, the Master Servicer and the Depositor a statement setting forth for
the Certificates:

                  (i) the amount of the related distribution to Holders of each
         Class allocable to principal, separately identifying (A) the aggregate
         amount of any Principal Prepayments included therein, (B) the aggregate
         of all scheduled payments of principal included therein and (C) Extra
         Principal Distribution Amount (if any);

                  (ii) the amount of such distribution to Holders of each Class
         allocable to interest;

                  (iii) the Certificate Principal Balance or Certificate
         Notional Balance of each Class after giving effect (i) to all
         distributions allocable to principal on such Distribution Date and (ii)
         the allocation of any Applied Realized Loss Amounts for such
         Distribution Date;

                  (iv) the aggregate of the Stated Principal Balances of all of
         the Mortgage Loans and of the Mortgage Loans for the following
         Distribution Date;

                  (v) the related amount of the Master Servicing Fees paid to or
         retained by the Master Servicer and the Servicing Fees paid to or
         retained by the Company or the related Servicer for the related Due
         Period;

                  (vi) the Pass-Through Rate for each Class of Certificates with
         respect to the current Accrual Period, and, if applicable, whether such
         Pass-Through Rate was limited by the Net WAC Rate Cap;

                  (vii) the amount of Advances included in the distribution on
         such Distribution Date;

                  (viii) the cumulative amount of Applied Realized Loss Amounts
         to date and, in addition, if the Certificate Principal Balances of the
         Subordinate Certificates have all been reduced to zero, the cumulative
         amount of any Realized Losses that have not been allocated to any
         Certificates;

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

                  (x) with respect to any Mortgage Loan that was liquidated
         during the preceding calendar month, the loan number and Stated
         Principal Balance of, and Realized Loss on, such Mortgage Loan as of
         the close of business on the Determination Date preceding such
         Distribution Date;

                                      -97-

<PAGE>

                  (xi) the total number and principal balance of any real estate
         owned or REO Properties as of the close of business on the
         Determination Date preceding such Distribution Date;

                  (xii) the three month rolling average of the percent
         equivalent of a fraction, the numerator of which is the aggregate
         stated Principal Balance of the Mortgage Loans that are 60 days or more
         delinquent or are in bankruptcy or foreclosure or are REO Properties,
         and the denominator of which is the aggregate Stated Principal Balance
         of all of the Mortgage Loans as of the last day of such Distribution
         Date;

                  (xiii) the Realized Losses during the related Prepayment
         Period and the cumulative Realized Losses through the end of the
         preceding month;

                  (xiv) Net WAC Rate Carryover Amount for each Class of
         Certificates and the amount on deposit in the Net WAC Reserve Fund; and

                  (xv) the amount of the distribution made on such Distribution
         Date to the Holders of the Class P Certificates allocable to Prepayment
         Charges.

                  The Securities Administrator may make the foregoing Monthly
Statement (and, at its option, any additional files containing the same
information in an alternative format) available each month to Certificateholders
via the Securities Administrator's internet website. The Securities
Administrator's internet website shall initially be located at
"www.ctslink.com". Assistance in using the website can be obtained by calling
the Securities Administrator'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 Securities Administrator may change the way
Monthly Statements are distributed in order to make such distributions more
convenient or more accessible to the above parties.

         To the extent timely received from the Securities Administrator, the
Trustee will also make the related Monthly Statements available to
Certificateholders via the Trustee's internet website. The Trustee's internet
website will initially be located at "www.jpmorgan.com/absmbs". Assistance in
using the Trustee's internet website can be obtained by calling the Trustee's
customer service desk at (877) 722-1095.

                  (b) The Securities Administrator's responsibility for making
the above information available to the Certificateholders is limited to the
availability, timeliness and accuracy of the information derived from the Master
Servicer, the Company and the Servicers. The Securities Administrator will make
available a copy of each statement provided pursuant to this Section 6.05 to
each Rating Agency.

                  (c) Within a reasonable period of time after the end of each
calendar year, the Trustee shall cause to be furnished upon request to each
Person who at any time during the calendar year was a Certificateholder, based
on information provided by the Securities Administrator containing the
information set forth in clauses (a)(i) and (a)(ii) of this Section 6.05
aggregated for such calendar year or applicable portion thereof during which
such Person was a Certificateholder.

                                      -98-

<PAGE>

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 or the Securities Administrator pursuant to any requirements of the Code
as from time to time in effect.

                  (d) Upon filing with the Internal Revenue Service, the
Securities Administrator shall furnish to the Holders of the Residual
Certificates the applicable Form 1066 and each applicable Form 1066Q and shall
respond promptly to written requests made not more frequently than quarterly by
any Holder of a Residual Certificate with respect to the following matters:

                  (i) The original projected principal and interest cash flows
         on the Closing Date on each Class of regular and residual interests
         created hereunder and on the Mortgage Loans, based on the Prepayment
         Assumption;

                  (ii) The projected remaining principal and interest cash flows
         as of the end of any calendar quarter with respect to each Class of
         regular and residual interests created hereunder and the Mortgage
         Loans, based on the Prepayment Assumption;

                  (iii) The applicable Prepayment Assumption and any interest
         rate assumptions used in determining the projected principal and
         interest cash flows described above;

                  (iv) The original issue discount (or, in the case of the
         Mortgage Loans, market discount) or premium accrued or amortized
         through the end of such calendar quarter with respect to each Class of
         regular or residual interests created hereunder and to the Mortgage
         Loans, together with each constant yield to maturity used in computing
         the same;

                  (v) The treatment of losses realized with respect to the
         Mortgage Loans or the regular interests created hereunder, including
         the timing and amount of any cancellation of indebtedness income of a
         REMIC with respect to such regular interests or bad debt deductions
         claimed with respect to the Mortgage Loans;

                  (vi) The amount and timing of any non-interest expenses of a
         REMIC; and

                  (vii) Any taxes (including penalties and interest) imposed on
         the REMIC, including, without limitation, taxes on "prohibited
         transactions," "contributions" or "net income from foreclosure
         property" or state or local income or franchise taxes.

                  The information pursuant to clauses (i), (ii), (iii) and (iv)
above shall be provided by the Depositor pursuant to Section 10.12.

         Section 6.06 REMIC DESIGNATIONS AND REMIC I ALLOCATIONS.

                  (a) The Trustee shall elect that each of REMIC I, REMIC II and
REMIC III and shall be treated as a REMIC under Section 860D of the Code. Any
inconsistencies or ambiguities in this Agreement or in the administration of
this Agreement shall be resolved in a manner that preserves the validity of such
REMIC elections. The assets of REMIC I shall include the Mortgage Loans and all
interest owing in respect of and principal due thereon, the Distribution
Account, the

                                      -99-

<PAGE>

Master Servicer Collection Account, the Reserve Account, the Protected Accounts
maintained by the Company and the Servicers, any REO Property, any proceeds of
the foregoing and any other assets subject to this Agreement (other than the Net
WAC Reserve Fund). The REMIC I Regular Interests shall constitute the assets of
REMIC II. The REMIC II Regular Interests shall constitute the assets of REMIC
III.

                  (b) On each Distribution Date, the Available Funds, in the
following order of priority and in accordance with the Remittance Report, shall
be distributed by REMIC I to REMIC II on account of the REMIC I Regular
Interests or withdrawn from the Distribution Account and distributed to the
Holders of the Class R-1 Certificates, as the case may be:

                  (i) first, to the Holders of REMIC I Regular Interest
LTI-IO-A, REMIC I Regular Interest LTI-IO-B and REMIC I Regular Interest
LTI-IO-C, in an amount equal to (A) the Uncertificated Accrued Interest for such
Distribution Date, plus (B) any amounts in respect thereof remaining unpaid from
previous Distribution Dates and second, to the Holders of REMIC I Regular
Interest LTI-1 and REMIC I Regular Interest LTI-P, in an amount equal to (A) the
Uncertificated Accrued Interest for such Distribution Date, plus (B) any amounts
in respect thereof remaining unpaid from previous Distribution Dates;

                  (ii) to the Holders of the REMIC I Regular Interest LTI-P, on
the Distribution Date in June 2008 or any Distribution Date thereafter until
$100 has been distributed pursuant to this clause;

                  (iii) on each Distribution Date, the remainder of the
Available Funds for such Distribution Date after the distributions made pursuant
to clause (i) and clause (ii) above, first, to the Holders of REMIC I Regular
Interest LTI-1 until the Uncertificated Principal Balance of such REMIC I
Regular Interest is reduced to zero, and second, to the Holders of REMIC I
Regular Interest LTI-IO-A, REMIC I Regular Interest LTI-IO-B and REMIC I Regular
Interest LTI-IO-C, until the Uncertificated Principal Balance of each such REMIC
I Regular Interest is reduced to zero; and

                  (iv) to the Holders of the Class R-1 Certificates, any amounts
remaining after the distributions pursuant to clauses (i) through (iii) above.

                  On each Distribution Date, all amounts representing Prepayment
Charges in respect of the Mortgage Loans received during the related Prepayment
Period will be distributed by REMIC I to the Holders of REMIC I Regular Interest
LTI-P. The payment of the foregoing amounts to the Holders of REMIC I Regular
Interest LTI-P shall not reduce the Uncertificated Principal Balance thereof.

         Section 6.07      REMIC II ALLOCATIONS.

                  (a) On each Distribution Date, the Available Funds, in the
following order of priority and in accordance with the Remittance Report, shall
be distributed by REMIC II to REMIC III on account of the REMIC II Regular
Interests or withdrawn from the Distribution Account and distributed to the
Holders of the Class R-2 Certificates, as the case may be:

                                      -100-

<PAGE>

                  (i) first, to the Holders of REMIC II Regular Interest
LTII-IO, in an amount equal to (A) the Uncertificated Accrued Interest for such
REMIC II Regular Interest for such Distribution Date, plus (B) any amounts in
respect thereof remaining unpaid from previous Distribution Dates and then to
Holders of REMIC II Regular Interest LTII-AA, REMIC Regular Interest LTII-A1,
REMIC Regular Interest LTII-A2, REMIC Regular Interest LTII-A3, REMIC Regular
Interest LTII- A4, REMIC II Regular Interest LTII-M1, REMIC II Regular Interest
LTII-M2, REMIC II Regular Interest LTII-B1, REMIC II Regular Interest LTII-B2,
REMIC II Regular Interest LTII-ZZ and REMIC II Regular Interest LTII-P, pro
rata, in an amount equal to (A) the Uncertificated Accrued Interest for each
such REMIC II Regular Interest for such Distribution Date, plus (B) any amounts
in respect thereof remaining unpaid from previous Distribution Dates. Amounts
payable as Uncertificated Accrued Interest in respect of REMIC II Regular
Interest LTII-ZZ shall be reduced and deferred when the REMIC II
Overcollateralized Amount is less than the REMIC II Overcollateralization Target
Amount, by the lesser of (x) the amount of such difference and (y) the REMIC II
Regular Interest LTII-ZZ Maximum Interest Deferral Amount and such amount will
be payable to the Holders of REMIC Regular Interest LTII-A1, REMIC Regular
Interest LTII-A2, REMIC Regular Interest LTII-A3, REMIC Regular Interest
LTII-A4, REMIC II Regular Interest LTII-M1, REMIC II Regular Interest LTII-M2,
REMIC II Regular Interest LTII-B1 and REMIC II Regular Interest LTII-B2 in the
same proportion as the Overcollateralization Increase Amount is allocated to the
Corresponding Certificates;

                  (ii) second, to the Holders of REMIC II Regular Interests, in
an amount equal to the remainder of the Available Funds for such Distribution
Date after the distributions made pursuant to clause (i) above, allocated as
follows:

                  (a) to the Holders of REMIC II Regular Interest LTII-AA and
REMIC II Regular Interest LTII-P, 98.00% of such remainder (other than amounts
payable under clause (d) below), until the Uncertificated Principal Balance of
such REMIC II Regular Interest is reduced to zero, provided, however, that the
Uncertificated Principal Balance of REMIC II Regular Interest LTII-P shall not
be reduced until the Distribution Date in June 2008 or any Distribution Date
thereafter, at which point such amount shall be distributed to REMIC II Regular
Interest LTII-P, until $100 has been distributed pursuant to this clause;

                  (b) to the Holders of REMIC Regular Interest LTII-A1, REMIC
Regular Interest LTII-A2, REMIC Regular Interest LTII-A3, REMIC Regular Interest
LTII-A4, REMIC II Regular Interest LTII-M1, REMIC II Regular Interest LTII-M2,
REMIC II Regular Interest LTII-B1 and REMIC II Regular Interest LTII-B2, 1.00%
of such remainder (other than amounts payable under clause (d) below), in the
same proportion as principal payments are allocated to the Corresponding
Certificates, until the Uncertificated Principal Balances of such REMIC II
Regular Interests are reduced to zero;

                  (c) to the Holders of REMIC II Regular Interest LTII-ZZ, 1.00%
of such remainder (other than amounts payable under the proviso below), until
the Uncertificated Principal Balance of such REMIC II Regular Interest is
reduced to zero; then

                  (d) any remaining amount to the Holders of the Class R-2
Certificates; and

                                                       -101-

<PAGE>

                  (iii) third, to REMIC II Regular Interest LTII-P, 100% of the
amount paid in respect of REMIC I Regular Interest LTI-P;

provided, however, that (i) 98.00% and (ii) 2.00% of any principal payments that
are attributable to an Overcollateralization Release Amount shall be allocated
to Holders of (i) REMIC II Regular Interest LTII-AA and REMIC II Regular
Interest LTII-P, in that order and (ii) REMIC II Regular Interest LTII-ZZ,
respectively; provided that REMIC II Regular Interest LTII-P shall not be
reduced until the Distribution Date in May 2008, at which point such amount
shall be distributed to REMIC II Regular Interest LTII-P, until $100 has been
distributed pursuant to this clause.

         Section 6.08      NET WAC RESERVE FUND.

         (a) The Trustee shall establish a Net WAC Reserve Fund on behalf of the
holders of the Offered Certificates (other than the Class A-IO Certificates).
The Net WAC Reserve Fund must be an Eligible Account. The Net WAC Reserve Fund
shall be entitled "Net WAC Reserve Fund, JPMorgan Chase Bank as Trustee for the
benefit of holders of Bear Stearns Asset Backed Securities, Inc., Asset-Backed
Certificates, Series 2003-AC2, Class A-1, Class A-2, Class A-3, Class A-4, Class
M-1, Class M-2, Class B-1 and Class B-2". On the Closing Date, the Depositor
will deposit, or cause to be deposited, into the Net WAC Reserve Fund $5,000. On
each Distribution Date as to which there is a Net WAC Rate Carryover Amount
payable to any Class of Certificates, the Trustee shall deposit the amounts
pursuant to paragraphs 6, 7, 8 and 9 of clause THIRD of Section 6.04(a) into the
Net WAC Reserve Fund and the Trustee has been directed by the Class C
Certificateholder to distribute such amounts to the Holders of the Offered
Certificates (other than the Class A-IO Certificates) in the amounts and
priorities set forth in clause THIRD of Section 6.04(a). Notwithstanding
anything set forth herein, any distributions to the Holders of the Class B-1
Certificates and Class B-2 Certificates pursuant to this Section 6.08 shall be
made on a pro rata basis.

         (b) The Net WAC Reserve Fund is an "outside reserve fund" within the
meaning of Treasury Regulation ss.1.860G-2(h) and shall be an asset of the Trust
Fund but not an asset of any REMIC. The Trustee on behalf of the Trust shall be
the nominal owner of the Net WAC Reserve Fund. The Class C Certificateholders
shall be the beneficial owners of the Net WAC Reserve Fund, subject to the power
of the Trustee to transfer amounts under Section 6.04(a). Amounts in the Net WAC
Reserve Fund shall be held either uninvested in a trust or deposit account of
the Trustee with no liability for interest or other compensation thereof or, at
the direction of the Majority Class C Certificateholder, be invested in
Permitted Investments that mature no later than the Business Day prior to the
next succeeding Distribution Date. All net income and gain from such investments
shall be distributed to the Majority Class C Certificateholder, not as a
distribution in respect of any interest in any REMIC, on such Distribution Date.
All amounts earned on amounts on deposit in the Net WAC Reserve Fund shall be
taxable to the Majority Class C Certificateholder. Any losses on such
investments shall be deposited in the Net WAC Reserve Fund by the Majority Class
C Certificateholder out of its own funds immediately as realized. In the event
that the Majority Class C Certificateholder shall fail to provide investment
instructions to the Trustee, the amounts on deposit in the Net WAC Reserve Fund
shall be held uninvested.

                                      -102-

<PAGE>

         (c) For federal tax return and information reporting, the right of the
holders of the Offered Certificates (other than the Class A-IO Certificates) to
receive payments from the Net WAC Reserve Fund in respect of any Net WAC Rate
Carryover Amount shall be assigned a value of zero.

                                      -103-

<PAGE>

                                   ARTICLE VII

                                THE CERTIFICATES

         Section 7.01      THE CERTIFICATES.

                  The Certificates shall be substantially in the forms attached
hereto as Exhibits A-1 through A-7. The Certificates shall be issuable in
registered form, in the minimum dollar denominations, integral dollar multiples
in excess thereof (except that one Certificate of each Class may be issued in a
different amount which must be in excess of the applicable minimum dollar
denomination) and aggregate dollar denominations as set forth in the following
table:

<TABLE>
<CAPTION>
                   Minimum         Integral Multiple in   Original Certificate
    Class        Denomination        Excess of Minimum     Principal Balance              Pass-Through Rate
    -----        ------------        -----------------     -----------------              -----------------
<S>                <C>                     <C>               <C>                      <C>
     A-1           $25,000                 $1,000            $100,000,000.00          Class A-1 Pass-Through Rate
     A-2           $25,000                 $1,000             $35,000,000.00          Class A-2 Pass-Through Rate
     A-3           $25,000                 $1,000            $100,996,000.00          Class A-3 Pass-Through Rate
     A-4           $25,000                 $1,000             $53,400,000.00          Class A-4 Pass-Through Rate
    A-IO           $25,000                 $1,000                  N/A                Class A-IO Pass-Through Rate
     M-1           $25,000                 $1,000             $18,400,000.00          Class M-1 Pass-Through Rate
     M-2           $25,000                 $1,000             $13,383,000.00          Class M-2 Pass-Through Rate
     B-1           $25,000                 $1,000             $6,393,000.00           Class B-1 Pass-Through Rate
     B-2           $25,000                 $1,000             $6,992,440.00           Class B-1 Pass-Through Rate
      C            $25,000                 $1,000                  N/A                            N/A
      P               $100                   N/A                 $100.00                          N/A
     R-1              100%                   N/A                   N/A                            N/A
     R-2              100%                   N/A                   N/A                            N/A
     R-3              100%                   N/A                   N/A                            N/A
</TABLE>

                  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 authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of such authentication and
delivery. No Certificate shall be entitled to any benefit under this Agreement,
or be valid for any purpose, unless there appears on such Certificate the
countersignature of 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 countersigned and delivered hereunder. All
Certificates shall be dated the date of their countersignature. On the Closing
Date, the Trustee shall authenticate the Certificates to be issued at the
written 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 7.02 CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND
EXCHANGE OF CERTIFICATES.

                                      -104-

<PAGE>

                  (a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 7.09 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 authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Certificates
of the same Class and of like aggregate Percentage Interest.

                  At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of the same Class in authorized denominations
and evidencing the same aggregate Percentage Interest upon surrender of the
Certificates to be exchanged at the office or agency of the Trustee. Whenever
any Certificates are so surrendered for exchange, the Trustee shall execute,
authenticate, and deliver the Certificates that 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 canceled and subsequently destroyed by the Trustee in
accordance with the Trustee's customary procedures.

                  (b) No Transfer of a Private Certificate shall be made unless
such Transfer is made pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws or is exempt from the
registration requirements under the Securities 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 and the Securities Administrator in writing the facts surrounding
the Transfer in substantially the forms set forth in Exhibit E (the "Transferor
Certificate") and (x) deliver a letter in substantially the form of either
Exhibit F (the "Investment Letter") or Exhibit G (the "Rule 144A Letter") or (y)
there shall be delivered to the Trustee and the Securities Administrator an
Opinion of Counsel addressed to the Trustee and the Securities Administrator
that such Transfer may be made pursuant to an exemption from the Securities Act,
which Opinion of Counsel shall not be an expense of the Depositor, the Seller,
the Master Servicer, the Securities Administrator or the Trustee. 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, the Securities Administrator 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

                                      -105-

<PAGE>

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, the Depositor, the Seller, the
Securities Administrator and the Master Servicer against any liability that may
result if the Transfer is not so exempt or is not made in accordance with such
federal and state laws.

                  No Transfer of an ERISA Restricted Certificate shall be made
unless either (i) the Trustee, the Master Servicer and the Securities
Administrator shall have received a representation from the transferee of such
Certificate acceptable to and in form and substance satisfactory to the Trustee,
the Master Servicer and the Securities Administrator, to the effect that such
transferee is not an employee benefit plan subject to Section 406 of ERISA
and/or a plan subject to Section 4975 of the Code, or a Person acting on behalf
of any such plan or using the assets of any such plan, or (ii) 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 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, the
Trustee shall have received an Opinion of Counsel for the benefit of the
Trustee, the Master Servicer and the Securities Administrator and on which they
may rely, satisfactory to the Trustee, to the effect that the purchase or
holding of such ERISA Restricted Certificate will not result in any prohibited
transactions under ERISA or Section 4975 of the Code and will not subject the
Trustee, the Master Servicer, the Depositor or the Securities Administrator to
any obligation in addition to those expressly undertaken in this Agreement,
which Opinion of Counsel shall not be an expense of the Trustee, the Master
Servicer, the Depositor or the Securities Administrator. 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
Section 406 of ERISA and/or a plan subject to Section 4975 of the Code without
the delivery of the Opinion of Counsel as described above shall be void and of
no effect; provided that the restriction set forth in this sentence shall not be
applicable if there has been delivered to the Trustee an Opinion of Counsel
meeting the requirements of clause (ii) of the first sentence of this paragraph.
None of the Trustee, the Securities Administrator or the Master Servicer shall
be required to monitor, determine or inquire as to compliance with the transfer
restrictions with respect to any ERISA Restricted Certificate that is a
Book-Entry Certificate, and none of the Trustee, the Securities Administrator or
the Master Servicer shall have any liability for transfers of any such
Book-Entry Certificates made through the book-entry facilities of any Depository
or between or among participants of the Depository or Certificate Owners made in
violation of the transfer restrictions set forth herein. None of the Trustee,
the Securities Administrator or the Master Servicer shall be under any liability
to any Person for any registration of transfer of any ERISA Restricted
Certificate that is in fact not permitted by this Section 7.02(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. The
Trustee and the Securities Administrator shall each be entitled, but not
obligated, to recover from any Holder of any ERISA Restricted Certificate that
was in fact an employee benefit plan subject to Section 406 of ERISA or a plan
subject to Section 4975 of the Code or a Person acting on behalf of any such
plan at the time it became a Holder or, at such subsequent time as it became
such a plan or Person acting on behalf of such a plan, all payments made on such
ERISA Restricted Certificate at and after either such time. Any such payments so
recovered by the Trustee or the Securities Administrator shall be paid and
delivered by the Trustee or the Securities

                                      -106-

<PAGE>

Administrator to the last preceding Holder of such Certificate that is not such
a plan or Person acting on behalf of a plan.

         Each beneficial owner of a Class M-1, Class M-2, Class B-1 or Class B-2
Certificate or any interest therein shall be deemed to have represented, by
virtue of its acquisition or holding of that certificate or interest therein,
that either (i) it is not a Plan or investing with "Plan Assets", (ii) it has
acquired and is holding such certificate in reliance on the Exemption, and that
it understands that there are certain conditions to the availability of the
Exemption, including that the certificate must be rated, at the time of
purchase, not lower than "BBB-" (or its equivalent) by S&P, Fitch or Moody's
Investors Service, Inc., and the certificate is so rated or (iii) (1) it is an
insurance company, (2) the source of funds used to acquire or hold the
certificate or interest therein is an "insurance company general account," as
such term is defined in Prohibited Transaction Class Exemption ("PTCE") 95-60,
and (3) the conditions in Sections I and III of PTCE 95-60 have been satisfied.

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

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

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

                  (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 7.02(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 6.02(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

                                      -107-

<PAGE>

         Certificate that is in fact not permitted by Section 7.02(b) and this
         Section 7.02(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. 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 Master Servicer shall make available within 60 days of
         written request from the Trustee, all information necessary to compute
         any tax imposed under Section 860E(e) of the Code as a result of a
         Transfer of an Ownership Interest in a Residual Certificate to any
         Holder who is not a Permitted Transferee.

                  The restrictions on Transfers of a Residual Certificate set
forth in this Section 7.02(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
addressed to the Trustee, which Opinion of Counsel shall not be an expense of
the Trustee, the Securities Administrator, the Seller or the Master Servicer to
the effect that the elimination of such restrictions will not cause REMIC I,
REMIC II and/or REMIC III, as applicable, 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 that, based on an Opinion of Counsel
addressed to the Trustee and 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 that 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 7.02 shall not be an expense of the
Trust Fund, the Trustee, the Depositor, the Seller, the Securities Administrator
or the Master Servicer.

         Section 7.03 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 of the ownership thereof and
(b) there is delivered to the Securities Administrator 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, authenticate 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 7.03, 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

                                      -108-

<PAGE>

therewith. Any replacement Certificate issued pursuant to this Section 7.03
shall constitute complete and indefeasible evidence of ownership in the Trust
Fund, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time. All Certificates surrendered to the
Trustee under the terms of this Section 7.03 shall be canceled and destroyed by
the Trustee in accordance with its standard procedures without liability on its
part.

         Section 7.04 PERSONS DEEMED OWNERS.

                  The Securities Administrator, the Trustee and any agent of the
Securities Administrator 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 Securities Administrator, the Trustee nor any agent
of the Securities Administrator or the Trustee shall be affected by any notice
to the contrary.

         Section 7.05 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 that such Certificateholders propose to transmit or if the
Depositor or the 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 the 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.

         Section 7.06 BOOK-ENTRY CERTIFICATES.

                  The Regular Certificates, upon original issuance, shall be
issued in the form of one or more typewritten Certificates representing the
Book- Entry Certificates, to be delivered to the Depository by or on behalf of
the Depositor. Such Certificates shall initially be registered on the
Certificate Register in the name of the Depository or its nominee, and no
Certificate Owner of such Certificates will receive a definitive certificate
representing such Certificate Owner's interest in such Certificates, except as
provided in Section 7.08. Unless and until definitive, fully registered
Certificates ("Definitive Certificates") have been issued to the Certificate
Owners of such Certificates pursuant to Section 7.08:

                  (a) the provisions of this Section shall be in full force and
effect;

                  (b) the Depositor, the Securities Administrator and the
Trustee may deal with the Depository and the Depository Participants for all
purposes (including the making of distributions) as the authorized
representative of the respective Certificate Owners of such Certificates;

                                      -109-

<PAGE>

                  (c) registration of the Book-Entry Certificates may not be
transferred by the Trustee except to another Depository;

                  (d) the rights of the respective Certificate Owners of such
Certificates shall be exercised only through the Depository and the Depository
Participants and shall be limited to those established by law and agreements
between the Owners of such Certificates and the Depository and/or the Depository
Participants. Pursuant to the Depository Agreement, unless and until Definitive
Certificates are issued pursuant to Section 7.08, the Depository will make
book-entry transfers among the Depository Participants and receive and transmit
distributions of principal and interest on the related Certificates to such
Depository Participants;

                  (e) the Depository may collect its usual and customary fees,
charges and expenses from its Depository Participants;

                  (f) the Trustee may rely and shall be fully protected in
relying upon information furnished by the Depository with respect to its
Depository Participants; and

                  (g) to the extent that the provisions of this Section conflict
with any other provisions of this Agreement, the provisions of this Section
shall control.

                  For purposes of any provision of this Agreement requiring or
permitting actions with the consent of, or at the direction of,
Certificateholders evidencing a specified percentage of the aggregate unpaid
principal amount of any Class of Certificates, such direction or consent may be
given by Certificate Owners (acting through the Depository and the Depository
Participants) owning Book-Entry Certificates evidencing the requisite percentage
of principal amount of such Class of Certificates.

         Section 7.07 NOTICES TO DEPOSITORY.

                  Whenever any notice or other communication is required to be
given to Certificateholders of a Class with respect to which Book-Entry
Certificates have been issued, unless and until Definitive Certificates shall
have been issued to the related Certificate Owners, the Trustee shall give all
such notices and communications to the Depository.

         Section 7.08 DEFINITIVE CERTIFICATES.

                  If, after Book-Entry Certificates have been issued with
respect to any Certificates, (a) the Depositor or the Depository advises the
Trustee that the Depository is no longer willing or able to discharge properly
its responsibilities under the Depository Agreement with respect to such
Certificates and the Depositor is unable to locate a qualified successor, (b)
the Depositor, at its sole option, advises the Trustee that it elects to
terminate the book-entry system with respect to such Certificates through the
Depository or (c) after the occurrence and continuation of an Event of Default,
Certificate Owners of such Book-Entry Certificates having not less than 51% of
the Voting Rights evidenced by any Class of Book-Entry Certificates advise the
Trustee and the Depository in writing through the Depository Participants that
the continuation of a book-entry system with respect to Certificates of such
Class through the Depository (or its successor) is no longer in the best

                                      -110-

<PAGE>

interests of the Certificate Owners of such Class, then the Trustee shall notify
all Certificate Owners of such Certificates, through the Depository, of the
occurrence of any such event and of the availability of Definitive Certificates
to applicable Certificate Owners requesting the same. The Depositor shall
provide the Trustee with an adequate inventory of certificates to facilitate the
issuance and transfer of Definitive Certificates. Upon surrender to the Trustee
of any such Certificates by the Depository, accompanied by registration
instructions from the Depository for registration, the Trustee shall countersign
and deliver such Definitive Certificates. Neither the Depositor nor the Trustee
shall be liable for any delay in delivery of such instructions and each may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of such Definitive Certificates, all references herein to
obligations imposed upon or to be performed by the Depository shall be deemed to
be imposed upon and performed by the Trustee, to the extent applicable with
respect to such Definitive Certificates and the Trustee shall recognize the
Holders of such Definitive Certificates as Certificateholders hereunder.

         Section 7.09 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 at 2001 Bryan Street, 8th
Floor, Dallas, Texas 75201, Attention: ITS Transfer Department -BSABS 2003-AC2
where Certificates may be surrendered for registration of transfer or exchange.
The Trustee will give prompt written notice to the Certificateholders of any
change in such location of any such office or agency.

                                      -111-

<PAGE>

                                  ARTICLE VIII

                       THE COMPANY AND THE MASTER SERVICER

         Section 8.01 LIABILITIES OF THE DEPOSITOR, THE COMPANY AND THE MASTER
SERVICER. Each of the Depositor, the Company and the Master Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
imposed upon and undertaken by it herein.

         Section 8.02 MERGER OR CONSOLIDATION OF THE DEPOSITOR, THE COMPANY OR
THE MASTER SERVICER.

                  (a) Each of the Depositor, the Company and the Master Servicer
will keep in full force and effect its existence, rights and franchises as a
corporation under the laws of the state of its incorporation, and will obtain
and preserve its qualification to do business as a foreign corporation in each
jurisdiction in which such qualification is or shall be necessary to protect the
validity and enforceability of this Agreement, the Certificates or any of the
Mortgage Loans and to perform its duties under this Agreement.

                  (b) Any Person into which the Depositor, the Company or the
Master Servicer may be merged or consolidated, or any corporation resulting from
any merger or consolidation to which the Depositor, the Company or the Master
Servicer shall be a party, or any Person succeeding to the business of the
Depositor, the Company or the Master Servicer, shall be the successor of the
Depositor, the Company or the Master Servicer hereunder, 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 8.03 INDEMNIFICATION OF THE TRUSTEE, THE MASTER SERVICER AND
                      THE SECURITIES ADMINISTRATOR.

                  (a) The Master Servicer agrees to indemnify the Indemnified
Persons for, and to hold them harmless against, any loss, liability or expense
(including reasonable legal fees and disbursements of counsel) incurred on their
part that may be sustained in connection with, arising out of, or relating to,
any claim or legal action (including any pending or threatened claim or legal
action) relating to this Agreement, including the powers of attorney delivered
pursuant to Sections 4.01 and 4.05 hereof, the Assignment Agreements, the
Custodial Agreement or the Certificates (i) related to the Master Servicer's
failure to perform its duties in compliance with this Agreement (except as any
such loss, liability or expense shall be otherwise reimbursable pursuant to this
Agreement) or (ii) incurred by reason of the Master Servicer's willful
misfeasance, bad faith or gross negligence in the performance of duties
hereunder or by reason of reckless disregard of obligations and duties
hereunder, provided, in each case, that with respect to any such claim or legal
action (or pending or threatened claim or legal action), the Trustee shall have
given the Master Servicer and the Seller written notice thereof promptly after
the Trustee shall have with respect to such claim or legal action knowledge
thereof; provided, however that the failure to give such notice shall not
relieve the Master Servicer of its indemnification obligations hereunder. This
indemnity shall

                                      -112-

<PAGE>

survive the resignation or removal of the Trustee, Master Servicer or the
Securities Administrator and the termination of this Agreement.

                  (b) The Company agrees to indemnify the Indemnified Persons
and to hold them harmless from and against any and all claims, losses, damages,
penalties, fines, forfeitures, legal fees and related costs, judgments, and any
other costs, fees and expenses that the Indemnified Persons may sustain in any
way related to the failure of the Company to perform in any way its duties and
service the EMC Mortgage Loans in strict compliance with the terms of this
Agreement and for breach of any representation or warranty of the Company
contained herein. The Company shall immediately notify the Master Servicer and
the Trustee if a claim is made by a third party with respect to this Agreement
or the EMC Mortgage Loans, assume (with the consent of the Master Servicer and
the Trustee and with counsel reasonably satisfactory to the Master Servicer and
the Trustee) the defense of any such claim and pay all expenses in connection
therewith, including counsel fees, and promptly pay, discharge and satisfy any
judgment or decree which may be entered against it or any Indemnified Person in
respect of such claim but failure to so notify the Company shall not limit its
obligations hereunder. The Company agrees that it will not enter into any
settlement of any such claim without the consent of the Indemnified Persons
unless such settlement includes an unconditional release of such Indemnified
Persons from all liability that is the subject matter of such claim. The
provisions of this Section 8.03(b) shall survive termination of this Agreement.

                  (c) The Seller will indemnify any Indemnified Person for any
loss, liability or expense of any Indemnified Person not otherwise paid or
covered pursuant to Subsections (a) or (b) above.

         Section 8.04 LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE COMPANY,
THE MASTER SERVICER AND OTHERS. Subject to the obligation of the Depositor, the
Company and the Master Servicer to indemnify the Indemnified Persons pursuant to
Section 8.03:

                  (a) Neither the Depositor, the Company, the Master Servicer
nor any of the directors, officers, employees or agents of the Depositor, the
Company and the Master Servicer shall be under any liability to the Indemnified
Persons, the Trust Fund or the Certificateholders for taking any action or for
refraining from taking 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 Company, the Master Servicer or any such Person against any
breach of warranties or representations made herein or any liability which would
otherwise be imposed by reason of such Person's willful misfeasance, bad faith
or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder.

                  (b) The Depositor, the Company, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Company and 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.

                  (c) The Depositor, the Company, the Master Servicer, the
Trustee, the Custodian and any director, officer, employee or agent of the
Depositor, the Company, the Master Servicer, the

                                      -113-

<PAGE>

Trustee or the Custodian shall be indemnified by the Trust and held harmless
thereby against any loss, liability or expense (including reasonable legal fees
and disbursements of counsel) incurred on their part that may be sustained in
connection with, arising out of, or related to, any claim or legal action
(including any pending or threatened claim or legal action) relating to this
Agreement, the Assignment Agreements, the Custodial Agreement, the Certificates
or the Servicing Agreements (except with respect to the Master Servicer only, to
the extent that the Master Servicer is indemnified by the Company under this
Agreement or by the related Servicer under the related Servicing Agreement),
other than (i) any such loss, liability or expense related to the Company's or
the Master Servicer's failure to perform its respective duties in compliance
with this Agreement (except as any such loss, liability or expense shall be
otherwise reimbursable pursuant to this Agreement), or to the Custodian's
failure to perform its duties under the Custodial Agreement, or (ii) any such
loss, liability or expense incurred by reason of the Company's, the Master
Servicer's or the Custodian's willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or under the Custodial Agreement, as
applicable, or by reason of reckless disregard of obligations and duties
hereunder or under the Custodial Agreement, as applicable.

                  (d) Neither the Depositor, the Company nor the Master Servicer
shall be under any obligation to appear in, prosecute or defend any legal action
that is not incidental to its duties under this Agreement and that in its
opinion may involve it in any expense or liability; provided, however, the
Master Servicer may in its discretion, with the consent of the Trustee (which
consent shall not be unreasonably withheld), undertake any such action which it
may deem necessary or desirable with respect to this Agreement and the rights
and duties of the parties hereto and the interests of the Certificateholders
hereunder. In such event, 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 Master Servicer shall be entitled to be reimbursed therefor
out of the Master Servicer Collection Account as provided by Section 5.05.
Nothing in this Subsection 8.04(d) shall affect the Master Servicer's obligation
to supervise, or to take such actions as are necessary to ensure, the servicing
and administration of the Mortgage Loans pursuant to Subsection 4.01(a).

                  (e) In taking or recommending any course of action pursuant to
this Agreement, unless specifically required to do so pursuant to this
Agreement, the Master Servicer shall not be required to investigate or make
recommendations concerning potential liabilities which the Trust might incur as
a result of such course of action by reason of the condition of the Mortgaged
Properties but shall give notice to the Trustee if it has notice of such
potential liabilities.

                  (f) The Master Servicer shall not be liable for any acts or
omissions of the Company or the Servicers, except as otherwise expressly
provided herein.

         Section 8.05 MASTER SERVICER AND COMPANY NOT TO RESIGN. (a) Except as
provided in Section 8.07, the Master Servicer shall not resign from the
obligations and duties hereby imposed on it except (i) with the prior written
consent of the Trustee (which consent shall not be unreasonably withheld) or
(ii) upon a determination that any such duties hereunder are no longer
permissible under applicable law and such impermissibility cannot be cured. Any
such determination permitting the resignation of the Master Servicer shall be
evidenced by an Opinion of Counsel to such effect, addressed to and delivered
to, the Trustee. No such resignation by the Master Servicer shall become
effective until EMC or the Trustee or a successor to the Master Servicer
reasonably satisfactory to

                                      -114-

<PAGE>

the Trustee shall have assumed the responsibilities and obligations of the
Master Servicer in accordance with Section 9.02 hereof. The Trustee shall notify
the Rating Agencies of the resignation of the Master Servicer.

                  (b) The Company shall not resign from the obligations and
duties hereby imposed on it except (i) upon the assignment of its servicing
duties with respect to all or a portion of the EMC Mortgage Loans to an
institution that is a Fannie Mae and Freddie Mac approved seller/servicer in
good standing that has a net worth of not less than $10,000,000 and with the
prior written consent of the Master Servicer (which consent shall not be
unreasonably withheld) or (ii) upon the determination that its duties hereunder
are no longer permissible under applicable law and such incapacity cannot be
cured by the Company. Any determination permitting the resignation of the
Company shall be evidenced by an Opinion of Counsel to such effect addressed to
and delivered, to the Master Servicer and the Trustee which Opinion of Counsel
shall be in form and substance acceptable to the Master Servicer and the
Trustee. No appointment of a successor to the Company shall be effective
hereunder unless (a) the Rating Agencies have confirmed in writing that such
appointment will not result in a downgrade, qualification or withdrawal of the
then current ratings assigned to the Certificates, (b) such successor shall have
represented that it is meets the eligibility criteria set forth in clause (i)
above and (c) such successor has agreed to assume the obligations of the Company
hereunder to the extent of the EMC Mortgage Loans to be serviced by such
successor. The Company shall provide a copy of the written confirmation of the
Rating Agencies and the agreement executed by such successor to the Master
Servicer and the Trustee. No such resignation shall become effective until a
Qualified Successor or the Master Servicer shall have assumed the Company's
responsibilities and obligations hereunder. The Company shall notify the Master
Servicer, the Trustee and the Rating Agencies of the resignation of the Company
or the assignment of all or a portion of its servicing duties hereunder in
accordance with this Section 8.05.

         Section 8.06 SUCCESSOR MASTER SERVICER. In connection with the
appointment of any successor Master Servicer or the assumption of the duties of
the Master Servicer, EMC or the Trustee may make such arrangements for the
compensation of such successor master servicer out of payments on the Mortgage
Loans as EMC or the Trustee and such successor master servicer shall agree. If
the successor master servicer does not agree that such market value is a fair
price, such successor master servicer shall obtain two quotations of market
value from third parties actively engaged in the servicing of single-family
mortgage loans. In no event shall the compensation of any successor master
servicer exceed that permitted the Master Servicer without the consent of all of
the Certificateholders.

         Section 8.07 SALE AND ASSIGNMENT OF MASTER SERVICING. The Master
Servicer may sell and assign its rights and delegate its duties and obligations
in its entirety as Master Servicer under this Agreement and EMC may terminate
the Master Servicer without cause and select a new Master Servicer; provided,
however, that: (i) the purchaser or transferee accepting such assignment and
delegation (a) shall be a Person which shall be qualified to service mortgage
loans for Fannie Mae or Freddie Mac; (b) shall have a net worth of not less than
$10,000,000 (unless otherwise approved by each Rating Agency pursuant to clause
(ii) below); (c) shall be reasonably satisfactory to the Trustee (as evidenced
in a writing signed by the Trustee); and (d) shall execute and deliver to the
Trustee an agreement, in form and substance reasonably satisfactory to the
Trustee, which contains an assumption by such Person of the due and punctual
performance and observance of each covenant

                                      -115-

<PAGE>

and condition to be performed or observed by it as master servicer under this
Agreement, any custodial agreement from and after the effective date of such
agreement; (ii) each Rating Agency shall be given prior written notice of the
identity of the proposed successor to the Master Servicer and each Rating
Agency's rating of the Certificates in effect immediately prior to such
assignment, sale and delegation will not be downgraded, qualified or withdrawn
as a result of such assignment, sale and delegation, as evidenced by a letter to
such effect delivered to the Master Servicer and the Trustee; (iii) the Master
Servicer assigning and selling the master servicing shall deliver to the Trustee
an Officer's Certificate and an Opinion of Counsel addressed to the Trustee,
each stating that all conditions precedent to such action under this Agreement
have been completed and such action is permitted by and complies with the terms
of this Agreement; and (iv) in the event the Master Servicer is terminated
without cause by EMC, EMC shall pay, from its own funds and without any right of
reimbursement, the terminated Master Servicer a termination fee equal to 0.25%
of the aggregate Stated Principal Balance of the Mortgage Loans at the time the
master servicing of the Mortgage Loans is transferred to the successor Master
Servicer. No such assignment or delegation shall affect any liability of the
Master Servicer arising prior to the effective date thereof.

                                      -116-

<PAGE>

                                   ARTICLE IX

                    DEFAULT; TERMINATION OF MASTER SERVICER;
                             TERMINATION OF COMPANY

         Section 9.01      EVENTS OF DEFAULT.

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

                  (i) any failure by the Master Servicer to remit to the Trustee
         any amounts received or collected by the Master Servicer in respect of
         the Mortgage Loans and required to be remitted by it hereunder or any
         Advance required to be made by it pursuant to this Agreement, which
         failure shall continue unremedied for one Business Day 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 Trustee and
         the Master Servicer by the Holders of Certificates evidencing not less
         than 25% of the Voting Rights evidenced by the Certificates; or

                  (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 or any breach
         of a representation or warranty by the Master Servicer, which failure
         or breach shall continue unremedied for a period of 60 days after the
         date on which written notice of such failure shall have been given to
         Master Servicer by the Trustee or the Depositor, or to the Trustee and
         the Master Servicer 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,
         marshalling of assets and liabilities or similar proceedings, or for
         the winding-up or liquidation of its affairs, shall have been entered
         against the Master Servicer and such decree or order shall have
         remained in force undischarged or unstayed for a period of 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) the Master Servicer assigns or delegates its duties or
         rights under this Agreement in contravention of the provisions
         permitting such assignment or delegation under Sections 8.05 or 8.07.

                                      -117-

<PAGE>

                  If an Event of Default 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, and 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 (and the Securities Administrator if the Master Servicer and the
Securities Administrator are the same entity) under this Agreement and in and to
the Mortgage Loans and the proceeds thereof, other than its rights as a
Certificateholder hereunder. On or after the receipt by the Master Servicer of
such written notice, all authority and power of the Master Servicer (and, if
applicable, the Securities Administrator) hereunder, whether with respect to the
Mortgage Loans or otherwise, shall pass to and be vested in the Trustee, or any
successor appointed pursuant to Section 9.02 (a "Successor Master Servicer" and,
if applicable, "Successor Securities Administrator"). Such Successor Master
Servicer shall thereupon if such Successor Master Servicer is a successor to the
Master Servicer, make any Advance required by Article VI, subject, in the case
of the Trustee, to Section 9.02. The Trustee is hereby authorized and empowered
to execute and deliver, on behalf of the terminated Master Servicer and, if
applicable, the terminated Securities Administrator, 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 any 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
or Article X. The Master Servicer and, if applicable, the Securities
Administrator agrees to cooperate with the Trustee in effecting the termination
of the Master Servicer's and, if applicable, the Securities Administrator's
responsibilities and rights hereunder, including, without limitation, the
transfer to the applicable Successor Master Servicer of all cash amounts which
shall at the time be credited to the Master Servicer Collection Account
maintained pursuant to Section 5.05, or thereafter be received with respect to
the applicable Mortgage Loans. The Trustee shall promptly notify the Rating
Agencies of the occurrence of an Event of Default known to the Trustee.

                  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 that was due
prior to the notice terminating the Master Servicer's rights and obligations as
Master Servicer hereunder and received after such notice, that portion thereof
to which the Master Servicer would have been entitled pursuant to Sections 5.05
and to receive any other amounts payable to the Master Servicer hereunder the
entitlement to which arose prior to the termination of its activities hereunder.

         Section 9.02      TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

                  On and after the time the Master Servicer receives a notice of
termination pursuant to Section 9.01 hereof the Trustee shall automatically
become the successor to the Master Servicer with respect to the transactions set
forth or provided for herein and after a transition period (not to exceed 90
days), shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Master Servicer by the terms and provisions
hereof; provided, however that, pursuant to Article VI hereof, the Trustee in
its capacity as successor Master Servicer shall be responsible for making any
Advances required to be made by the Master Servicer immediately upon the
termination

                                      -118-

<PAGE>

of the Master Servicer and any such Advance shall be made on the Distribution
Date on which such Advance was required to be made by the predecessor Master
Servicer. Effective on the date of such notice of termination, as compensation
therefor, the Trustee shall be entitled to all compensation, reimbursement of
expenses and indemnifications that the Master Servicer would have been entitled
to if it had continued to act hereunder, provided, however, that the Trustee
shall not be (i) liable for any acts or omissions of the Master Servicer, (ii)
obligated to make Advances if it is prohibited from doing so under applicable
law, (iii) responsible for expenses of the Master Servicer pursuant to Section
2.03 or (iv) obligated to deposit losses on any Permitted Investment directed by
the Master Servicer. Notwithstanding the foregoing, 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 Article VI 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 Master Servicer shall (i) be an institution
that is a Fannie Mae and Freddie Mac approved seller/servicer in good standing,
that has a net worth of at least $15,000,000 and (ii) be willing to act as
successor servicer of any Mortgage Loans under this Agreement or the related
Servicing Agreement with respect to which the Company or the original Servicer
has been terminated as servicer, and shall have executed and delivered to the
Depositor and the Trustee an agreement accepting such delegation and assignment,
that contains an assumption by such Person of the rights, powers, duties,
responsibilities, obligations and liabilities of the Master Servicer (other than
any liabilities of the Master Servicer hereof incurred prior to termination of
the Master Servicer under Section 9.01 or as otherwise set forth herein), with
like effect as if originally named as a party to this Agreement, provided that
each Rating Agency shall have acknowledged in writing that its rating of the
Certificates in effect immediately prior to such assignment and delegation will
not be qualified or reduced as a result of such assignment and delegation. If
the Trustee assumes the duties and responsibilities of the Master Servicer in
accordance with this Section 9.02, the Trustee shall not resign as Master
Servicer until a Successor Master Servicer has been appointed and has accepted
such appointment. 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 4.04 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 or otherwise as it and such successor shall agree; provided that
no such compensation unless agreed to by the Certificateholders shall be in
excess of that 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 and the Securities Administrator to deliver or provide, or
any delay in delivering or providing, any cash, information, documents or
records to it.

                  The costs and expenses of the Trustee in connection with the
termination of the Master Servicer, appointment of a Successor Master Servicer
and, if applicable, any transfer of servicing, including, without limitation,
all costs and expenses associated with the complete transfer

                                      -119-

<PAGE>

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 or the
Successor Master Servicer to service the related Mortgage Loans properly and
effectively, to the extent not paid by the terminated Master Servicer, shall be
payable to the Trustee pursuant to Section 10.05. Any successor to the Master
Servicer as successor servicer under any Subservicing Agreement shall give
notice to the applicable Mortgagors of such change of servicer and shall, during
the term of its service as successor servicer maintain in force the policy or
policies that the Master Servicer is required to maintain pursuant to Section
4.04.

         Section 9.03      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 actually known to a Responsible Officer of
the Trustee, unless such Event of Default shall have been cured or waived.

         Section 9.04      WAIVER OF DEFAULTS.

                  The Trustee shall transmit by mail to all Certificateholders,
within 60 days after the occurrence of any Event of Default actually known to a
Responsible Officer of the Trustee, unless such Event of Default shall have been
cured, notice of each such Event of Default hereunder known to the Trustee. The
Holders of Certificates evidencing not less than 51% of the Voting Rights may,
on behalf of all Certificateholders, waive any default by the Master Servicer in
the performance of its obligations hereunder and the consequences thereof,
except a default in the making of or the causing to be made of any required
distribution on the Certificates. Upon any such waiver of a past default, such
default shall be deemed to cease to exist, and any Event of Default arising
therefrom shall be deemed to have been timely remedied for every purpose of this
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon except to the extent expressly so waived.
The Trustee shall give notice of any such waiver to the Rating Agencies.

         Section 9.05      COMPANY DEFAULT.

                  In case one or more of the following events of default by the
Company (each, a "Company Default") shall occur and be continuing, that is to
say:

                  (i) any failure by the Company to remit to the Master Servicer
any payment required to be made under the terms of this Agreement on any
Remittance Date; or

                  (ii) failure on the part of the Company duly to observe or
perform in any material respect any other of the covenants or agreements on the
part of the Company set forth in this Agreement, the breach of which has a
material adverse effect and which continue unremedied for a period of sixty days
(except that such number of days shall be fifteen in the case of a failure to
pay any premium for any insurance policy required to be maintained under this
Agreement and such

                                      -120-

<PAGE>

failure shall be deemed to have a material adverse effect) after the date on
which written notice of such failure, requiring the same to be remedied, shall
have been given to the Company by the Master Servicer; or

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

                  (iv) the Company shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, bankruptcy,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Company or of or relating to all or
substantially all of its property; or

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

                  (vi) the Company attempts to assign its right to servicing
compensation hereunder or the Company attempts to sell or otherwise dispose of
all or substantially all of its property or assets or to assign this Agreement
or the servicing responsibilities hereunder or to delegate its duties hereunder
or any portion thereof except as otherwise permitted herein; or

                  (vii) the Company ceases to be qualified to transact business
in any jurisdiction where it is currently so qualified, but only to the extent
such non-qualification materially and adversely affects the Company's ability to
perform its obligations hereunder;

         then, and in each and every such case, so long as a Company Default
shall not have been remedied, the Master Servicer, by notice in writing to the
Company may, in addition to whatever rights the Master Servicer and the Trustee
on behalf of the Certificateholders may have under Section 8.03 and at law or
equity to damages, including injunctive relief and specific performance,
terminate all the rights and obligations of the Company under this Agreement and
in and to the EMC Mortgage Loans and the proceeds thereof without compensating
the Company for the same. On or after the receipt by the Company of such written
notice, all authority and power of Company under this Agreement, whether with
respect to the EMC Mortgage Loans or otherwise, shall pass to and be vested in
the Master Servicer. Upon written request from the Master Servicer, the Company
shall prepare, execute and deliver, any and all documents and other instruments,
place in the Master Servicer's possession all Mortgage Files relating to the EMC
Mortgage Loans, and 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 EMC Mortgage Loans
and related documents, or otherwise, at the Company's sole expense. The Company
agrees to cooperate with the Master Servicer in effecting the termination of the
Company's responsibilities and rights hereunder, including, without limitation,
the transfer to such successor for administration by it of all cash amounts
which shall at the time be credited by the Company to its Protected Account or
Escrow

                                      -121-

<PAGE>

Account or thereafter received with respect to the EMC Mortgage Loans or any
related REO Property.

         Section 9.06      WAIVER OF COMPANY DEFAULTS.

         The Master Servicer, with the consent of the Trustee, may waive only by
written notice any default by the Company in the performance of its obligations
hereunder and its consequences. Upon any such waiver of a past default, such
default shall cease to exist, and any Company Default arising therefrom shall be
deemed to have been remedied for every purpose of this Agreement. No such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon except to the extent expressly so waived in writing.

                                      -122-

<PAGE>

                                    ARTICLE X

             CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR

         Section 10.01     DUTIES OF TRUSTEE AND SECURITIES ADMINISTRATOR.

                  (a) The Trustee, prior to the occurrence of an Event of
Default and after the curing or waiver of all Events of Default which may have
occurred, and the Securities Administrator each undertake to perform such duties
and only such duties as are specifically set forth in this Agreement as duties
of the Trustee and the Securities Administrator, respectively. If an Event of
Default has occurred and has not been cured or waived, the Trustee shall
exercise such of the rights and powers vested in it by this Agreement, and the
same degree of care and skill in their exercise, as a prudent person would
exercise under the circumstances in the conduct of such Person's own affairs.

                  (b) Upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments which are specifically
required to be furnished to the Trustee or the Securities Administrator pursuant
to any provision of this Agreement, the Trustee or the Securities Administrator,
respectively, shall examine them to determine whether they are, on their face,
in the form required by this Agreement; provided, however, that neither the
Trustee nor the Securities Administrator shall be responsible for the accuracy
or content of any resolution, certificate, statement, opinion, report, document,
order or other instrument furnished by the Master Servicer; provided, further,
that neither the Trustee nor the Securities Administrator shall be responsible
for the accuracy or verification of any calculation provided to it pursuant to
this Agreement.

                  (c) On each Distribution Date, the Trustee shall make monthly
distributions and the final distribution to the Certificateholders from funds in
the Distribution Account as provided in Sections 6.04 and 11.01 herein based
solely on the applicable Remittance Report.

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

                  (i) Prior to the occurrence of an Event of Default, and after
         the curing or waiver of all such Events of Default which may have
         occurred with respect to the Trustee and at all times with respect to
         the Securities Administrator, the duties and obligations of the Trustee
         and the Securities Administrator shall be determined solely by the
         express provisions of this Agreement, neither the Trustee nor the
         Securities Administrator shall be liable except for the performance of
         their respective 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 or the Securities Administrator
         and, in the absence of bad faith on the part of the Trustee or the
         Securities Administrator, respectively, the Trustee or the Securities
         Administrator, respectively, 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

                                      -123-

<PAGE>

         the Trustee or the Securities Administrator, respectively, and
         conforming to the requirements of this Agreement;

                  (ii) Neither the Trustee nor the Securities Administrator
         shall be liable in its individual capacity for an error of judgment
         made in good faith by a Responsible Officer or Responsible Officers of
         the Trustee or an officer or officers of the Securities Administrator,
         respectively, unless it shall be proved that the Trustee or the
         Securities Administrator, respectively, was negligent in ascertaining
         the pertinent facts;

                  (iii) Neither the Trustee nor the Securities Administrator
         shall be liable with respect to any action taken, suffered or omitted
         to be taken by it in good faith in accordance with the directions of
         the Holders of Certificates evidencing not less than 25% of the
         aggregate Voting Rights of the Certificates, if such action or
         non-action relates to the time, method and place of conducting any
         proceeding for any remedy available to the Trustee or the Securities
         Administrator, respectively, or exercising any trust or other power
         conferred upon the Trustee or the Securities Administrator,
         respectively, under this Agreement;

                  (iv) The Trustee shall not be required to take notice or be
         deemed to have notice or knowledge of any default or Event of Default
         unless a Responsible Officer of the Trustee shall have actual knowledge
         thereof. In the absence of such notice, the Trustee may conclusively
         assume there is no such default or Event of Default;

                  (v) The Trustee shall not in any way be liable by reason of
         any insufficiency in any Account held by or in the name of Trustee
         unless it is determined by a court of competent jurisdiction in a
         non-appealable judgment that the Trustee's gross negligence or willful
         misconduct was the primary cause of such insufficiency (except to the
         extent that the Trustee is obligor and has defaulted thereon);

                  (vi) Anything in this Agreement to the contrary
         notwithstanding, in no event shall the Trustee or the Securities
         Administrator be liable for special, indirect or consequential loss or
         damage of any kind whatsoever (including but not limited to lost
         profits), even if the Trustee or the Securities Administrator,
         respectively, has been advised of the likelihood of such loss or damage
         and regardless of the form of action; and

                  (vii) None of the Securities Administrator, the Master
         Servicer, the Seller, the Depositor or the Trustee shall be responsible
         for the acts or omissions of the other, it being understood that this
         Agreement shall not be construed to render them partners, joint
         venturers or agents of one another.

Neither the Trustee nor the Securities Administrator shall be required to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Trustee or the Securities Administrator to perform, or be
responsible for the manner of performance of, any of the

                                      -124-

<PAGE>

obligations of the Master Servicer or the Company hereunder or any Servicer
under the related Servicing Agreement.

                  (e) All funds received by the Trustee and required to be
deposited in the Distribution Account pursuant to this Agreement will be
promptly so deposited by the Trustee.

         Section 10.02 CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE SECURITIES
                       ADMINISTRATOR.

                  (a) Except as otherwise provided in Section 10.01:

                  (i) The Trustee and the Securities Administrator may rely and
         shall be protected in acting or refraining from acting in reliance on
         any resolution or certificate of the Seller, the Company, the Master
         Servicer or the related Servicer, any certificates 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;

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

                  (iii) Neither the Trustee nor the Securities Administrator
         shall be under any obligation to exercise any of the trusts or powers
         vested in it by this Agreement, other than its obligation to give
         notices pursuant to 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 or the Securities Administrator, as applicable, reasonable
         security or indemnity against the costs, expenses and liabilities which
         may be incurred therein or thereby. Nothing contained herein shall,
         however, relieve the Trustee of the obligation, upon the occurrence of
         an Event of Default of which a Responsible Officer of the Trustee has
         actual knowledge (which has not been cured or waived), to exercise such
         of the rights and powers vested in it by this Agreement, and to use the
         same degree of care and skill in their exercise, as a prudent person
         would exercise under the circumstances in the conduct of his own
         affairs;

                  (iv) Prior to the occurrence of an Event of Default hereunder
         and after the curing or waiver of all Events of Default which may have
         occurred with respect to the Trustee and at all times with respect to
         the Securities Administrator, neither the Trustee nor the Securities
         Administrator shall be liable in its individual capacity for any action
         taken, suffered or omitted by it in good faith and believed by it to be
         authorized or within the discretion or rights or powers conferred upon
         it by this Agreement;

                  (v) Neither the Trustee nor the Securities Administrator shall
         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

                                      -125-

<PAGE>

         document, unless requested in writing to do so by Holders of
         Certificates evidencing not less than 25% of the aggregate Voting
         Rights of the Certificates and provided that the payment within a
         reasonable time to the Trustee or the Securities Administrator, as
         applicable, of the costs, expenses or liabilities likely to be incurred
         by it in the making of such investigation is, in the opinion of the
         Trustee or the Securities Administrator, as applicable, reasonably
         assured to the Trustee or the Securities Administrator, as applicable,
         by the security afforded to it by the terms of this Agreement. The
         Trustee or the Securities Administrator may require reasonable
         indemnity against such expense or liability as a condition to taking
         any such action. The reasonable expense of every such examination shall
         be paid by the Certificateholders requesting the investigation;

                  (vi) The Trustee and the Securities Administrator may execute
         any of the trusts or powers hereunder or perform any duties hereunder
         either directly or through Affiliates, agents or attorneys; provided,
         however, that the Trustee may not appoint any paying agent other than
         the Securities Administrator to perform any paying agent functions
         under this Agreement without the express written consent of the Master
         Servicer, which consent will not be unreasonably withheld. Neither the
         Trustee nor the Securities Administrator shall be liable or responsible
         for the misconduct or negligence of any of the Trustee's or the
         Securities Administrator's agents or attorneys or paying agent
         appointed hereunder by the Trustee or the Securities Administrator with
         due care and, when required, with the consent of the Master Servicer;

                  (vii) Should the Trustee or the Securities Administrator deem
         the nature of any action required on its part to be unclear, the
         Trustee or the Securities Administrator, respectively, may require
         prior to such action that it be provided by the Depositor with
         reasonable further instructions; the right of the Trustee or the
         Securities Administrator to perform any discretionary act enumerated in
         this Agreement shall not be construed as a duty, and neither the
         Trustee nor the Securities Administrator shall be accountable for other
         than its negligence or willful misconduct in the performance of any
         such act;

                  (viii) Neither the Trustee nor the Securities Administrator
         shall be required to give any bond or surety with respect to the
         execution of the trust created hereby or the powers granted hereunder,
         except as provided in Subsection 10.07; and

                  (ix) Neither the Trustee nor the Securities Administrator
         shall have any duty to conduct any affirmative investigation as to the
         occurrence of any condition requiring the repurchase of any Mortgage
         Loan by any Person pursuant to this Agreement, or the eligibility of
         any Mortgage Loan for purposes of this Agreement.

         Section 10.03 TRUSTEE AND SECURITIES ADMINISTRATOR NOT LIABLE FOR
                       CERTIFICATES OR MORTGAGE LOANS.

                  The recitals contained herein and in the Certificates (other
than the signature and countersignature of the Trustee on the Certificates)
shall be taken as the statements of the Depositor, and neither the Trustee nor
the Securities Administrator shall have any responsibility for their
correctness. Neither the Trustee nor the Securities Administrator makes any
representation as to the

                                      -126-

<PAGE>

validity or sufficiency of the Certificates (other than the signature and
countersignature of the Trustee on the Certificates) or of any Mortgage Loan
except as expressly provided in Sections 2.02 and 2.06 hereof; provided,
however, that the foregoing shall not relieve the Trustee of the obligation to
review the Mortgage Files pursuant to Sections 2.02 and 2.05 of this Agreement.
The Trustee's signature and countersignature (or countersignature of its agent)
on the Certificates shall be solely in its capacity as Trustee and shall not
constitute the Certificates an obligation of the Trustee in any other capacity.
Neither the Trustee or the Securities Administrator shall be accountable for the
use or application by the Depositor of any of the Certificates or of the
proceeds of such Certificates, or for the use or application of any funds paid
to the Depositor with respect to the Mortgage Loans. Subject to the provisions
of Section 2.06, neither the Trustee nor the Securities Administrator shall be
responsible for the legality or validity of this Agreement or any document or
instrument relating to this Agreement, the validity of the execution of this
Agreement or of any supplement hereto or instrument of further assurance, or the
validity, priority, perfection or sufficiency of the security for the
Certificates issued hereunder or intended to be issued hereunder. Neither the
Trustee nor the Securities Administrator shall at any time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any Mortgage or any Mortgage Loan, or the perfection and
priority of any Mortgage or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Trust Fund or its ability to
generate the payments to be distributed to Certificateholders, under this
Agreement. Neither the Trustee nor the Securities Administrator shall have any
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to record this Agreement.

         Section 10.04 TRUSTEE AND SECURITIES ADMINISTRATOR MAY OWN
                       CERTIFICATES.

                  Each of the Trustee and the Securities Administrator in its
individual capacity or in any capacity other than as Trustee or Securities
Administrator hereunder may become the owner or pledgee of any Certificates with
the same rights it would have if it were not the Trustee or the Securities
Administrator, as applicable, and may otherwise deal with the parties hereto.

         Section 10.05 TRUSTEE'S AND SECURITIES ADMINISTRATOR'S FEES AND
                       EXPENSES.

                  The fees and expenses of the Trustee and the Securities
Administrator shall be paid in accordance with a side letter agreement with the
Master Servicer and at the expense of the Master Servicer. In addition, the
Trustee and the Securities Administrator will be entitled to recover from the
Master Servicer Collection Account pursuant to Section 5.06 all reasonable
out-of-pocket expenses, disbursements and advances and the expenses of the
Trustee and the Securities Administrator, respectively, in connection with any
Event of Default, any breach of this Agreement or any claim or legal action
(including any pending or threatened claim or legal action) incurred or made by
the Trustee or the Securities Administrator, respectively, in the administration
of the trusts hereunder (including the reasonable compensation, expenses and
disbursements of its counsel) except any such expense, disbursement or advance
as may arise from its negligence or intentional misconduct or which is the
responsibility of the Certificateholders or the Trust Fund hereunder. If funds
in the Master Servicer Collection Account are insufficient therefor, the Trustee
and the Securities Administrator shall recover such expenses from the Depositor.
Such compensation and

                                      -127-

<PAGE>

reimbursement obligation shall not be limited by any provision of law in regard
to the compensation of a trustee of an express trust.

         Section 10.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES
                       ADMINISTRATOR.

                  The Trustee and any successor Trustee and the Securities
Administrator and any successor Securities Administrator shall during the entire
duration of this Agreement be a state bank or trust company or a national
banking 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 and undivided profits of at
least $40,000,000 or, in the case of a successor Trustee, $50,000,000, subject
to supervision or examination by federal or state authority and, in the case of
the Trustee, rated "BBB" or higher by Fitch with respect to their long-term
rating and rated "BBB" or higher by Standard & Poor's and "Baa2" or higher by
Moody's with respect to any outstanding long-term unsecured unsubordinated debt,
and, in the case of a successor Trustee or successor Securities Administrator
other than pursuant to Section 10.10, rated in one of the two highest long-term
debt categories of, or otherwise acceptable to, each of the Rating Agencies. The
Trustee shall not be an Affiliate of the Master Servicer. If the Trustee
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 10.06 the combined capital and surplus of such
corporation shall be deemed to be its total equity capital (combined capital and
surplus) as set forth in its most recent report of condition so published. In
case at any time the Trustee or the Securities Administrator, as applicable,
shall cease to be eligible in accordance with the provisions of this Section
10.06, the Trustee or the Securities Administrator shall resign immediately in
the manner and with the effect specified in Section 10.08.

         Section 10.07 INSURANCE.

                  The Trustee and the Securities Administrator, at their own
expense, shall at all times maintain and keep in full force and effect: (i)
fidelity insurance, (ii) theft of documents insurance and (iii) forgery
insurance (which may be collectively satisfied by a "Financial Institution Bond"
and/or a "Bankers' Blanket Bond"). All such insurance shall be in amounts, with
standard coverage and subject to deductibles, as are customary for insurance
typically maintained by banks or their affiliates which act as custodians for
investor-owned mortgage pools. A certificate of an officer of the Trustee or the
Securities Administrator as to the Trustee's or the Securities Administrator's,
respectively, compliance with this Section 10.07 shall be furnished to any
Certificateholder upon reasonable written request.

         Section 10.08 RESIGNATION AND REMOVAL OF TRUSTEE AND SECURITIES
                       ADMINISTRATOR.

                  The Trustee and the Securities Administrator may at any time
resign (including, in the case of the Securities Administrator, in connection
with the resignation or termination of the Master Servicer) and be discharged
from the Trust hereby created by giving written notice thereof to the Depositor,
the Seller, the Securities Administrator (or the Trustee, if the Securities
Administrator resigns) and the Master Servicer, with a copy to the Rating
Agencies. Upon receiving such notice of resignation, the Depositor shall
promptly appoint a successor trustee or successor securities administrator, as
applicable, by written instrument, in triplicate, one copy of which

                                      -128-

<PAGE>

instrument shall be delivered to each of the resigning trustee or securities
administrator, as applicable, and the successor trustee or securities
administrator, as applicable. If no successor trustee or successor securities
administrator shall have been so appointed and have accepted appointment within
30 days after the giving of such notice of resignation, the resigning Trustee or
Securities Administrator may petition any court of competent jurisdiction for
the appointment of a successor trustee or securities administrator.

                  If at any time (i) the Trustee or the Securities Administrator
shall cease to be eligible in accordance with the provisions of Section 10.06
hereof and shall fail to resign after written request thereto by the Depositor,
(ii) the Trustee or the Securities Administrator shall become incapable of
acting, or shall be adjudged as bankrupt or insolvent, or a receiver of the
Trustee or the Securities Administrator or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or the
Securities Administrator or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, or (iii)(A) a tax is imposed with
respect to the Trust Fund by any state in which the Trustee or the Securities
Administrator or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee or securities administrator
and (C) the Trustee or the Securities Administrator, as applicable fails to
indemnify the Trust Fund against such tax, then the Depositor or the Master
Servicer may remove the Trustee or the Securities Administrator, as applicable,
and appoint a successor trustee or successor securities administrator, as
applicable, by written instrument, in multiple copies, a copy of which
instrument shall be delivered to the Trustee, the Securities Administrator, each
Master Servicer and the successor trustee or successor securities administrator,
as applicable.

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

                  Any resignation or removal of the Trustee or Securities
Administrator and appointment of a successor trustee or securities administrator
pursuant to any of the provisions of this Section 10.08 shall become effective
upon acceptance of appointment by the successor trustee or securities
administrator as provided in Section 10.09 hereof.

         Section 10.09 SUCCESSOR TRUSTEE OR SECURITIES ADMINISTRATOR.

                  Any successor trustee or securities administrator appointed as
provided in Section 10.08 hereof shall execute, acknowledge and deliver to the
Depositor and to its predecessor trustee or predecessor securities
administrator, as applicable, and the Master Servicer an instrument accepting
such appointment hereunder and thereupon the resignation or removal of the
predecessor trustee or securities administrator shall become effective and such
successor trustee or securities administrator, without any further act, deed or
conveyance, shall become fully vested with all the

                                      -129-

<PAGE>

rights, powers, duties and obligations of its predecessor hereunder, with the
like effect as if originally named as trustee or securities administrator
herein.

                  No successor trustee or securities administrator shall accept
appointment as provided in this Section 10.09 unless at the time of such
acceptance such successor trustee or securities administrator shall be eligible
under the provisions of Section 10.07 hereof and its appointment shall not
adversely affect the then current rating of the Certificates.

                  Upon acceptance of appointment by a successor trustee or
securities administrator as provided in this Section 10.09, the successor
trustee or securities administrator shall mail notice of the succession of such
trustee or securities administrator hereunder to all Holders of Certificates. If
the successor trustee or securities administrator fails to mail such notice
within ten days after acceptance of appointment, the Depositor shall cause such
notice to be mailed at the expense of the Trust Fund.

         Section 10.10 MERGER OR CONSOLIDATION OF TRUSTEE OR SECURITIES
                       ADMINISTRATOR.

                  Any corporation, state bank or national banking association
into which the Trustee or the Securities Administrator may be merged or
converted or with which it may be consolidated or any corporation, state bank or
national banking association resulting from any merger, conversion or
consolidation to which the Trustee or the Securities Administrator shall be a
party, or any corporation, state bank or national banking association succeeding
to substantially all of the corporate trust business of the Trustee or of the
business of the Securities Administrator, shall be the successor of the Trustee
or the Securities Administrator hereunder, provided that such corporation shall
be eligible under the provisions of Section 10.06 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 10.11 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 10.11, 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
10.06 and no notice to Certificateholders of the appointment of any co-trustee
or separate trustee shall be required under Section 10.09.

                                      -130-

<PAGE>

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

                  (i) All rights, powers, duties and obligations conferred or
         imposed upon the Trustee, 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 a Trustee hereunder
         or as a Successor 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 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

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

                  Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article X. 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 10.12     TAX MATTERS.

                  It is intended that the Trust Fund shall constitute, and that
the affairs of the Trust Fund shall be conducted so that each REMIC formed
hereunder qualifies as, a "real estate mortgage investment conduit" as defined
in and in accordance with the REMIC Provisions. In furtherance of such
intention, the Securities Administrator covenants and agrees that it shall act
as agent (and the Securities Administrator is hereby appointed to act as agent)
on behalf of the Trust Fund. The

                                      -131-

<PAGE>

Trustee and/or the Securities Administrator, as agent on behalf of the Trust
Fund, shall do or refrain from doing, as applicable, the following: (a) the
Securities Administrator shall prepare and file, or cause to be prepared and
filed, in a timely manner, U.S. Real Estate Mortgage Investment Conduit Income
Tax Returns (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 each 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)
the Securities Administrator shall apply for an employer identification number
with the Internal Revenue Service via a Form SS-4 or other comparable method for
each REMIC that is or becomes a taxable entity, and 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 for the Trust Fund; (c) the
Trustee shall make or cause to be made elections, on behalf of each REMIC formed
hereunder to be treated as a REMIC on the federal tax return of such REMIC for
its first taxable year (and, if necessary, under applicable state law); (d) the
Securities Administrator shall 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; (e) the Securities Administrator shall 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 Person that is not a
Permitted Transferee, or a pass-through entity in which a Person that is not a
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) each of the Securities Administrator and the Trustee shall,
to the extent under its control, conduct the affairs of the Trust Fund at all
times that any Certificates are outstanding so as to maintain the status of each
REMIC formed hereunder as a REMIC under the REMIC Provisions; (g) neither the
Trustee nor the Securities Administrator shall knowingly or intentionally take
any action or omit to take any action that would cause the termination of the
REMIC status of any REMIC formed hereunder; (h) the Trustee shall pay, from the
sources specified in the penultimate paragraph of this Section 10.12, as
directed by the Securities Administrator in its Remittance Report, the amount of
any federal, state and local taxes, including prohibited transaction taxes as
described below, imposed on any REMIC formed hereunder prior to the termination
of the Trust Fund when and as the same shall be due and payable (but such
obligation shall not prevent the Trustee, the Securities Administrator at the
written request of the Trustee, or any other appropriate Person from contesting
any such tax in appropriate proceedings and shall not prevent the Securities
Administrator from withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings); (i) the Trustee shall sign or cause to be
signed federal, state or local income tax or information returns or any other
document prepared by the Securities Administrator pursuant to this Section 10.12
requiring a signature thereon by the Trustee; (j) the Securities Administrator
shall maintain records relating to each REMIC formed hereunder including but not
limited to the income, expenses, assets and liabilities of each

                                      -132-

<PAGE>

such REMIC and adjusted basis of the Trust Fund property 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) the Securities
Administrator shall, for federal income tax purposes, maintain books and records
with respect to the REMICs on a calendar year and on an accrual basis; (l)
neither the Trustee nor the Master Servicer shall enter into any arrangement not
otherwise provided for in this Agreement by which the REMICs will receive a fee
or other compensation for services nor permit the REMICs to receive any income
from assets other than "qualified mortgages" as defined in Section 860G(a)(3) of
the Code or "permitted investments" as defined in Section 860G(a)(5) of the
Code; and (m) as and when necessary and appropriate, the Trustee, or at the
written request of the Trustee, the Securities Administrator, shall represent
the Trust Fund 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 REMIC formed hereunder,
enter into settlement agreements with any governmental taxing agency, extend any
statute of limitations relating to any tax item of the Trust Fund, and otherwise
act on behalf of each REMIC formed hereunder in relation to any tax matter
involving any such REMIC.

                  In order to enable each of the Trustee and the Securities
Administrator to perform its duties as set forth herein, the Depositor shall
provide, or cause to be provided, to the Trustee or the Securities Administrator
within 10 days after the Closing Date all information or data that the Trustee
or the Securities Administrator requests in writing 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 or the Securities
Administrator promptly upon written request therefor, any such additional
information or data that the Trustee or the Securities Administrator may, from
time to time, request in order to enable the Trustee or the Securities
Administrator to perform its duties as set forth herein. The Depositor hereby
indemnifies each of Trustee and the Securities Administrator for any losses,
liabilities, damages, claims or expenses of the Trustee or the Securities
Administrator arising from any errors or miscalculations of the Trustee or the
Securities Administrator, as applicable, that result from any failure of the
Depositor to provide, or to cause to be provided, accurate information or data
to the Trustee or the Securities Administrator, as applicable, on a timely
basis.

                  In the event that any tax is imposed on "prohibited
transactions" of any of REMIC I, REMIC II or REMIC III as defined in Section
860F(a)(2) of the Code, on the "net income from foreclosure property" of the
Trust Fund as defined in Section 860G(c) of the Code, on any contribution to any
of REMIC I, REMIC II or REMIC III after the startup day pursuant to Section
860G(d) of the Code, or any other tax is imposed, including, without limitation,
any federal, state or local tax or minimum tax imposed upon any of REMIC I,
REMIC II or REMIC III, and is not paid as otherwise provided for herein, such
tax shall be paid by (i) the Trustee or the Securities Administrator, if any
such other tax arises out of or results from a breach by the Trustee or the
Securities Administrator, respectively, of any of its obligations under this
Agreement, (ii) any party hereto (other than the Trustee or the Securities
Administrator) to the extent any such other tax arises out of or results from a
breach by such other party of any of its obligations under this Agreement or
(iii) in all other cases, or in the event that any liable party hereto fails to
honor its obligations under the preceding clauses (i) or (ii), any such tax will
be paid first with amounts otherwise to be distributed to the Class R
Certificateholders, and second with amounts otherwise to be distributed

                                      -133-

<PAGE>

to all other Certificateholders in the following order of priority: first, to
the Class B-1 Certificates and Class B-2 Certificates, on a pro rata basis,
second, to the Class M-2 Certificates, third, to the Class M-1 Certificates and
fourth to the Senior Certificates (pro rata based on the amounts to be
distributed). Notwithstanding anything to the contrary contained herein, to the
extent that such tax is payable by the Holder of any Certificates, the Trustee
is hereby authorized to retain on any Distribution Date, from the Holders of the
Class R Certificates (and, if necessary, second, from the Holders of the other
Certificates in the priority specified in the preceding sentence), funds
otherwise distributable to such Holders in an amount sufficient to pay such tax.
Following written notification to the Securities Administrator by the Trustee of
any amount payable out of distributions to the Certificateholders pursuant to
the preceding two sentences, the Securities Administrator shall include in its
Remittance Report instructions as to distributions to such parties taking into
account the priorities described in the second preceding sentence. The
Securities Administrator, on written request by the Trustee, agrees to promptly
notify in writing the party liable for any such tax of the amount thereof and
the due date for the payment thereof.

                  The Trustee and the Securities Administrator each agree that,
in the event it should obtain any information necessary for the other party to
perform its obligations pursuant to this Section 10.12, it will promptly notify
and provide such information to such other party. Notwithstanding anything in
this Agreement to the contrary, the Trustee agrees that, in the event that the
Trustee obtains actual knowledge that the Securities Administrator has breached
any of its obligations pursuant to this Section 10.12, the Trustee shall perform
such obligations on its behalf to the extent that the Trustee possesses all
documents necessary to so perform and receives reasonable compensation therefor,
provided, however, that the Trustee shall not be liable for any losses resulting
from any such breach.

                                      -134-

<PAGE>

                                   ARTICLE XI

                                   TERMINATION

         Section 11.01 TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL
                       MORTGAGE LOANS.

                  Subject to Section 11.03, the obligations and responsibilities
of the Depositor, the Master Servicer, the Securities Administrator, the Seller
and the Trustee created hereby with respect to the Trust Fund shall terminate
upon the earlier of (a) the purchase by the Majority Class C Certificateholder
of all of the Mortgage Loans (and REO Properties) remaining in the Trust Fund at
a price (the "Mortgage Loan Purchase Price") equal to the sum of (i) 100% of the
Stated Principal Balance of each Mortgage Loan (other than in respect of REO
Property), (ii) accrued interest thereon at the applicable Mortgage Rate to, but
not including, the first day of the month of such purchase, (iii) the appraised
value of any REO Property in the Trust Fund (up to the Stated Principal Balance
of the related Mortgage Loan), such appraisal to be conducted by an appraiser
mutually agreed upon by the Master Servicer and the Trustee and (iv)
unreimbursed out-of pocket costs of the Company, the Servicers or the Master
Servicer, including unreimbursed servicing advances and the principal portion of
any unreimbursed Advances, made on the Mortgage Loans prior to the exercise of
such repurchase right and (v) any unreimbursed costs and expenses of the Trustee
and the Securities Administrator payable pursuant to Section 10.05 and (b) the
later of (i) the maturity or other liquidation (or any Advance with respect
thereto) of the last Mortgage Loan remaining in the Trust Fund and the
disposition of all REO Property and (ii) the distribution to Certificateholders
of all amounts required to be distributed to them pursuant to this Agreement, as
applicable. In no event shall the trusts created hereby continue beyond the
earlier of (i) the expiration of 21 years from the death of the last survivor of
the descendants of Joseph P. Kennedy, the late Ambassador of the United States
to the Court of St. James, living on the date hereof and (ii) the Latest
Possible Maturity Date.

                  The right to repurchase all Mortgage Loans and REO Properties
pursuant to clause (a) in the preceding paragraph shall be exercisable on or
after the earlier of (i) the 20% Clean-Up Call Date and (ii) the Distribution
Date in April 2013.

         Section 11.02 FINAL DISTRIBUTION ON THE CERTIFICATES.

                  If on any Determination Date, (i) 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 Master Servicer Collection
Account, the Master Servicer shall direct the Securities Administrator to send a
final distribution notice promptly to each Certificateholder or (ii) the
Securities Administrator determines that a Class of Certificates shall be
retired after a final distribution on such Class, the Securities Administrator
shall notify the Certificateholders within five (5) Business Days after such
Determination Date that the final distribution in retirement of such Class of
Certificates is scheduled to be made on the immediately following Distribution
Date. Any final distribution made pursuant to the immediately preceding sentence
will be made only upon presentation and surrender of the related Certificates at
the office of the Trustee specified in the final distribution notice to
Certificateholders. If the Class C Certificateholder elects to terminate the
Trust Fund pursuant to

                                      -135-

<PAGE>

Section 11.01, at least 20 days prior to the date notice is to be mailed to the
Certificateholders, the Majority Class C Certificateholder shall notify the
Depositor, the Securities Administrator, the Trustee of the date the Majority
Class C Certificateholder intends to terminate the Trust Fund. The Master
Servicer shall remit the Mortgage Loan Purchase Price to the Trustee on the
Business Day prior to the Distribution Date for such Optional Termination by the
Majority Class C Certificateholder.

                  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 promptly
by the Securities Administrator by letter to Certificateholders mailed not
earlier than the 10th day and no later than the 15th day of the month
immediately 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 Securities
Administrator 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 Master Servicer Collection Account to be remitted to the
Trustee for deposit in the Distribution Account on the Business Day prior to the
applicable Distribution Date in an amount equal to the final distribution in
respect of the Certificates. Upon such final deposit with respect to the Trust
Fund and the receipt by the Trustee of a Request for Release therefor, the
Trustee or the Custodian shall promptly release to the Master Servicer, as
applicable the Mortgage Files for the Mortgage Loans and the Trustee shall
execute and deliver any documents prepared and delivered to it which are
necessary to transfer any REO Property.

                  Upon presentation and surrender of the Certificates, the
Trustee shall cause to be distributed to Certificateholders of each Class in
accordance with the Remittance Report the amounts allocable to such Certificates
held in the Distribution Account in the order and priority set forth in Section
6.04 hereof on the final Distribution Date and in proportion to their respective
Percentage Interests.

                  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 Securities Administrator
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
Securities Administrator 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 that remain a part of the Trust Fund. If within one year
after the second notice all Certificates shall not have been surrendered for
cancellation, the Class R Certificateholders shall be entitled to all unclaimed
funds and other assets of the Trust Fund that remain subject hereto.

                                      -136-

<PAGE>

         Section 11.03 ADDITIONAL TERMINATION REQUIREMENTS.

                  (a) Upon exercise by the Majority Class C Certificateholder of
its purchase option as provided in Section 11.01, the Trust Fund shall be
terminated in accordance with the following additional requirements, unless each
of the Trustee and the Securities Administrator have been supplied with an
Opinion of Counsel addressed to the Trustee, at the expense of the Majority
Class C Certificateholder, to the effect that the failure of the Trust Fund to
comply with the requirements of this Section 11.03 will not (i) result in the
imposition of taxes on "prohibited transactions" of a REMIC, or (ii) cause a
REMIC to fail to qualify as a REMIC at any time that any Certificates are
outstanding:

                  (1) The Majority Class C Certificateholder shall establish a
90-day liquidation period and notify the Trustee and Securities Administrator
thereof, and the Securities Administrator shall in turn specify the first day of
such period in a statement attached to the tax return for each of REMIC I, REMIC
II and REMIC III pursuant to Treasury Regulation Section 1.860F-1. The Majority
Class C Certificateholder shall satisfy all the requirements of a qualified
liquidation under Section 860F of the Code and any regulations thereunder, as
evidenced by an Opinion of Counsel addressed to the Trustee obtained at the
expense of the Majority Class C Certificateholder;

                  (2) During such 90-day liquidation period, and at or prior to
the time of making the final payment on the Certificates, the Securities
Administrator as agent of the Trustee shall sell all of the assets of REMIC I,
REMIC II and REMIC III for cash; and

                  (3) At the time of the making of the final payment on the
Certificates, the Securities Administrator as agent for the Trustee shall
distribute or credit, or cause to be distributed or credited, to the Holders of
the Residual Certificates all cash on hand (other than cash retained to meet
claims), and REMIC I shall terminate at that time.

                  (b) By their acceptance of the Certificates, the Holders
thereof hereby authorize the adoption of a 90-day liquidation period for REMIC
I, REMIC II and REMIC III, which authorization shall be binding upon all
successor Certificateholders.

                  (c) The Securities Administrator as agent for each REMIC
hereby agrees to adopt and sign such a plan of complete liquidation upon the
written request of the Majority Class C Certificateholder, and the receipt of
the Opinion of Counsel referred to in Section 11.03(a)(1) and to take such other
action in connection therewith as may be reasonably requested by the Majority
Class C Certificateholder.

                                      -137-

<PAGE>

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

         Section 12.01 AMENDMENT.

                  This Agreement may be amended from time to time by parties
hereto, without the consent of any of the Certificateholders to cure any
ambiguity, to correct or supplement any provisions herein (including to give
effect to the expectations of investors), to change the manner in which the
Master Servicer Collection Account maintained by the Master Servicer or the
Protected Account maintained by the Company is maintained 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 if such action shall
not, as evidenced by an Opinion of Counsel addressed to the Trustee, adversely
affect in any material respect the interests of any Certificateholder; provided
that any such amendment shall be deemed not to adversely affect in any material
respect the interests of the Certificateholders and no such Opinion of Counsel
shall be required if the Person requesting such amendment obtains a letter from
each Rating Agency stating that such amendment would not result in the
downgrading or withdrawal of the respective ratings then assigned to the
Certificates.

                  Notwithstanding the foregoing, without the consent of the
Certificateholders, the parties hereto may at any time and from time to time
amend this Agreement to modify, eliminate or add to any of its provisions to
such extent as shall be necessary or appropriate to maintain the qualification
of each of REMIC I, REMIC II and REMIC III as a REMIC under the Code or to avoid
or minimize the risk of the imposition of any tax on any of REMIC I, REMIC II or
REMIC III pursuant to the Code that would be a claim against any of REMIC I,
REMIC II or REMIC III at any time prior to the final redemption of the
Certificates, provided that the Trustee has been provided an Opinion of Counsel
addressed to the Trustee, which opinion shall be an expense of the party
requesting such opinion but in any case shall not be an expense of the Trustee,
the Securities Administrator or the Trust Fund, to the effect that such action
is necessary or appropriate to maintain such qualification or to avoid or
minimize the risk of the imposition of such a tax.

                  This Agreement may also be amended from time to time by the
parties hereto and the Holders of each Class of Certificates affected thereby
evidencing over 50% of the Voting Rights of such Class or Classes for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the Holders of Certificates; provided 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) cause any of REMIC I, REMIC II or REMIC III to cease to
qualify as a REMIC or (iii) reduce the aforesaid percentages of Certificates of
each Class the Holders of which are required to consent to any such amendment
without the consent of the Holders of all Certificates of such Class then
outstanding.

                  Notwithstanding any contrary provision of this Agreement, the
Trustee shall not consent to any amendment to this Agreement unless it shall
have first received an Opinion of Counsel addressed to the Trustee , which
opinion shall be an expense of the party requesting such

                                      -138-

<PAGE>

amendment but in any case shall not be an expense of the Trustee or the
Securities Administrator, to the effect that such amendment will not (other than
an amendment pursuant to clause (ii) of, and in accordance with, the preceding
paragraph) cause the imposition of any tax on REMIC I, REMIC II or REMIC III or
the Certificateholders or cause REMIC I, REMIC II or REMIC III to cease to
qualify as a REMIC at any time that any Certificates are outstanding. Further,
nothing in this Agreement shall require the Trustee to enter into an amendment
without receiving an Opinion of Counsel, 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 (including any consent of the
applicable Certificateholders) have been complied with.

                  Promptly after the execution of any amendment to this
Agreement requiring the consent of Certificateholders, the Trustee shall furnish
written notification of the substance of such amendment to each
Certificateholder and each Rating Agency.

                  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.

         Section 12.02 RECORDATION OF AGREEMENT; COUNTERPARTS.

                  To the extent permitted by applicable law, this Agreement is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the Mortgaged Properties are situated, and in any other appropriate
public recording office or elsewhere. The Master Servicer shall effect such
recordation at the Trust's expense upon the request in writing of a
Certificateholder, but only if such direction is accompanied by an Opinion of
Counsel (provided at the expense of the Certificateholder requesting
recordation) to the effect that such recordation would materially and
beneficially affect the interests of the Certificateholders or is required by
law.

                  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 12.03 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 WITHOUT
REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAWS).

                                      -139-

<PAGE>

         Section 12.04 INTENTION OF PARTIES.

                  It is the express intent of the parties hereto that the
conveyance of the Mortgage Notes, Mortgages, assignments of Mortgages, title
insurance policies and any modifications, extensions and/or assumption
agreements and private mortgage insurance policies relating to the Mortgage
Loans by the Seller to the Depositor, and by the Depositor to the Trustee be,
and be construed as, an absolute sale thereof to the Depositor or the Trustee,
as applicable. It is, further, not the intention of the parties that such
conveyance be deemed a pledge thereof by the Seller to the Depositor, or 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 Seller or the
Depositor, as applicable, 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) each conveyance provided for
in this Agreement shall be deemed to be an assignment and a grant by the Seller
or the Depositor, as applicable , 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 assets of the Trust Fund, such security interest would be deemed
to be a perfected security interest of first priority under applicable law and
will be maintained as such throughout the term of the Agreement.

         Section 12.05 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 a
Responsible Officer of the Trustee has actual knowledge:

                  (i) Any material change or amendment to this Agreement;

                  (ii) The occurrence of any Event of Default that has not been
         cured;

                  (iii) The resignation or termination of the Master Servicer,
         the Securities Administrator or the Trustee and the appointment of any
         successor;

                  (iv) The repurchase or substitution of Mortgage Loans pursuant
         to Sections 2.02, 2.03, 4.21 and 11.01; and

                  (v) The final payment to Certificateholders.

                  (b) All directions, demands and notices hereunder shall be in
writing and shall be deemed to have been duly given when delivered at or mailed
by registered mail, return receipt requested, postage prepaid, or by recognized
overnight courier, or by facsimile transmission to a number provided by the
appropriate party if receipt of such transmission is confirmed to (i) in the
case of the Depositor, Bear Stearns Asset Backed Securities, Inc., 383 Madison
Avenue, New York,

                                      -140-

<PAGE>

New York 10179, Attention: Chief Counsel; (ii) in the case of the Seller or the
Company, EMC Mortgage Corporation, 909 Hidden Ridge Drive, Irving, Texas 75038,
Attention: Ralene Ruyle or such other address as may be hereafter furnished to
the other parties hereto by the Master Servicer in writing; (iv) in the case of
the Trustee, at each Corporate Trust Office or such other address as the Trustee
may hereafter furnish to the other parties hereto; (v) in the case of the Master
Servicer or the Securities Administrator, P. O. Box 98, Columbia, Maryland 21046
(or, for overnight deliveries, 9062 Old Annapolis Road, Columbia, Maryland
21045), Attention: BSABS 2003-AC2 or such other address as may be hereafter
furnished to the other parties hereto by the Securities Administrator in writing
and (vi) in the case of the Rating Agencies, (x) Moody's Investors Service,
Inc., 99 Church Street, New York, New York 10007, Attention: Home Equity
Monitoring and (y) Standard & Poor's, 55 Water Street, 41st Floor, New York, New
York 10041, Attention: Mortgage Surveillance Group. Any notice delivered to the
Seller, the Master Servicer, the Securities Administrator or the Trustee under
this Agreement shall be effective only upon receipt. Any notice required or
permitted to be mailed to a Certificateholder, unless otherwise provided herein,
shall be given by first-class mail, postage prepaid, at the address of such
Certificateholder as shown in the Certificate Register; any notice so mailed
within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Certificateholder receives such notice.

         Section 12.06 SEVERABILITY OF PROVISIONS.

                  If any one or more of the covenants, agreements, provisions or
terms of this Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions or terms shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Certificates or the rights of the Holders thereof.

         Section 12.07 ASSIGNMENT.

                  Notwithstanding anything to the contrary contained herein,
except as provided pursuant to Section 8.02, this Agreement may not be assigned
by the Master Servicer, the Seller or the Depositor.

         Section 12.08 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS.

                  The death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust Fund, nor entitle such
Certificateholder's legal 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 Fund, 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.

                                      -141-

<PAGE>

                  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 or the
Securities Administrator, as appropriate, a written notice of an Event of
Default and of the continuance thereof, as hereinbefore provided, 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 or the
Securities Administrator, as appropriate to institute such action, suit or
proceeding in its own name as Trustee or the Securities Administrator, as
appropriate, hereunder and shall have offered to the Trustee or the Securities
Administrator, as appropriate, such reasonable indemnity as it may require
against the costs, expenses, and liabilities to be incurred therein or thereby,
and the Trustee or the Securities Administrator, as appropriate, 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 12.08, each
and every Certificateholder, the Trustee or the Securities Administrator shall
be entitled to such relief as can be given either at law or in equity.

         Section 12.09 INSPECTION AND AUDIT RIGHTS. The Master Servicer agrees
that, on reasonable prior notice, it will 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 such Mortgage Loans with its officers,
employees and independent public accountants (and by this provision the Master
Servicer hereby authorizes such 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 12.09
shall be borne by the party requesting such inspection, subject to such party's
right to reimbursement hereunder (in the case of the Trustee, pursuant to
Section 10.05 hereof).

         Section 12.10 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.

                                      * * *

                                      -142-

<PAGE>

                  IN WITNESS WHEREOF, the Depositor, the Master Servicer, the
Seller, the Company, the Securities Administrator and the Trustee have caused
their names to be signed hereto by their respective officers thereunto duly
authorized as of the day and year first above written.

                                       BEAR STEARNS ASSET BACKED SECURITIES,
                                       INC.,
                                                as Depositor

                                       By:_________________________________
                                       Name:
                                       Title:

                                       EMC MORTGAGE CORPORATION,
                                                as Seller and Company

                                       By:_________________________________
                                       Name:
                                       Title:

                                       WELLS FARGO BANK MINNESOTA,
                                       NATIONAL
                                       ASSOCIATION
                                                as Securities Administrator and
                                                Master Servicer

                                       By:_________________________________
                                       Name:
                                       Title:

                                       JPMORGAN CHASE BANK
                                                as Trustee

                                       By:_________________________________
                                       Name:
                                       Title:

<PAGE>

STATE OF NEW YORK       )
                        ) ss.:
COUNTY OF NEW YORK      )

                  On this ___ day of April, 2003, before me, a notary public in
and for said State, appeared ______________, personally known to me on the basis
of satisfactory evidence to be an authorized representative of Bear Stearns
Asset Backed Securities, Inc., one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
such corporation and acknowledged to me that such corporation executed the
within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                ____________________________
                                                Notary Public

[Notarial Seal]

<PAGE>

STATE OF                )
                        ) ss.:
COUNTY OF               )

                  On this ____ day of April, 2003, before me, a notary public in
and for said State, appeared _______________, personally known to me on the
basis of satisfactory evidence to be an authorized representative of Wells Fargo
Bank Minnesota, National Association that executed the within instrument, and
also known to me to be the person who executed it on behalf of such corporation,
and acknowledged to me that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                     ___________________________
                                                     Notary Public

[Notarial Seal]

<PAGE>

STATE OF NEW YORK       )
                        ) ss.:
COUNTY OF NEW YORK      )

                  On this ____ day of April, 2003, before me, a notary public in
and for said State, appeared _________________, personally known to me on the
basis of satisfactory evidence to be an authorized representative of EMC
Mortgage Corporation, one of the corporations that executed the within
instrument, and also known to me to be the person who executed it on behalf of
such corporation and acknowledged to me that such corporation executed the
within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                   ____________________________
                                                   Notary Public

[Notarial Seal]

<PAGE>

STATE OF                )
                        ) ss.:
COUNTY OF               )

                  On this ____ day of April, 2003, before me, a notary public in
and for said State, appeared _______________, personally known to me on the
basis of satisfactory evidence to be an authorized representative of JPMorgan
Chase Bank that executed the within instrument, and also known to me to be the
person who executed it on behalf of such corporation, and acknowledged to me
that such corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                    ____________________________
                                                    Notary Public

[Notarial Seal]

<PAGE>

                                                                     EXHIBIT A-1

                    Form of Class A-[1][2][3][4] Certificates

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE
PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Pass-Through Rate: ____%

Class A-[1][2][3][4] Senior

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Principal Balance of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP:  ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class A-[1][2][3][4] Certificates with respect to a
         Trust Fund consisting primarily of a pool of conventional one- to
         four-family fixed interest rate mortgage loans sold by BEAR STEARNS
         ASSET BACKED SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional first lien, fixed rate mortgage loans
secured by one- to four- family residences, units in planned unit developments
and individual condominium units (collectively, the "Mortgage Loans") sold by
Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were
sold by EMC Mortgage Corporation

                                      A-1-2

<PAGE>

("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association will act as
master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs
on the Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such last day is
not a Business Day, the Business Day immediately preceding such last day) of the
calendar month immediately preceding the month in which the Distribution Date
occurs, an amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount (of interest and principal, if any) required to
be distributed to the Holders of Certificates of the same Class as this
Certificate. The Assumed Final Distribution Date is the Distribution Date in the
month following the latest scheduled maturity date of any Mortgage Loan and is
not likely to be the date on which the Certificate Principal Balance of this
Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
initial Certificate Principal Balance of this Certificate is set forth above.
The Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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.

                                      A-1-3

<PAGE>

                  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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of each Class of Certificates affected thereby evidencing over 50% of
the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of Depositor, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the

                                     A-1-4

<PAGE>

Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-1-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class A-[1][2][3][4] Certificates referred
to in the within-mentioned Agreement.

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-2

                         Form of Class A-IO Certificates

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

                                      A-2-1

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Pass-Through Rate: ____%

Class A-IO Senior

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Notional Amount
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Notional Amount of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP:  ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class A-IO Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional first lien, fixed rate mortgage loans
secured by one- to four- family residences, units in planned unit developments
and individual condominium units (collectively, the "Mortgage Loans") sold by
Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were
sold by EMC Mortgage Corporation

                                      A-2-2

<PAGE>

("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association will act as
master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs
on the Certificate Notional Amount hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such last day is
not a Business Day, the Business Day immediately preceding such last day) of the
calendar month immediately preceding the month in which the Distribution Date
occurs, an amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount (of interest, if any) required to be distributed
to the Holders of Certificates of the same Class as this Certificate. The
Assumed Final Distribution Date is the Distribution Date in October 2005.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
Class A-IO Certificates have no Certificate Principal Balance. The Initial
Certificate Notional Balance of this Certificate is set forth above.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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 hereby, and the rights,
duties and immunities of the Trustee.

                                      A-2-3

<PAGE>

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such class or classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of Depositor, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the Certificates. In no event, however, will the
Trust Fund created by the Agreement continue beyond the expiration of 21 years
after the death of certain persons identified in the Agreement.

                                      A-2-4

<PAGE>

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-2-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class A-IO Certificates referred to in the
within-mentioned Agreement.

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-3

                       Form of Class M-[1][2] Certificate

         THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE SENIOR
CERTIFICATES AS DESCRIBED IN THE AGREEMENT (AS DEFINED BELOW).

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON. ACCORDINGLY, FOLLOWING THE INITIAL
ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE PRINCIPAL BALANCE OF THIS
CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW. ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE PRINCIPAL BALANCE BY
INQUIRY OF THE TRUSTEE NAMED HEREIN.

         EACH BENEFICIAL OWNER OF A CERTIFICATE OR ANY INTEREST THEREIN SHALL BE
DEEMED TO HAVE REPRESENTED, BY VIRTUE OF ITS ACQUISITION OR HOLDING OF THAT
CERTIFICATE OR INTEREST THEREIN, THAT EITHER (I) IT IS NOT A PLAN OR INVESTING
WITH "PLAN ASSETS", (II) IT HAS ACQUIRED AND IS HOLDING SUCH CERTIFICATE IN
RELIANCE ON PROHIBITED TRANSACTION EXEMPTION 2002-41 AS AMENDED ("EXEMPTION"),
AND THAT IT UNDERSTANDS THAT THERE ARE CERTAIN CONDITIONS TO THE AVAILABILITY OF
THE EXEMPTION, INCLUDING THAT THE CERTIFICATE MUST BE RATED, AT THE TIME OF
PURCHASE, NOT LOWER THAN "BBB-" (OR ITS EQUIVALENT) BY S&P, FITCH OR MOODY'S
INVESTORS SERVICE, INC., AND THE CERTIFICATE IS SO RATED OR (III) (1) IT IS AN
INSURANCE COMPANY, (2) THE SOURCE OF FUNDS USED TO ACQUIRE OR HOLD THE
CERTIFICATE OR INTEREST THEREIN IS AN "INSURANCE COMPANY GENERAL ACCOUNT," AS
SUCH TERM IS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 95-60,
AND (3) THE CONDITIONS IN SECTIONS I AND III OF PTCE 95-60 HAVE BEEN SATISFIED.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

                                      A-3-1

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Pass-Through Rate: ____%

Class M-[1][2] Subordinate

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Principal Balance of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class M-[1][2] Certificates with respect to a Trust
         Fund consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional first lien, fixed rate mortgage loans
secured by one- to four- family residences, units in planned unit developments
and individual condominium units (collectively, the "Mortgage Loans") sold by
Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were
sold by EMC Mortgage Corporation

                                      A-3-2

<PAGE>

("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association will act as
master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs
on the Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the last day (or if such last day is
not a Business Day, the Business Day immediately preceding such last day) of the
calendar month immediately preceding the month in which the Distribution Date
occurs, an amount equal to the product of the Percentage Interest evidenced by
this Certificate and the amount (of interest and principal, if any) required to
be distributed to the Holders of Certificates of the same Class as this
Certificate. The Assumed Final Distribution Date is the Distribution Date in the
month following the latest scheduled maturity date of any Mortgage Loan and is
not likely to be the date on which the Certificate Principal Balance of this
Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
initial Certificate Principal Balance of this Certificate is set forth above.
The Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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.

                                      A-3-3

<PAGE>

                  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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

         Each beneficial owner of a Certificate or any interest therein shall be
deemed to have represented, by virtue of its acquisition or holding of that
certificate or interest therein, that either (i) it is not a Plan or investing
with "Plan Assets", (ii) it has acquired and is holding such certificate in
reliance on the Exemption, and that it understands that there are certain
conditions to the availability of the Exemption, including that the certificate
must be rated, at the time of purchase, not lower than "BBB-" (or its
equivalent) by S&P, Fitch or Moody's Investors Service, Inc., and the
certificate is so rated or (iii) (1) it is an insurance company, (2) the source
of funds used to acquire or hold the certificate or interest therein is an
"insurance company general account," as such term is defined in Prohibited
Transaction Class Exemption ("PTCE") 95-60, and (3) the conditions in Sections I
and III of PTCE 95-60 have been satisfied.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the

                                      A-3-4

<PAGE>

Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-3-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class M-[1][2] Certificates referred to in
the within-mentioned Agreement.

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-4

                       Form of Class B-[1][2] Certificates

                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
SENIOR CERTIFICATES, THE CLASS M-1 CERTIFICATES AND THE CLASS M-2 CERTIFICATES
AS DESCRIBED IN THE AGREEMENT (AS DEFINED BELOW).

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE CERTIFICATE PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE
DECREASED BY THE PRINCIPAL PAYMENTS HEREON AND REALIZED LOSSES ALLOCABLE HERETO.
ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CERTIFICATE
PRINCIPAL BALANCE OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION
SHOWN BELOW. ANYONE ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CERTIFICATE
PRINCIPAL BALANCE BY INQUIRY OF THE TRUSTEE NAMED HEREIN.

         EACH BENEFICIAL OWNER OF A CERTIFICATE OR ANY INTEREST THEREIN SHALL BE
DEEMED TO HAVE REPRESENTED, BY VIRTUE OF ITS ACQUISITION OR HOLDING OF THAT
CERTIFICATE OR INTEREST THEREIN, THAT EITHER (I) IT IS NOT A PLAN OR INVESTING
WITH "PLAN ASSETS", (II) IT HAS ACQUIRED AND IS HOLDING SUCH CERTIFICATE IN
RELIANCE ON PROHIBITED TRANSACTION EXEMPTION 2002-41 AS AMENDED ("EXEMPTION"),
AND THAT IT UNDERSTANDS THAT THERE ARE CERTAIN CONDITIONS TO THE AVAILABILITY OF
THE EXEMPTION, INCLUDING THAT THE CERTIFICATE MUST BE RATED, AT THE TIME OF
PURCHASE, NOT LOWER THAN "BBB-" (OR ITS EQUIVALENT) BY S&P, FITCH OR MOODY'S
INVESTORS SERVICE, INC., AND THE CERTIFICATE IS SO RATED OR (III) (1) IT IS AN
INSURANCE COMPANY, (2) THE SOURCE OF FUNDS USED TO ACQUIRE OR HOLD THE
CERTIFICATE OR INTEREST THEREIN IS AN "INSURANCE COMPANY GENERAL ACCOUNT," AS
SUCH TERM IS DEFINED IN PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 95-60,
AND (3) THE CONDITIONS IN SECTIONS I AND III OF PTCE 95-60 HAVE BEEN SATISFIED.

                  UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE DEPOSITOR OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

                                      A-4-1

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Pass-Through Rate: ____%

Class B-[1][2] Subordinate

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Principal Balance of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class B-[1][2] Certificates with respect to a Trust
         Fund consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that Cede & Co. is the registered owner of the
Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional first lien, fixed rate mortgage loans
secured by one- to four- family residences, units in planned unit developments
and individual condominium units (collectively, the "Mortgage Loans") sold by
Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans were
sold by EMC Mortgage Corporation

                                      A-4-2

<PAGE>

("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association will act as
master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Interest on this Certificate will accrue during the month
prior to the month in which a Distribution Date (as hereinafter defined) occurs
on the Certificate Principal Balance hereof at a per annum rate equal to the
Pass-Through Rate set forth above. The Trustee will distribute on the 25th day
of each month, or, if such 25th day is not a Business Day, the immediately
following Business Day (each, a "Distribution Date"), commencing on the First
Distribution Date specified above, to the Person in whose name this Certificate
is registered at the close of business on the Business Day immediately preceding
such Distribution Date, an amount equal to the product of the Percentage
Interest evidenced by this Certificate and the amount (of interest and
principal, if any) required to be distributed to the Holders of Certificates of
the same Class as this Certificate. The Assumed Final Distribution Date is the
Distribution Date in the month following the latest scheduled maturity date of
any Mortgage Loan and is not likely to be the date on which the Certificate
Principal Balance of this Class of Certificates will be reduced to zero.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice. The
initial Certificate Principal Balance of this Certificate is set forth above.
The Certificate Principal Balance hereof will be reduced to the extent of
distributions allocable to principal hereon and any Realized Losses allocable
hereto.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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.

                                      A-4-3

<PAGE>

                  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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  Each beneficial owner of a Certificate or any interest therein
shall be deemed to have represented, by virtue of its acquisition or holding of
that certificate or interest therein, that either (i) it is not a Plan or
investing with "Plan Assets", (ii) it has acquired and is holding such
certificate in reliance on the Exemption, and that it understands that there are
certain conditions to the availability of the Exemption, including that the
certificate must be rated, at the time of purchase, not lower than "BBB-" (or
its equivalent) by S&P, Fitch or Moody's Investors Service, Inc., and the
certificate is so rated or (iii) (1) it is an insurance company, (2) the source
of funds used to acquire or hold the certificate or interest therein is an
"insurance company general account," as such term is defined in Prohibited
Transaction Class Exemption ("PTCE") 95-60, and (3) the conditions in Sections I
and III of PTCE 95-60 have been satisfied.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new Certificates evidencing the
same Class and in the same aggregate Percentage Interest, as requested by the
Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the

                                      A-4-4

<PAGE>

Certificates. In no event, however, will the Trust Fund created by the Agreement
continue beyond the expiration of 21 years after the death of certain persons
identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-4-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class B-[1][2] Certificates referred to in
the within-mentioned Agreement.

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-5

                          Form of Class C Certificates

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES
THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH
ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY
THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
(B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE
THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION.

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION
7.02(B) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER
SERVICER, THE TRUSTEE AND THE SECURITIES ADMINISTRATOR THAT THE PURCHASE OF THIS
CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER
SERVICER, THE TRUSTEE OR THE

                                      A-5-1

<PAGE>

SECURITIES ADMINISTRATOR TO ANY OBLIGATION OR LIABILITY IN ADDITION
TO THOSE UNDERTAKEN IN THE AGREEMENT.

                                      A-5-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Percentage Interest: 100%

Class C                                                   Variable Pass-Through Rate

Date of Pooling and Servicing Agreement and               Initial Certificate Principal Balance of this
Cut-off Date:                                             Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Notional Balance of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class C Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that _______________ is the registered owner of
the Percentage Interest evidenced hereby in the beneficial ownership interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
generally consisting of conventional first lien, fixed rate mortgage loans
secured by one- to four- family residences, units in planned unit developments
and individual condominium units (collectively, the "Mortgage Loans") sold by
Bear Stearns Asset

                                      A-5-3

<PAGE>

Backed Securities, Inc. ("BSABS"). The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association
will act as master servicer of the Mortgage Loans (the "Master Servicer," which
term includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit E and either F
or G, as applicable, and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee, the Securities Administrator or the
Master Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. Neither the Depositor nor the Trustee is obligated to
register or qualify the Class of Certificates specified on the face hereof under
the 1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Securities
Administrator, 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.

                  No transfer of this Class C Certificate will be made unless
the Trustee and the Securities Administrator have received either (i) an opinion
of counsel acceptable to and in form and

                                      A-5-4

<PAGE>

substance satisfactory to the Trustee, the Securities Administrator and the
Master Servicer with respect to the permissibility of such transfer under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Internal Revenue Code (the "Code") and stating, among other
things, that the transferee's acquisition of a Class C Certificate will not
constitute or result in a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code and will not subject the Master Servicer, the
Trustee or the Securities Administrator to any obligation or liability in
addition to those undertaken in the agreement or (ii) a representation letter,
in the form as described by the Agreement, stating that the transferee is not an
employee benefit or other plan subject to the prohibited transaction provisions
of ERISA or Section 4975 of the Code (a "Plan"), or any other person (including
an investment manager, a named fiduciary or a trustee of any Plan) acting,
directly or indirectly, on behalf of or purchasing any Certificate with "plan
assets" of any Plan.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new

                                      A-5-5

<PAGE>

Certificates evidencing the same Class and in the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the Certificates. In no event, however, will the
Trust Fund created by the Agreement continue beyond the expiration of 21 years
after the death of certain persons identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-5-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-6

                          Form of Class P Certificates

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER ANY
STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES
THAT THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY
(1) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON
THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR ITS OWN ACCOUNT OR A QIB
PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (2) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN CERTIFICATED FORM TO AN
"INSTITUTIONAL ACCREDITED INVESTOR" WITHIN THE MEANING THEREOF IN RULE
501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE ACT OR ANY ENTITY IN WHICH
ALL OF THE EQUITY OWNERS COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY
THE TRUSTEE OF A LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
(B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER EVIDENCE ACCEPTABLE TO THE TRUSTEE
THAT SUCH REOFFER, RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH CASE IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
JURISDICTION.

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION
7.02(B) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER
SERVICER, THE TRUSTEE AND THE SECURITIES ADMINISTRATOR THAT THE PURCHASE OF THIS
CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER
SERVICER, THE TRUSTEE OR THE

                                      A-6-1

<PAGE>

SECURITIES ADMINISTRATOR TO ANY OBLIGATION OR LIABILITY IN ADDITION TO THOSE
UNDERTAKEN IN THE AGREEMENT.

                                      A-6-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1                                          Percentage Interest: 100%

Class P

Date of Pooling and Servicing Agreement and               Aggregate Initial Certificate Principal Balance
Cut-off Date:                                             of this Certificate as of the Cut-off Date:
April 1, 2003                                             $___________

First Distribution Date:                                  Initial Certificate Principal Balance of this
May 27, 2003                                              Certificate as of the Cut-off Date:
                                                          $___________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class P Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that ___________________ is the registered
owner of the Percentage Interest evidenced hereby in the beneficial ownership
interest of Certificates of the same Class as this Certificate in a trust (the
"Trust Fund") generally consisting of conventional first lien, fixed rate
mortgage loans secured by one- to four- family residences, units in planned unit
developments and individual condominium units (collectively, the "Mortgage
Loans") sold by Bear Stearns Asset

                                      A-6-3

<PAGE>

Backed Securities, Inc. ("BSABS"). The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to BSABS. Wells Fargo Bank Minnesota, National Association
will act as master servicer of the Mortgage Loans (the "Master Servicer," which
term includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank, as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.

                  No transfer of this Certificate shall be made unless the
transfer is made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "1933 Act"), and an effective
registration or qualification under applicable state securities laws, or is made
in a transaction that does not require such registration or qualification. In
the event that such a transfer of this Certificate is to be made without
registration or qualification, the Trustee shall require receipt of (i) if such
transfer is purportedly being made in reliance upon Rule 144A under the 1933
Act, written certifications from the Holder of the Certificate desiring to
effect the transfer, and from such Holder's prospective transferee,
substantially in the forms attached to the Agreement as Exhibit E and either F
or G, as applicable, and (ii) in all other cases, an Opinion of Counsel
satisfactory to it that such transfer may be made without such registration or
qualification (which Opinion of Counsel shall not be an expense of the Trust
Fund or of the Depositor, the Trustee, the Securities Administrator or the
Master Servicer in their respective capacities as such), together with copies of
the written certification(s) of the Holder of the Certificate desiring to effect
the transfer and/or such Holder's prospective transferee upon which such Opinion
of Counsel is based. Neither the Depositor nor the Trustee is obligated to
register or qualify the Class of Certificates specified on the face hereof under
the 1933 Act or any other securities law or to take any action not otherwise
required under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Securities
Administrator, 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.

                  No transfer of this Class P Certificate will be made unless
the Trustee and the Securities Administrator have received either (i) an opinion
of counsel acceptable to and in form and

                                      A-6-4

<PAGE>

substance satisfactory to the Trustee, the Securities Administrator and the
Master Servicer with respect to the permissibility of such transfer under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Internal Revenue Code (the "Code") and stating, among other
things, that the transferee's acquisition of a Class P Certificate will not
constitute or result in a non-exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code and will not subject the Master Servicer, the
Trustee or the Securities Administrator to any obligation or liability in
addition to those undertaken in the agreement or (ii) a representation letter,
in the form as described by the Agreement, stating that the transferee is not an
employee benefit or other plan subject to the prohibited transaction provisions
of ERISA or Section 4975 of the Code (a "Plan"), or any other person (including
an investment manager, a named fiduciary or a trustee of any Plan) acting,
directly or indirectly, on behalf of or purchasing any Certificate with "plan
assets" of any Plan.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject to certain limitations therein set forth,
this Certificate is exchangeable for one or more new

                                      A-6-5

<PAGE>

Certificates evidencing the same Class and in the same aggregate Percentage
Interest, as requested by the Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Depositor, the Master Servicer,
the Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the Certificates. In no event, however, will the
Trust Fund created by the Agreement continue beyond the expiration of 21 years
after the death of certain persons identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-6-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                     EXHIBIT A-7

                         Form of Class R-_ Certificates

                  THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A
NON-UNITED STATES PERSON OR A DISQUALIFIED ORGANIZATION (AS DEFINED BELOW).

                  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 (THE "CODE").

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION
7.02(B) OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE MASTER
SERVICER, THE TRUSTEE AND THE SECURITIES ADMINISTRATOR THAT THE PURCHASE OF THIS
CERTIFICATE WILL NOT CONSTITUTE OR RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION
UNDER SECTION 406 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED ("ERISA"), OR SECTION 4975 OF THE CODE AND WILL NOT SUBJECT THE MASTER
SERVICER, THE TRUSTEE OR THE SECURITIES ADMINISTRATOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.

                  ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE
MAY BE MADE ONLY IF THE PROPOSED TRANSFEREE PROVIDES A TRANSFER AFFIDAVIT TO THE
MASTER SERVICER AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE UNITED
STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY POSSESSION OF THE UNITED
STATES, OR ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN AN
INSTRUMENTALITY WHICH IS A CORPORATION IF ALL OF ITS ACTIVITIES ARE SUBJECT TO
TAX AND EXCEPT FOR FREDDIE MAC, A MAJORITY OF ITS BOARD OF DIRECTORS IS NOT
SELECTED BY SUCH GOVERNMENTAL UNIT), (B) A FOREIGN GOVERNMENT, ANY INTERNATIONAL
ORGANIZATION, OR ANY AGENCY OR INSTRUMENTALITY OF EITHER OF THE FOREGOING, (C)
ANY ORGANIZATION (OTHER THAN CERTAIN FARMERS' COOPERATIVES DESCRIBED IN SECTION
521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF THE CODE
UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX IMPOSED BY SECTION 511 OF THE
CODE (INCLUDING THE TAX IMPOSED BY SECTION 511 OF THE CODE ON UNRELATED BUSINESS
TAXABLE INCOME), (D) RURAL ELECTRIC AND TELEPHONE COOPERATIVES DESCRIBED IN
SECTION 1381(A)(2)(C) OF THE CODE, (E) AN ELECTING LARGE PARTNERSHIP UNDER
SECTION 775(A) OF THE CODE (ANY SUCH PERSON DESCRIBED IN THE FOREGOING CLAUSES
(A), (B), (C), (D) OR (E) BEING HEREIN REFERRED TO AS A

                                      A-7-1

<PAGE>

"DISQUALIFIED ORGANIZATION"), OR (F) AN AGENT OF A DISQUALIFIED ORGANIZATION,
(2) NO PURPOSE OF SUCH TRANSFER IS TO IMPEDE THE ASSESSMENT OR COLLECTION OF TAX
AND (3) SUCH TRANSFEREE SATISFIES CERTAIN ADDITIONAL CONDITIONS RELATING TO THE
FINANCIAL CONDITION OF THE PROPOSED TRANSFEREE. NOTWITHSTANDING THE REGISTRATION
IN THE CERTIFICATE REGISTER OR ANY TRANSFER, SALE OR OTHER DISPOSITION OF THIS
CERTIFICATE TO A DISQUALIFIED ORGANIZATION OR AN AGENT OF A DISQUALIFIED
ORGANIZATION, SUCH REGISTRATION SHALL BE DEEMED TO BE OF NO LEGAL FORCE OR
EFFECT WHATSOEVER AND SUCH PERSON SHALL NOT BE DEEMED TO BE A CERTIFICATEHOLDER
FOR ANY PURPOSE HEREUNDER, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF
DISTRIBUTIONS ON THIS CERTIFICATE. EACH HOLDER OF THIS CERTIFICATE BY ACCEPTANCE
OF THIS CERTIFICATE SHALL BE DEEMED TO HAVE CONSENTED TO THE PROVISIONS OF THIS
PARAGRAPH.

                                      A-7-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>
Certificate No.1

Class R-_                                                 Percentage Interest: 100%

Date of Pooling and Servicing Agreement and
Cut-off Date:
April 1, 2003

First Distribution Date:
May 27, 2003

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP:  ___________

Assumed Final Distribution Date:
___________
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC2

         evidencing a fractional undivided interest in the distributions
         allocable to the Class R-_ Certificates with respect to a Trust Fund
         consisting primarily of a pool of conventional one- to four-family
         fixed interest rate mortgage loans sold by BEAR STEARNS ASSET BACKED
         SECURITIES, INC.

                  This Certificate is payable solely from the assets of the
Trust Fund, and does not represent an obligation of or interest in Bear Stearns
Asset Backed Securities, Inc., the Master Servicer, the Trustee or the
Securities Administrator referred to below or any of their affiliates or any
other person. Neither this Certificate nor the underlying Mortgage Loans are
guaranteed or insured by any governmental entity or by Bear Stearns Asset Backed
Securities, Inc., the Master Servicer, the Trustee or the Securities
Administrator or any of their affiliates or any other person. None of Bear
Stearns Asset Backed Securities, Inc., the Master Servicer or any of their
affiliates will have any obligation with respect to any certificate or other
obligation secured by or payable from payments on the Certificates.

                  This certifies that Bear, Stearns Securities Corp. is the
registered owner of the Percentage Interest evidenced hereby in the beneficial
ownership interest of Certificates of the same Class as this Certificate in a
trust (the "Trust Fund") generally consisting of conventional first lien, fixed
rate mortgage loans secured by one- to four- family residences, units in planned
unit developments and individual condominium units (collectively, the "Mortgage
Loans") sold by Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The
Mortgage Loans were sold by EMC Mortgage Corporation ("EMC") to BSABS. Wells
Fargo Bank Minnesota, National Association will act as

                                      A-7-3

<PAGE>

master servicer of the Mortgage Loans (the "Master Servicer," which term
includes any successors thereto under the Agreement referred to below). The
Trust Fund was created pursuant to the Pooling and Servicing Agreement dated as
of the Cut-off Date specified above (the "Agreement"), among BSABS, as depositor
(the "Depositor"), EMC Mortgage Corporation as seller and company, Wells Fargo
Bank Minnesota, National Association, as Master Servicer and securities
administrator (the "Securities Administrator") and JPMorgan Chase Bank as
trustee (the "Trustee"), a summary of certain of the pertinent provisions of
which is set forth hereafter. To the extent not defined herein, capitalized
terms used herein shall have the meaning ascribed to them 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 its acceptance hereof assents and by which such Holder is bound.

         Each Holder of this Certificate will be deemed to have agreed to be
bound by the restrictions set forth in the Agreement to the effect that (i) each
person holding or acquiring any Ownership Interest in this Certificate must be a
United States Person and a Permitted Transferee, (ii) the transfer of any
Ownership Interest in this Certificate will be conditioned upon the delivery to
the Trustee of, among other things, an affidavit to the effect that it is a
United States Person and Permitted Transferee, (iii) any attempted or purported
transfer of any Ownership Interest in this Certificate in violation of such
restrictions will be absolutely null and void and will vest no rights in the
purported transferee, and (iv) if any person other than a United States Person
and a Permitted Transferee acquires any Ownership Interest in this Certificate
in violation of such restrictions, then the Depositor will have the right, in
its sole discretion and without notice to the Holder of this Certificate, to
sell this Certificate to a purchaser selected by the Depositor, which purchaser
may be the Depositor, or any affiliate of the Depositor, on such terms and
conditions as the Depositor may choose.

                  The Trustee will distribute on the 25th day of each month, or,
if such 25th day is not a Business Day, the immediately following Business Day
(each, a "Distribution Date"), commencing on the First Distribution Date
specified above, to the Person in whose name this Certificate is registered at
the close of business on the last day (or if such last day is not a Business
Day, the Business Day immediately preceding such last day) of the calendar month
immediately preceding the month in which the Distribution Date occurs, an amount
equal to the product of the Percentage Interest evidenced by this Certificate
and the amounts required to be distributed to the Holders of Certificates of the
same Class as this Certificate. The Assumed Final Distribution Date is the
Distribution Date in the month following the latest scheduled maturity date of
any Mortgage Loan.

                  Distributions on this Certificate will be made by the Trustee
by check mailed to the address of the Person entitled thereto as such name and
address shall appear on the Certificate Register or, if such Person so requests
by notifying the Trustee in writing as specified in the Agreement.
Notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that purpose and designated in such notice.

                                      A-7-4

<PAGE>

                  No transfer of this Class R-1 Certificate will be made unless
the Trustee and the Securities Administrator have received either (i) an opinion
of counsel acceptable to and in form and substance satisfactory to the Trustee,
the Securities Administrator and the Master Servicer with respect to the
permissibility of such transfer under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), and Section 4975 of the Internal Revenue Code
(the "Code") and stating, among other things, that the transferee's acquisition
of a Class R-1 Certificate will not constitute or result in a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the Code
and will not subject the Master Servicer, the Trustee or the Securities
Administrator to any obligation or liability in addition to those undertaken in
the agreement or (ii) a representation letter, in the form as described by the
Agreement, stating that the transferee is not an employee benefit or other plan
subject to the prohibited transaction provisions of ERISA or Section 4975 of the
Code (a "Plan"), or any other person (including an investment manager, a named
fiduciary or a trustee of any Plan) acting, directly or indirectly, on behalf of
or purchasing any Certificate with "plan assets" of any Plan.

                  This Certificate is one of a duly authorized issue of
Certificates designated as set forth on the face hereof (the "Certificates").
The Certificates, in the aggregate, evidence the entire beneficial ownership
interest in the Trust Fund formed pursuant to the Agreement.

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund 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 hereby, and the rights,
duties and immunities of the Trustee.

                  The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the rights of the Certificateholders under the
Agreement from time to time by the parties thereto with the consent of the
Holders of the Class or Classes of Certificates affected thereby evidencing over
50% of the Voting Rights of such Class or Classes. 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 lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.

                  As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is registrable
with the Trustee upon surrender of this Certificate for registration of transfer
at the offices or agencies maintained by the Trustee for such purposes, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Trustee duly executed by the Holder hereof or such Holder's
attorney duly authorized in writing, and thereupon one or more new Certificates
in authorized denominations representing a like aggregate Percentage Interest
will be issued to the designated transferee.

                  The Certificates are issuable only as registered Certificates
without coupons in the Classes and denominations specified in the Agreement. As
provided in the Agreement and subject

                                      A-7-5

<PAGE>

to certain limitations therein set forth, this Certificate is exchangeable for
one or more new Certificates evidencing the same Class and in the same aggregate
Percentage Interest, as requested by the Holder surrendering the same.

                  No service charge will be made to the Certificateholders for
any such registration of transfer, 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 Trustee and any agent of any
of them may treat the Person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of Depositor, the Master Servicer, the
Trustee or any such agent shall be affected by notice to the contrary.

                  The obligations created by the Agreement and the Trust Fund
created thereby (other than the obligations to make payments to
Certificateholders with respect to the termination of the Agreement) shall
terminate upon the earlier of (i) the later of (A) the maturity or other
liquidation (or Advance with respect thereto) of the last Mortgage Loan
remaining in the Trust Fund and disposition of all property acquired upon
foreclosure or deed in lieu of foreclosure of any Mortgage Loan and (B) the
remittance of all funds due under the Agreement, or (ii) the optional repurchase
by the party named in the Agreement of all the Mortgage Loans and other assets
of the Trust Fund in accordance with the terms of the Agreement. Such optional
repurchase may be made only on or after the Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than the
percentage of the aggregate Stated Principal Balance specified in the Agreement
of the Mortgage Loans at the Cut-off Date. The exercise of such right will
effect the early retirement of the Certificates. In no event, however, will the
Trust Fund created by the Agreement continue beyond the expiration of 21 years
after the death of certain persons identified in the Agreement.

                  Unless this Certificate has been countersigned by an
authorized signatory of the Trustee by manual signature, this Certificate shall
not be entitled to any benefit under the Agreement, or be valid for any purpose.

                                      A-7-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: April 30, 2003                        JPMORGAN CHASE BANK,
                                             not in its individual capacity but
                                             solely as Trustee

                                             By:________________________________
                                                      Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class R-__ Certificates referred to in the
within-mentioned Agreement.

                                             JPMORGAN CHASE BANK
                                             Authorized signatory of JPMorgan
                                             Chase Bank, not in its individual
                                             capacity but solely as Trustee

                                             By:________________________________
                                                     Authorized Signatory

<PAGE>

                                   ASSIGNMENT
                                   ----------

                  FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s)
and transfer(s) unto __________________________________ (Please print or
typewrite name and address including postal zip code of assignee) a Percentage
Interest evidenced by the within Asset-Backed Certificate and hereby authorizes
the transfer of registration of such interest to assignee on the Certificate
Register of the Trust Fund.

                  I (We) further direct the Certificate Registrar to issue a new
Certificate of a like denomination and Class, to the above named assignee and
deliver such Certificate to the following address:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

Dated:                              ____________________________________________
                                         Signature by or on behalf of assignor

                                                ________________________________
                                                      Signature Guaranteed

                            DISTRIBUTION INSTRUCTIONS

                  The assignee should include the following for purposes of
distribution:

                  Distributions shall be made, by wire transfer or otherwise, in
immediately available funds to _________________________________ for the account
of _________________________ account number _____________, or, if mailed by
check, to ______________________________. Applicable statements should be mailed
to _____________________________________________.

                  This information is provided by __________________, the
assignee named above, or ________________________, as its agent.

<PAGE>

                                                                       EXHIBIT B

                             MORTGAGE LOAN SCHEDULE
                             ----------------------

                  The Preliminary and Final Mortgage Loan Schedules shall set
forth the following information with respect to each Mortgage Loan:

(a)      the loan number;

(b)      the Mortgagor's name;

(c)      the street address (including city, state and zip code) of the
         Mortgaged Property;

(d)      the property type;

(e)      the Mortgage Rate;

(f)      the Master Servicing Rate;

(g)      the Net Rate;

(h)      the original term;

(i)      the maturity date;

(j)      the stated remaining term to maturity;

(k)      the original principal balance;

(1)      the first payment date;

(m)      the principal and interest payment in effect as of the Cut-off Date;

(n)      the unpaid principal balance as of the Cut-off Date;

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

(p)      paid-through date;

(q)      the insurer of any Primary Mortgage Insurance Policy;

(r)      the Mortgage Loan Group;

(s)      the Gross Margin, if applicable;

(t)      the Maximum Lifetime Mortgage Rate, if applicable;

<PAGE>

(u)      the Minimum Lifetime Mortgage Rate, if applicable;

(v)      the Periodic Rate Cap, if applicable; and

(w)      the number of days delinquent, if any.

Such schedule also shall set forth for all of the Mortgage Loans, the total
number of Mortgage Loans, the total of each of the amounts described under (xi)
and (xiv) above, the weighted average by principal balance as of the Cut-off
Date of each of the rates described under (v), (vi) and (vii) above, and the
weighted average remaining term to maturity by unpaid principal balance as of
the Cut-off Date.

<PAGE>

                                                                     EXHIBIT C-1
                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                                April 30, 2003

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, and subject to Section 2.02 of the Pooling and Servicing
Agreement, the undersigned, as Custodian, hereby certifies that it has received
a Mortgage File (which contains an original Mortgage Note or lost note
affidavit) to the extent required in Section 2.01 of the Pooling and Servicing
Agreement with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule, with any exceptions listed on Schedule A attached hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                     WELLS FARGO BANK MINNESOTA,
                                                     NATIONAL ASSOCIATION

                                                     By:________________________
                                                     Name:______________________
                                                     Title:_____________________

                                      C-1-1

<PAGE>

                                                                     EXHIBIT C-2
                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                    [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File to the extent required pursuant to Section 2.01 of the
Pooling and Servicing Agreement with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule, and it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: all required documents have been executed
and received and that such documents related to the Mortgage Loans identified on
the Mortgage Loan Schedule, with any exceptions listed on Schedule A attached
hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                  WELLS FARGO BANK MINNESOTA,
                                                  NATIONAL ASSOCIATION

                                                  By:________________________
                                                  Name:______________________
                                                  Title:_____________________

                                      C-2-1

<PAGE>

                                                                     EXHIBIT C-3

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                       [DATE]

JPMorgan Chase Bank
4 New York Plaza
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule containing with respect to each such Mortgage Loan:

         (i) the original Mortgage Note, including any riders thereto, endorsed
         without recourse to the order of "JPMorgan Chase Bank, as Trustee for
         certificateholders of Bear Stearns Asset Backed Securities, Inc. Asset
         Backed Certificates, Series 2003- AC2," and showing to the extent
         available to the Seller an unbroken chain of endorsements from the
         original payee thereof to the Person endorsing it to the Trustee,

                  (ii) the original Mortgage and, if the related Mortgage Loan
                  is a MOM Loan, noting the presence of the MIN and language
                  indicating that such Mortgage Loan is a MOM Loan, which shall
                  have been recorded (or if the original is not available, a
                  copy), with evidence of such recording indicated thereon (or
                  if permitted by Section 2.2 of the Custodial Agreement, shall
                  be in recordable form),

                                      C-3-1

<PAGE>

                  (iii) unless the Mortgage Loan is a MOM Loan, the assignment
                  (either an original or a copy, which may be in the form of a
                  blanket assignment if permitted in the jurisdiction in which
                  the Mortgaged Property is located) to the Trustee of the
                  Mortgage with respect to each Mortgage Loan in the name of
                  "JPMorgan Chase Bank, as Trustee for certificateholders of
                  Bear Stearns Asset Backed Securities, Inc. Asset Backed
                  Certificates, Series 2003-AC2," which shall have been recorded
                  (or if permitted by Section 2.2 of the Custodial Agreement,
                  shall be in recordable form);

                  (iv) an original or a copy of all intervening assignments of
                  the Mortgage, if any, with evidence of recording thereon,

                  (v) the original policy of title insurance or mortgagee's
                  certificate of title insurance or commitment or binder for
                  title insurance, if available, or a copy thereof, or, in the
                  event that such original title insurance policy is
                  unavailable, a photocopy thereof, or in lieu thereof, a
                  current lien search on the related Mortgaged Property and

                  (vi) originals or copies of all available assumption,
                  modification or substitution agreements, if any.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                   WELLS FARGO BANK MINNESOTA,
                                                   NATIONAL ASSOCIATION

                                                   By:________________________
                                                   Name:______________________
                                                   Title:_____________________

                                      C-3-2

<PAGE>

                                                                       EXHIBIT D

                           FORM OF TRANSFER AFFIDAVIT

                                              Affidavit pursuant to Section
                                              860E(e)(4) of the Internal Revenue
                                              Code of 1986, as amended, and for
                                              other purposes

STATE OF                   )
                           )ss:
COUNTY OF                  )

         [NAME OF OFFICER], being first duly sworn, deposes and says:

         1. That he/she is [Title of Officer] of [Name of Investor] (the
"Investor"), a [savings institution] [corporation] duly organized and existing
under the laws of [the State of _____] [the United States], on behalf of which
he makes this affidavit.

         2. That (i) the Investor is not a "disqualified organization" as
defined in Section 860E(e)(5) of the Internal Revenue Code of 1986, as amended
(the "Code"), and will not be a disqualified organization as of [Closing Date]
[date of purchase]; (ii) it is not acquiring the Bear Stearns Asset-Backed
Securities, Inc. Asset-Backed Certificates, Series 2003-AC2, Class R-__
Certificates (the "Residual Certificates") for the account of a disqualified
organization; (iii) it consents to any amendment of the Pooling and Servicing
Agreement that shall be deemed necessary by Bear Stearns Asset Backed
Securities, Inc. (upon advice of counsel) to constitute a reasonable arrangement
to ensure that the Residual Certificates will not be owned directly or
indirectly by a disqualified organization; and (iv) it will not transfer such
Residual Certificates unless (a) it has received from the transferee an
affidavit in substantially the same form as this affidavit containing these same
four representations and (b) as of the time of the transfer, it does not have
actual knowledge that such affidavit is false.

         3. That the Investor is one of the following: (i) a citizen or resident
of the United States, (ii) a corporation or partnership (including an entity
treated as a corporation or partnership for federal income tax purposes) created
or organized in, or under the laws of, the United States or any state thereof or
the District of Columbia (except, in the case of a partnership, to the extent
provided in regulations), provided that no partnership or other entity treated
as a partnership for United States federal income tax purposes shall be treated
as a United States Person unless all persons that own an interest in such
partnership either directly or through any entity that is not a corporation for
United States federal income tax purposes are United States Persons, (iii) an
estate whose income is subject to United States federal income tax regardless of
its source, or (iv) a trust other than a "foreign trust," as defined in Section
7701 (a)(31) of the Code.

         4. That the Investor's taxpayer identification number is
______________________.

                                       D-1

<PAGE>

         5. That no purpose of the acquisition of the Residual Certificates is
to avoid or impede the assessment or collection of tax.

         6. That the Investor understands that, as the holder of the Residual
Certificates, the Investor may incur tax liabilities in excess of any cash flows
generated by such Residual Certificates.

         7. That the Investor intends to pay taxes associated with holding the
Residual Certificates as they become due.

         IN WITNESS WHEREOF, the Investor has caused this instrument to be
executed on its behalf, pursuant to authority of its Board of Directors, by its
[Title of Officer] this ____ day of _________, 20__.

                                          [NAME OF INVESTOR]

                                          By:___________________________________
                                             [Name of Officer]
                                             [Title of Officer]
                                             [Address of Investor for receipt of
                                             distributions]

                                             Address of Investor for receipt of
                                             tax information:

                                       D-2

<PAGE>

         Personally appeared before me the above-named [Name of Officer], known
or proved to me to be the same person who executed the foregoing instrument and
to be the [Title of Officer] of the Investor, and acknowledged to me that he/she
executed the same as his/her free act and deed and the free act and deed of the
Investor.

         Subscribed and sworn before me this ___ day of _________, 20___.

NOTARY PUBLIC

COUNTY OF

STATE OF

My commission expires the ___ day of ___________________, 20___.

                                       D-3

<PAGE>

                                                                       EXHIBIT E

                         FORM OF TRANSFEROR CERTIFICATE

                              ______________,200___

Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004

Attention: Bear Stearns Asset Backed Securities Trust 2003-AC2

                  Re:      Bear Stearns Asset Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2003-AC2, Class__
                           ---------------------------------------------------

Ladies and Gentlemen:

         In connection with the sale by ___________ (the "Seller") to ________
(the "Purchaser") of $_________ Initial Certificate Principal Balance of
Asset-Backed Certificates, Series 2003-AC2, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of April 1, 2003 among Bear Stearns Asset-Backed
Securities, Inc., as depositor (the "Depositor"), EMC Mortgage Corporation, as
seller and company, Wells Fargo Bank Minnesota, National Association, as master
servicer and securities administrator, and JPMorgan Chase Bank, as trustee (the
"Trustee"). The Seller hereby certifies, represents and warrants to, a covenants
with, the Depositor and the Trustee that:

         Neither the Seller nor anyone acting on its behalf has (a) offered,
pledged, sold, disposed of or otherwise transferred any Certificate, any
interest in any Certificate or any other similar security to any person in any
manner, (b) has solicited any offer to buy or to accept a pledge, disposition or
other transfer of any Certificate, any interest in any Certificate or any other
similar security from any person in any manner, (c) has otherwise approached or
negotiated with respect to any Certificate, any interest in any Certificate or
any other similar security with any person in any manner, (d) has made any
general solicitation by means of general advertising or in any other manner, or
(e) has taken any other action, that (as to any of (a) through (e) above) would
constitute a distribution of the Certificates under the Securities Act of 1933
(the "Act"), that would render the disposition of any Certificate a violation of
Section 5 of the Act or any state securities law, or that would require
registration or qualification pursuant thereto. The Seller will not act in any
manner set forth in the foregoing sentence with respect to any Certificate. The
Seller has not and will not sell or otherwise transfer any of the Certificates,
except in compliance with the provisions of the Pooling and Servicing Agreement.

                                       E-1

<PAGE>

                                                Very truly yours,

                                                ________________________________
                                                (Seller)

                                                By:_____________________________

                                                Name:___________________________

                                                Title:__________________________

                                       E-2

<PAGE>

                                                                       EXHIBIT F

             FORM OF INVESTOR REPRESENTATION LETTER (NON-RULE 144A)

                                ___________,200__

Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

JPMorgan Chase Bank
4 New York Plaza, 4th Floor
New York, New York 10004

Attention:        Bear Stearns Asset Backed Securities Trust 2003-AC2

                  Re:      Bear Stearns Asset-Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2003-AC2, Class__
                           ---------------------------------------------------

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
______________ (the "Seller") $_________ Initial Certificate Principal Balance
of Asset-Backed Certificates, Series 2003-AC2, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of April 1, 2003 among Bear Stearns Asset Backed
Securities, Inc., as depositor (the "Depositor"), EMC Mortgage Corporation, as
seller and company, Wells Fargo Bank Minnesota, National Association, as master
servicer and securities administrator, and JPMorgan Chase Bank, as trustee (the
"Trustee"). All terms used herein and not otherwise defined shall have the
meanings set forth in the Pooling and Servicing Agreement. The Purchaser hereby
certifies, represents and warrants to, and covenants with, the Depositor and the
Trustee that:

                           1. The Purchaser understands that (a) the
                  Certificates have not been and will not be registered or
                  qualified under the Securities Act of 1933, as amended (the
                  "Act") or any state securities law, (b) the Depositor is not
                  required to so register or qualify the Certificates, (c) the
                  Certificates may be resold only if registered and qualified
                  pursuant to the provisions of the Act or any state securities
                  law, or if an exemption from such registration and
                  qualification is available, (d) the Pooling and Servicing
                  Agreement contains restrictions regarding the transfer of the
                  Certificates and (e) the Certificates will bear a legend to
                  the foregoing effect.

                           2. The Purchaser is acquiring the Certificates for
                  its own account for investment only and not with a view to or
                  for sale in connection with any distribution thereof in any
                  manner that would violate the Act or any applicable state
                  securities laws.

                                       F-1

<PAGE>

                           3. The Purchaser is (a) a substantial, sophisticated
                  institutional investor having such knowledge and experience in
                  financial and business matters, and, in particular, in such
                  matters related to securities similar to the Certificates,
                  such that it is capable of evaluating the merits and risks of
                  investment in the Certificates, (b) able to bear the economic
                  risks of such an investment and (c) an "accredited investor"
                  within the meaning of Rule 501 (a) promulgated pursuant to the
                  Act.

                           4. The Purchaser has been furnished with, and has had
                  an opportunity to review (a) [a copy of the Private Placement
                  Memorandum, dated ______, 2002, relating to the Certificates
                  (b)] a copy of the Pooling and Servicing Agreement and [(b)]
                  [(c)] such other information concerning the Certificates, the
                  Mortgage Loans and the Depositor as has been requested by the
                  Purchaser from the Depositor or the Seller and is relevant to
                  the Purchaser's decision to purchase the Certificates. The
                  Purchaser has had any questions arising from such review
                  answered by the Depositor or the Seller to the satisfaction of
                  the Purchaser. [If the Purchaser did not purchase the
                  Certificates from the Seller in connection with the initial
                  distribution of the Certificates and was provided with a copy
                  of the Private Placement Memorandum (the "Memorandum")
                  relating to the original sale (the "Original Sale") of the
                  Certificates by the Depositor, the Purchaser acknowledges that
                  such Memorandum was provided to it by the Seller, that the
                  Memorandum was prepared by the Depositor solely for use in
                  connection with the Original Sale and the Depositor did not
                  participate in or facilitate in any way the purchase of the
                  Certificates by the Purchaser from the Seller, and the
                  Purchaser agrees that it will look solely to the Seller and
                  not to the Depositor with respect to any damage, liability,
                  claim or expense arising out of, resulting from or in
                  connection with (a) error or omission, or alleged error or
                  omission, contained in the Memorandum, or (b) any information,
                  development or event arising after the date of the
                  Memorandum.]

                           5. The Purchaser has not and will not nor has it
                  authorized or will it authorize any person to (a) offer,
                  pledge, sell, dispose of or otherwise transfer any
                  Certificate, any interest in any Certificate or any other
                  similar security to any person in any manner, (b) solicit any
                  offer to buy or to accept a pledge, disposition of other
                  transfer of any Certificate, any interest in any Certificate
                  or any other similar security from any person in any manner,
                  (c) otherwise approach or negotiate with respect to any
                  Certificate, any interest in any Certificate or any other
                  similar security with any person in any manner, (d) make any
                  general solicitation by means of general advertising or in any
                  other manner or (e) take any other action, that (as to any of
                  (a) through (e) above) would constitute a distribution of any
                  Certificate under the Act, that would render the disposition
                  of any Certificate a violation of Section 5 of the Act or any
                  state securities law, or that would require registration or
                  qualification pursuant thereto. The Purchaser will not sell or
                  otherwise transfer any of the Certificates, except in
                  compliance with the provisions of the Pooling and Servicing
                  Agreement.

                                       F-2

<PAGE>

                                                   Very truly yours,

                                                   _________________________
                                                   (Purchaser)

                                                   By:______________________

                                                   Name:____________________

                                                   Title:___________________

                                       F-3

<PAGE>

                                                                       EXHIBIT G

                       FORM OF RULE 144A INVESTMENT LETTER

                                                                          [Date]
[SELLER]

Bear Stearns Asset Backed Securities, Inc.
383 Madison Avenue
New York, New York 10179

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004

         Re:      Bear Stearns Asset Backed Securities Trust 2003-AC2,
                  Asset-Backed Certificates, Series 2003-AC2 (the
                  "Certificates"), including the Class __Certificates (the
                  "Privately Offered Certificates")
                  --------------------------------------------------------

Dear Ladies and Gentlemen:

         In connection with our purchase of Privately Offered Certificates, we
confirm that:

                  (i)      we understand that the Privately Offered Certificates
                           are not being registered under the Securities Act of
                           1933, as amended (the "Act") or any applicable state
                           securities or "Blue Sky" laws, and are being sold to
                           us in a transaction that is exempt from the
                           registration requirements of such laws;

                  (ii)     any information we desired concerning the
                           Certificates, including the Privately Offered
                           Certificates, the trust in which the Certificates
                           represent the entire beneficial ownership interest
                           (the "Trust") or any other matter we deemed relevant
                           to our decision to purchase Privately Offered
                           Certificates has been made available to us;

                  (iii)    we are able to bear the economic risk of investment
                           in Privately Offered Certificates; we are an
                           institutional "accredited investor" as defined in
                           Section 501(a) of Regulation D promulgated under the
                           Act and a sophisticated institutional investor;

                  (iv)     we are acquiring Privately Offered Certificates for
                           our own account, not as nominee for any other person,
                           and not with a present view to any distribution or
                           other disposition of the Privately Offered
                           Certificates;

                  (v)      we agree the Privately Offered Certificates must be
                           held indefinitely by us (and may not be sold,
                           pledged, hypothecated or in any way disposed of)
                           unless subsequently registered under the Act and any
                           applicable state

                                       G-1

<PAGE>

                           securities or "Blue Sky" laws or an exemption from
                           the registration requirements of the Act and any
                           applicable state securities or "Blue Sky" laws is
                           available;

                  (vi)     we agree that in the event that at some future time
                           we wish to dispose of or exchange any of the
                           Privately Offered Certificates (such disposition or
                           exchange not being currently foreseen or
                           contemplated), we will not transfer or exchange any
                           of the Privately Offered Certificates unless:

                                    (A) (1) the sale is to an Eligible Purchaser
                           (as defined below), (2) if required by the Pooling
                           and Servicing Agreement (as defined below) a letter
                           to substantially the same effect as either this
                           letter or, if the Eligible Purchaser is a Qualified
                           Institutional Buyer as defined under Rule 144A of the
                           Act, the Rule 144A and Related Matters Certificate in
                           the form attached to the Pooling and Servicing
                           Agreement (as defined below) (or such other
                           documentation as may be acceptable to the Trustee) is
                           executed promptly by the purchaser and delivered to
                           the addressees hereof and (3) all offers or
                           solicitations in connection with the sale, whether
                           directly or through any agent acting on our behalf,
                           are limited only to Eligible Purchasers and are not
                           made by means of any form of general solicitation or
                           general advertising whatsoever; and

                                    (B) if the Privately Offered Certificate is
                           not registered under the Act (as to which we
                           acknowledge you have no obligation), the Privately
                           Offered Certificate is sold in a transaction that
                           does not require registration under the Act and any
                           applicable state securities or "blue sky" laws and,
                           if Wells Fargo Bank Minnesota, National Association
                           (the "Trustee") so requests, a satisfactory Opinion
                           of Counsel is furnished to such effect, which Opinion
                           of Counsel shall be an expense of the transferor or
                           the transferee;

                  (vii)    we agree to be bound by all of the terms (including
                           those relating to restrictions on transfer) of the
                           Pooling and Servicing, pursuant to which the Trust
                           was formed; we have reviewed carefully and understand
                           the terms of the Pooling and Servicing Agreement;

                  (viii)   we either: (i) are not acquiring the Privately
                           Offered Certificate directly or indirectly by, or on
                           behalf of, an employee benefit plan or other
                           retirement arrangement which is subject to Title I of
                           the Employee Retirement Income Security Act of 1974,
                           as amended, and/or section 4975 of the Internal
                           Revenue Code of 1986, as amended, or (ii) are
                           providing the Opinion of Counsel required by the
                           Agreement.

                                       G-2

<PAGE>

                           Section 401(c) of ERISA and the regulations
                           promulgated thereunder and (II) will not give rise to
                           any additional fiduciary duties on the part of the
                           Seller, the Master Servicer, any Servicer, the
                           Securities Administrator or the Trustee.

                  (ix)     We understand that each of the Class ___ Certificates
                           bears, and will continue to bear, a legend to
                           substantiate the following effect: "THIS CERTIFICATE
                           HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
                           SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
                           ACT"), OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER
                           HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT
                           THIS CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR
                           OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
                           SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
                           PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
                           144A") TO A PERSON THAT THE HOLDER REASONABLY
                           BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
                           THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
                           ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT
                           OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
                           THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS
                           BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO
                           AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
                           UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN
                           CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
                           INVESTOR" WITHIN THE MEANING THEREOF IN RULE
                           501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE
                           ACT OR ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS
                           COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
                           DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
                           SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
                           SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT
                           AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER
                           EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,
                           RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
                           SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH
                           CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
                           LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
                           JURISDICTION. THIS CERTIFICATE MAY NOT BE ACQUIRED
                           DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN
                           EMPLOYEE BENEFIT PLAN OR OTHER RETIREMENT ARRANGEMENT
                           WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE
                           RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED,
                           AND/OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF
                           1986, AS AMENDED, UNLESS THE PROPOSED TRANSFER AND/OR
                           HOLDING OF A CERTIFICATE AND THE SERVICING,
                           MANAGEMENT AND/OR OPERATION OF THE TRUST AND ITS
                           ASSETS: (1) WILL NOT RESULT IN ANY PROHIBITED

                                       G-3

<PAGE>

                           TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL
                           OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING,
                           BUT NOT LIMITED TO, PROHIBITED TRANSACTION EXEMPTION
                           ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60, PTE
                           96-23 OR SECTION 401(C) OF ERISA AND THE REGULATIONS
                           TO BE PROMULGATED THEREUNDER AND (II) WILL NOT GIVE
                           RISE TO ANY ADDITIONAL FIDUCIARY DUTIES ON THE PART
                           OF THE SELLER, THE MASTER SERVICER, ANY SERVICER, THE
                           SECURITIES ADMINISTRATOR OR THE TRUSTEE, WHICH WILL
                           BE DEEMED REPRESENTED BY AN OWNER OF A BOOK-ENTRY
                           CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE
                           EVIDENCED BY A REPRESENTATION OR AN OPINION OF
                           COUNSEL TO SUCH EFFECT BY OR ON BEHALF OF A HOLDER OF
                           A PRIVATE CERTIFICATE." THIS CERTIFICATE HAS NOT BEEN
                           AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT
                           OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
                           ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY
                           PURCHASING THIS CERTIFICATE, AGREES THAT THIS
                           CERTIFICATE MAY BE REOFFERED, RESOLD, PLEDGED OR
                           OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
                           SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1)
                           PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE
                           144A") TO A PERSON THAT THE HOLDER REASONABLY
                           BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN
                           THE MEANING OF RULE 144A (A "QIB"), PURCHASING FOR
                           ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT
                           OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE,
                           THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS
                           BEING MADE IN RELIANCE ON RULE 144A, (2) PURSUANT TO
                           AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
                           UNDER THE SECURITIES ACT (IF AVAILABLE) OR (3) IN
                           CERTIFICATED FORM TO AN "INSTITUTIONAL ACCREDITED
                           INVESTOR" WITHIN THE MEANING THEREOF IN RULE
                           501(a)(1), (2), (3) or (7) OF REGULATION D UNDER THE
                           ACT OR ANY ENTITY IN WHICH ALL OF THE EQUITY OWNERS
                           COME WITHIN SUCH PARAGRAPHS PURCHASING NOT FOR
                           DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
                           SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A LETTER
                           SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT
                           AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH OTHER
                           EVIDENCE ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,
                           RESALE, PLEDGE OR TRANSFER IS IN COMPLIANCE WITH THE
                           SECURITIES ACT AND OTHER APPLICABLE LAWS OR IN EACH
                           CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES
                           LAWS OF THE UNITED STATES AND ANY OTHER APPLICABLE
                           JURISDICTION."

         "ELIGIBLE PURCHASER" means a corporation, partnership or other entity
which we have reasonable grounds to believe and do believe (i) can make
representations with respect to itself to substantially the same effect as the
representations set forth herein, and (ii) is either a Qualified Institutional
Buyer as defined under Rule 144A of the Act or an institutional "Accredited
Investor" as defined under Rule 501 of the Act.

         Terms not otherwise defined herein shall have the meanings assigned to
them in the Pooling and Servicing Agreement, dated as of April 1, 2003, between
Bear Stearns Asset Backed Securities, Inc., as depositor, EMC Mortgage
Corporation, as seller and company, Wells Fargo Bank Minnesota, National
Association, as master servicer and securities administrator, and JPMorgan Chase
Bank, as Trustee (the "Pooling and Servicing Agreement').

         If the Purchaser proposes that its Certificates be registered in the
name of a nominee on its behalf, the Purchaser has identified such nominee
below, and has caused such nominee to complete the Nominee Acknowledgment at the
end of this letter.

Name of Nominee (if any): _______________________

                                       G-4

<PAGE>

         IN WITNESS WHEREOF, this document has been executed by the undersigned
who is duly authorized to do so on behalf of the undersigned Eligible Purchaser
on the ___ day of ________, 20___.

                                           Very truly yours,

                                           [PURCHASER]

                                           By:_______________________________
                                                    (Authorized Officer)

                                           [By:______________________________
                                                    Attorney-in-fact]

<PAGE>

                             Nominee Acknowledgment

         The undersigned hereby acknowledges and agrees that as to the
Certificates being registered in its name, the sole beneficial owner thereof is
and shall be the Purchaser identified above, for whom the undersigned is acting
as nominee.

                                           [NAME OF NOMINEE]

                                           By:_________________________________
                                                    (Authorized Officer)

                                           [By:________________________________
                                                    Attorney-in-fact]

<PAGE>

                                                                       EXHIBIT H
                        REQUEST FOR RELEASE OF DOCUMENTS

To:      JPMorgan Chase Bank
         4 New York Plaza, 6th Floor
         New York, New York 10004

RE:      Pooling and Servicing Agreement dated as of April 1, 2003, between Bear
         Stearns Asset Backed Securities Inc., as Depositor, EMC Mortgage
         Corporation, as seller and company, Wells Fargo Bank Minnesota,
         National Association, as master servicer and securities administrator,
         and JPMorgan Chase Bank, as Trustee
         ----------------------------------------------------------------------

         In connection with the administration of the Mortgage Loans held by you
pursuant to the above-captioned Pooling and Servicing Agreement, we request the
release, and hereby acknowledge receipt, of the 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 and proceeds have been
                           deposited into the Custodial Account

_____             2.       Foreclosure

_____             3.       Substitution

_____             4.       Other Liquidation

_____             5.       Nonliquidation          Reason:______________________

_____             6.       California Mortgage Loan paid in full

                                                   By:__________________________
                                                        (authorized signer)

                                                   Issuer:______________________
                                                   Address:_____________________

                                                   Date:________________________

                                       H-1

<PAGE>

                                                                       EXHIBIT I

                          DTC Letter of Representations
                             [provided upon request]

                                       I-1

<PAGE>

                                                                       EXHIBIT J

                   Schedule of Mortgage Loans with Lost Notes
                             [provided upon request]

                                       J-1

<PAGE>

                                                                       EXHIBIT K

THIS CUSTODIAL AGREEMENT (as amended and supplemented from time to time, the
"Agreement'), dated as of April 30, 2003, by and among JPMORGAN CHASE BANK, as
trustee (including its successors under the Pooling and Servicing Agreement
defined below, the "Trustee"), BEAR STEARNS ASSET BACKED SECURITIES, INC., as
depositor (together with any successor in interest, the "Depositor"), EMC
MORTGAGE CORPORATION, as seller (the "Seller") and company (together with any
successor in interest or successor under the Pooling and Servicing Agreement
referred to below, the "Company") and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as master servicer (together with any successor in interest or
successor under the Pooling and Servicing Agreement referred to below, the
"Master Servicer"), securities administrator and custodian (together with any
successor in interest or any successor appointed hereunder, the "Custodian").

                                WITNESSETH THAT:
                                ---------------

                  WHEREAS, the Depositor, the Seller, the Master Servicer and
the Trustee have entered into a Pooling and Servicing Agreement, dated as of
April 1, 2003, relating to the issuance of Bear Stearns Asset Backed Securities
Trust 2003-AC2, Asset-Backed Certificates, Series 2003-AC2 (as in effect on the
date of this agreement, the "Original Pooling and Servicing Agreement," and as
amended and supplemented from time to time, the "Pooling and Servicing
Agreement'); and

                  WHEREAS, the Custodian has agreed to act as agent for the
Trustee for the purposes of receiving and holding certain documents and other
instruments delivered by the Depositor, the Seller or the Master Servicer under
the Pooling and Servicing Agreement and the Servicers under their respective
Servicing Agreements, all upon the terms and conditions and subject to the
limitations hereinafter set forth;

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the Trustee, the
Depositor, the Seller, the Master Servicer and the Custodian hereby agree as
follows:

                                   ARTICLE I.
                                   DEFINITIONS

                  Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned in the Original Pooling and Servicing
Agreement, unless otherwise required by the context herein.

                                   ARTICLE II.
                          CUSTODY OF MORTGAGE DOCUMENTS

                                       K-1

<PAGE>

                  Section 2.1. CUSTODIAN TO ACT AS AGENT: ACCEPTANCE OF MORTGAGE
FILES. The custodian, as the duly appointed agent of the Trustee for these
purposes, acknowledges (subject to any exceptions noted in the Initial
Certification referred to in Section 2.3(a) receipt of the Mortgage Files
relating to the Mortgage Loans identified on the schedule attached hereto (the
"Mortgage Files") and declares that it holds and will hold such Mortgage Files
as agent for the Trustee, in trust, for the use and benefit of all present and
future Certificateholders.

                  Section 2.2. RECORDATION OF ASSIGNMENTS. If any Mortgage File
includes one or more assignments of Mortgage that have not been recorded
pursuant to the provisions of Section 2.01 of the Pooling and Servicing
Agreement and the related Mortgage Loan is not a MOM Loan or the related
Mortgaged Properties are located in jurisdictions specifically excluded by the
Opinion of Counsel delivered to the Trustee pursuant to Section 2.01 of the
Pooling and Servicing Agreement, each such assignment shall be delivered by the
Custodian to the Seller for the purpose of recording it in the appropriate
public office for real property records, and the Seller, at no expense to the
Custodian, shall promptly cause to be recorded in the appropriate public office
for real property records each such assignment of Mortgage and, upon receipt
thereof from such public office, shall return each such assignment of Mortgage
to the Custodian.

                  Section 2.3.   REVIEW OF MORTGAGE FILES.

                  (a) On or prior to the Closing Date, in accordance with
Section 2.02 of the Pooling and Servicing Agreement, the Custodian shall deliver
to the Seller and the Trustee an Initial Certification in the form annexed
hereto as Exhibit One evidencing receipt (subject to any exceptions noted
therein) of a Mortgage File for each of the Mortgage Loans listed on the
Schedule attached hereto (the "Mortgage Loan Schedule").

                  (b) Within 90 days of the Closing Date, the Custodian agrees,
for the benefit of Certificateholders, to review, in accordance with the
provisions of Section 2.02 of the Pooling and Servicing Agreement, each such
document, and shall deliver to the Seller and the Trustee an Interim
Certification in the form annexed hereto as Exhibit Two to the effect that all
such documents have been executed and received and that such documents relate to
the Mortgage Loans identified on the Mortgage Loan Schedule, except for any
exceptions listed on Schedule A attached to such Interim Certification. The
Custodian 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, or appropriate for the represented purpose or
that they have actually been recorded or that they are other than what they
purport to be on their face.

                  (c) Not later than 180 days after the Closing Date, the
Custodian shall review the Mortgage Files as provided in Section 2.02 of the
Pooling and Servicing Agreement and deliver to the Seller and the Trustee a
Final Certification in the form annexed hereto as Exhibit Three evidencing the
completeness of the Mortgage Files.

                  (d) In reviewing the Mortgage Files as provided herein and in
the Pooling and Servicing Agreement, the Custodian shall make no representation
as to and shall not be responsible to verify (i) the validity, legality,
enforceability, due authorization, recordability, sufficiency or

                                       K-2

<PAGE>

genuineness of any of the documents included in any Mortgage File or (ii) the
collectibility, insurability, effectiveness or suitability of any of the
documents in any Mortgage File.

         Upon receipt of written request from the Trustee, the Custodian shall
as soon as practicable supply the Trustee with a list of all of the documents
relating to the Mortgage Loans missing from the Mortgage Files.

                  Section 2.4. NOTIFICATION OF BREACHES OF REPRESENTATIONS AND
WARRANTIES. Upon discovery by the Custodian of a breach of any representation or
warranty made by the Depositor as set forth in the Pooling and Servicing
Agreement with respect to a Mortgage Loan relating to a Mortgage File, the
Custodian shall give prompt written notice to the Depositor, the related
Servicer and the Trustee.

                  Section 2.5. CUSTODIAN TO COOPERATE: RELEASE OF MORTGAGE
FILES. Upon receipt of written notice from the Trustee that the Seller has
repurchased a Mortgage Loan pursuant to Article II of the Pooling and Servicing
Agreement, and a request for release (a "Request for Release") confirming that
the purchase price therefore has been deposited in the Master Servicer
Collection Account or the Distribution Account, then the Custodian agrees to
promptly release to the Seller the related Mortgage File.

                  Upon the Custodian's receipt of a Request for Release
substantially in the form of Exhibit H to the Pooling and Servicing Agreement
signed by a Servicing Officer of the Company or the Servicer, as applicable,
stating that it has received payment in full of a Mortgage Loan or that payment
in full will be escrowed in a manner customary for such purposes, the Custodian
agrees promptly to release to the Company or the Servicer, as applicable, the
related Mortgage File. The Depositor shall deliver to the Custodian and the
Custodian agrees to review in accordance with the provisions of their Agreement
the Mortgage Note and other documents constituting the Mortgage File with
respect to any Replacement Mortgage Loan.

                  From time to time as is appropriate for the servicing or
foreclosure of any Mortgage Loan, including, for this purpose, collection under
any Primary Insurance Policy or LPMI Policy, the Company or the Servicer, as
applicable, shall deliver to the Custodian a Request for Release signed by a
Servicing Officer requesting that possession of all of the Mortgage File be
released to the Company or the Servicer, as applicable, and certifying as to the
reason for such release and that such release will not invalidate any insurance
coverage provided in respect of the Mortgage Loan under any of the Insurance
Policies. Upon receipt of the foregoing, the Custodian shall deliver the
Mortgage File to the Company or the Servicer, as applicable. The Company or the
Servicer, as applicable, shall cause each Mortgage File or any document therein
so released to be returned to the Custodian when the need therefore by the
Company or the Servicer, as applicable, no longer exists, unless (i) the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Master Servicer Collection Account or
the Distribution Account or (ii) the Mortgage File or such document has been
delivered to an attorney, or to a public trustee or other public official as
required by law, for purposes of initiating or pursuing legal action or other
proceedings for the foreclosure of the Mortgaged Property either judicially or
non-judicially, and the Company or the Servicer, as applicable, has delivered to
the Custodian a certificate of a

                                       K-3

<PAGE>

Servicing Officer certifying as to the name and address of the Person to which
such Mortgage File or such document was delivered and the purpose or purposes of
such delivery.

                  At any time that the Company or the Servicer is required to
deliver to the Custodian a Request for Release, the Company or the Servicer, as
applicable, shall deliver two copies of the Request for Release if delivered in
hard copy or the Company or the Servicer, as applicable, may furnish such
Request for Release electronically to the Custodian, in which event the
Servicing Officer transmitting the same shall be deemed to have signed the
Request for Release. In connection with any Request for Release of a Mortgage
File because of a repurchase of a Mortgage Loan, such Request for Release shall
be accompanied by an assignment of mortgage, without recourse, representation or
warranty from the Trustee to the Seller (unless such Mortgage Loan is a MOM
Loan) and the related Mortgage Note shall be endorsed without recourse,
representation or warranty by the Trustee and be returned to the Seller. In
connection with any Request for Release of a Mortgage File because of the
payment in full of a Mortgage Loan, such Request for Release shall be
accompanied by a certificate of satisfaction or other similar instrument to be
executed by or on behalf of the Trustee and returned to the Company or the
Servicer, as applicable.

                  Section 2.6. ASSUMPTION AGREEMENTS. In the event that any
assumption agreement, substitution of liability agreement or sale of servicing
agreement is entered into with respect to any Mortgage Loan subject to this
Agreement in accordance with the terms and provisions of the Pooling and
Servicing Agreement, the Master Servicer, to the extent provided in the Pooling
and Servicing Agreement or National City Servicing Agreement, shall cause the
Company or the Servicer, as applicable, to notify the Custodian that such
assumption or substitution agreement has been completed by forwarding to the
Custodian the original of such assumption or substitution agreement, which shall
be added to the related Mortgage File and, for all purposes, shall be considered
a part of such Mortgage File to the same extent as all other documents and
instruments constituting parts thereof.

                                  ARTICLE III.
                            CONCERNING THE CUSTODIAN

                  Section 3.1. CUSTODIAN A BAILEE AND AGENT OF THE TRUSTEE. With
respect to each Mortgage Note, Mortgage and other documents constituting each
Mortgage File which are delivered to the Custodian, the Custodian is exclusively
the bailee and agent of the Trustee and has no instructions to hold any Mortgage
Note or Mortgage for the benefit of any person other than the Trustee and the
Certificateholders and undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement. Except upon compliance with the
provisions of Section 2.5 of this Agreement, no Mortgage Note, Mortgage or
Mortgage File shall be delivered by the Custodian to the Company, the Depositor,
the Servicer or the Master Servicer or otherwise released from the possession of
the Custodian.

                  Section 3.2.   RESERVED.

                  Section 3.3. CUSTODIAN MAY OWN CERTIFICATES. The Custodian in
its individual or any other capacity may become the owner or pledgee of
Certificates with the same rights it would have if it were not Custodian.

                                       K-4

<PAGE>

                  Section 3.4. MASTER SERVICER TO PAY CUSTODIAN'S FEES AND
EXPENSES. The Master Servicer covenants and agrees to pay to the Custodian from
time to time, and the Custodian shall be entitled to, reasonable compensation
for all services rendered by it in the exercise and performance of any of the
powers and duties hereunder of the Custodian, and the Master Servicer will pay
or reimburse the Custodian upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Custodian in accordance with
any of the provisions of this Agreement (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ), except any such expense, disbursement or advance as
may arise from its negligence or bad faith or to the extent that such cost or
expense is indemnified by the Depositor pursuant to the Pooling and Servicing
Agreement.

                  Section 3.5. CUSTODIAN MAY RESIGN; TRUSTEE MAY REMOVE
CUSTODIAN. The Custodian may resign from the obligations and duties hereby
imposed upon it as such obligations and duties relate to its acting as Custodian
of the Mortgage Loans. Upon receiving such notice of resignation, the Trustee
shall either take custody of the Mortgage Files itself and give prompt notice
thereof to the Depositor, the Master Servicer and the Custodian, or promptly
appoint a successor Custodian by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Custodian and one copy to
the successor Custodian. If the Trustee shall not have taken custody of the
Mortgage Files and no successor Custodian shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor Custodian.

                  The Trustee may remove the Custodian at any time upon 60 days
prior written notice to Custodian. In such event, the Trustee shall appoint, or
petition a court of competent jurisdiction to appoint, a successor Custodian
hereunder. Any successor Custodian shall be a depository institution subject to
supervision or examination by federal or state authority shall be able to
satisfy the other requirements contained in Section 3.7 and shall be
unaffiliated with the Servicers, the Company and the Depositor.

                  Any resignation or removal of the Custodian and appointment of
a successor Custodian pursuant to any of the provisions of this Section 3.5
shall become effective upon acceptance of appointment by the successor
Custodian. The Trustee shall give prompt notice to the Depositor and the Master
Servicer of the appointment of any successor Custodian. No successor Custodian
shall be appointed by the Trustee without the prior approval of the Depositor
and the Master Servicer.

                  Section 3.6. MERGER OR CONSOLIDATION OF CUSTODIAN. Any Person
into which the Custodian may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Custodian shall be a party, or any Person succeeding
to the business of the Custodian, shall be the successor of the Custodian
hereunder, without the execution or filing of any paper or any further act on
the part of any of the parties hereto, anything herein to the contrary
notwithstanding.

                  Section 3.7. REPRESENTATIONS OF THE CUSTODIAN. The Custodian
hereby represents that it is a depository institution subject to supervision or
examination by a federal or state authority, has

                                       K-5

<PAGE>

a combined capital and surplus of at least $15,000,000 and is qualified to do
business in the jurisdictions in which it will hold any Mortgage File.

                                   ARTICLE IV.
                            MISCELLANEOUS PROVISIONS

                  Section 4.1. NOTICES. All notices, requests, consents and
demands and other communications required under this Agreement or pursuant to
any other instrument or document delivered hereunder shall be in writing and,
unless otherwise specifically provided, may be delivered personally, by telegram
or telex, or by registered or certified mail, postage prepaid, return receipt
requested, at the addresses specified on the signature page hereof (unless
changed by the particular party whose address is stated herein by similar notice
in writing), in which case the notice will be deemed delivered when received.

                  Section 4.2. AMENDMENTS. No modification or amendment of or
supplement to this Agreement shall be valid or effective unless the same is in
writing and signed by all parties hereto. The Trustee shall give prompt notice
to the Custodian of any amendment or supplement to the Pooling and Servicing
Agreement and furnish the Custodian with written copies thereof.

                  Section 4.3. GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

                  Section 4.4. RECORDATION OF AGREEMENT. To the extent permitted
by applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Depositor and at the Trust's expense on
direction by the Trustee, but only upon direction accompanied by an Opinion of
Counsel reasonably satisfactory to the Depositor to the effect that the failure
to effect such recordation is likely to materially and adversely affect 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 4.5. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the holders thereof.

                                       K-6

<PAGE>

                  IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.

Address:                                      JPMORGAN CHASE BANK, as Trustee

4 New York Plaza
New York, New York 10004                      By:____________________________
                                              Name:
Attention:                                    Title:
Telecopy:
Confirmation:
Address:                                      BEAR STEARNS ASSET BACKED
                                              SECURITIES, INC.
383 Madison Avenue
New York, New York 10179
                                              By:____________________________
                                              Name:
                                              Title:

Address:                                      EMC MORTGAGE CORPORATION

909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038                           By:____________________________
                                              Name:
                                              Title:

Address:                                      WELLS FARGO BANK MINNESOTA,
                                              NATIONAL ASSOCIATION, as Custodian
9062 Old Annapolis Road
Columbia, Maryland 21045                      By:____________________________
                                              Name:
                                              Title:

<PAGE>

STATE OF NEW YORK          )
                           ) ss:
COUNTY OF NEW YORK         )

                  On the ______ day of April 2003 before me, a notary public in
and for said State, personally appeared _______________, known to me to be a
_________________of JPMorgan Chase Bank, a New York State banking 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

[SEAL]

<PAGE>

STATE OF NEW YORK              )
                               ) ss:
COUNTY OF NEW YORK             )

                  On the ______ day of April 2003 before me, a notary public in
and for said State, personally appeared ________________, known to me to be a
_____________ of Bear Stearns Asset Backed Securities, Inc., 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
[SEAL]

<PAGE>

STATE OF TEXAS                 )
                               ) ss:
COUNTY OF DALLAS               )

                  On the ______ day of April 2003 before me, a notary public in
and for said State, personally appeared ________________, known to me to be a
__________________ of EMC Mortgage Corporation, one of the corporations that
executed the within instrument, and also known to me to be the person who
executed it on behalf of said corporation, and acknowledged to me that such
corporation executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                        ________________________
                                                               Notary Public
[Notarial Seal]

<PAGE>

STATE OF MARYLAND      )
                       ) ss:
COUNTY OF HOWARD       )

                  On the ______ day of April 2003 before me, a notary public in
and for said State, personally appeared ____________, known to me to be a of
Wells Fargo Bank Minnesota, National Association, one of the national
associations that executed the within instrument, and also known to me to be the
person who executed it on behalf of said national association, and acknowledged
to me that such national association executed the within instrument.

                  IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.

                                                        ________________________
                                                               Notary Public
[Notarial Seal]

<PAGE>

                                   EXHIBIT ONE

                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                                  April 30, 2003

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ---------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, and subject to Section 2.02 of the Pooling and Servicing
Agreement, the undersigned, as Custodian, hereby certifies that it has received
a Mortgage File (which contains an original Mortgage Note or lost note
affidavit) to the extent required in Section 2.01 of the Pooling and Servicing
Agreement with respect to each Mortgage Loan listed in the Mortgage Loan
Schedule, with any exceptions listed on Schedule A attached hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                    WELLS FARGO BANK MINNESOTA,
                                                    NATIONAL ASSOCIATION

                                                    By:________________________
                                                    Name:______________________
                                                    Title:_____________________

                                      K-1-1

<PAGE>

                                   EXHIBIT TWO

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                    ____________, 2002

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File to the extent required pursuant to Section 2.01 of the
Pooling and Servicing Agreement with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule, and it has reviewed the Mortgage File and the Mortgage
Loan Schedule and has determined that: all required documents have been executed
and received and that such documents related to the Mortgage Loans identified on
the Mortgage Loan Schedule, with any exceptions listed on Schedule A attached
hereto.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                     WELLS FARGO BANK MINNESOTA,
                                                     NATIONAL ASSOCIATION

                                                     By:________________________
                                                     Name:______________________
                                                     Title:_____________________

                                      K-2-1

<PAGE>

                                  EXHIBIT THREE

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                ____________, 2002

JPMorgan Chase Bank
4 New York Plaza, 6th Floor
New York, New York 10004

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC2

                  Re:      Custodial Agreement, dated as of April 30, 2003, by
                           and among JPMorgan Chase Bank, Wells Fargo Bank
                           Minnesota, National Association, Bear Stearns Asset
                           Backed Securities, Inc. and EMC Mortgage Corporation
                           relating to Bear Stearns Asset Backed Securities
                           Trust 2003-AC2, Asset-Backed Certificates, Series
                           2003-AC2
                           ----------------------------------------------------

Ladies and Gentlemen:

                  In accordance with Section 2.3 of the above-captioned
Custodial Agreement, the undersigned, as Custodian, hereby certifies that it has
received a Mortgage File with respect to each Mortgage Loan listed in the
Mortgage Loan Schedule containing with respect to each such Mortgage Loan:

                  (i) the original Mortgage Note, including any riders thereto,
                  endorsed without recourse to the order of "Bank One, National
                  Association, as Trustee for certificateholders of Bear Stearns
                  Asset Backed Securities, Inc. Asset Backed Certificates,
                  Series 2002- AC5," and showing to the extent available to the
                  Seller an unbroken chain of endorsements from the original
                  payee thereof to the Person endorsing it to the Trustee,

                  (ii) the original Mortgage and, if the related Mortgage Loan
                  is a MOM Loan, noting the presence of the MIN and language
                  indicating that such Mortgage Loan is a MOM Loan, which shall
                  have been recorded (or if the original is not available, a
                  copy), with evidence of such recording indicated thereon (or
                  if permitted by Section 2.3 of the Custodial Agreement, shall
                  be in recordable form),

                                      K-3-1

<PAGE>

                  (iii) unless the Mortgage Loan is a MOM Loan, the assignment
                  (either an original or a copy, which may be in the form of a
                  blanket assignment if permitted in the jurisdiction in which
                  the Mortgaged Property is located) to the Trustee of the
                  Mortgage with respect to each Mortgage Loan in the name of
                  "Bank One, National Association, as Trustee for
                  certificateholders of Bear Stearns Asset Backed Securities,
                  Inc. Asset Backed Certificates, Series 2002-AC5," which shall
                  have been recorded (or if permitted by Section 2.3 of the
                  Custodial Agreement, shall be in recordable form);

                  (iv) an original or a copy of all intervening assignments of
                  the Mortgage, if any, with evidence of recording thereon,

                  (v) the original policy of title insurance or mortgagee's
                  certificate of title insurance or commitment or binder for
                  title insurance, if available, or a copy thereof, or, in the
                  event that such original title insurance policy is
                  unavailable, a photocopy thereof, or in lieu thereof, a
                  current lien search on the related Mortgaged Property and

                  (vi) originals or copies of all available assumption,
                  modification or substitution agreements, if any.

                  Capitalized words and phrases used herein shall have the
respective meanings assigned to them in the above-captioned Custodial Agreement.

                                                    WELLS FARGO BANK MINNESOTA,
                                                    NATIONAL ASSOCIATION

                                                    By:________________________
                                                    Name:______________________
                                                    Title:_____________________

                                      K-3-2

<PAGE>

                                                                       EXHIBIT L

                          Form of Company Certification

         This certificate is being delivered pursuant to Section 3.13(b) of the
Pooling and Servicing Agreement, dated as of April 1, 2003 (the "Agreement"),
among Bear Stearns Asset Backed Securities, Inc., as depositor, EMC Mortgage
Corporation (the "Company"), as seller and servicer, Wells Fargo Bank Minnesota,
National Association, as master servicer and securities administrator, and
JPMorgan Chase Bank, as trustee. Capitalized terms used herein and not otherwise
defined have the meanings set forth in the Agreement.

         I certify that:

         (i)      I am a ____________________ of the Company.

         (ii)     Based on my knowledge, the information in the annual statement
                  of compliance furnished in March 20__ pursuant to Section
                  3.13(b) of the Agreement and the annual independent certified
                  public accountants' servicing report delivered pursuant to
                  Section 3.14 thereof (collectively, the "Reports"), and all
                  servicing reports, officer's certificates and other
                  information relating to the EMC Mortgage Loans submitted to
                  the Master Servicer taken as a whole, does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading as of the date of this certification.

         (iii)    The servicing information required to be provided to the
                  Master Servicer by the Company under the Agreement has been
                  provided to the Master Servicer.

         (iv)     I am responsible for reviewing the servicing activities
                  performed by the Company pursuant to this Agreement, and
                  except as disclosed in the Reports, the Company has, as of the
                  date of this certification, fulfilled its obligations under
                  the Agreement.

         (v)      I have disclosed to the Master Servicer all significant
                  deficiencies relating to the Company's compliance with the
                  minimum servicing standards in accordance with a review
                  conducted in compliance with the Uniform Single Attestation
                  Program for Mortgage Bankers or similar standard as set forth
                  in the Agreement.

______________________
Dated: March __, 20__

                                       L-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]