Document:

BEAR STEARNS ASSET BACKED SECURITIES, INC.,

                                   Depositor,

                            EMC MORTGAGE CORPORATION,

                           Seller and Master Servicer,

                                       and

                       LASALLE BANK NATIONAL ASSOCIATION,

                                     Trustee
                              ____________________

                         POOLING AND SERVICING AGREEMENT

                          Dated as of December 1, 2003
                    ________________________________________

               BEAR STEARNS ASSET BACKED SECURITIES TRUST 2003-HE1

                   ASSET-BACKED CERTIFICATES, SERIES 2003-HE1

<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.............................................44

                                                    ARTICLE II

                                             CONVEYANCE OF TRUST FUND
                                          REPRESENTATIONS AND WARRANTIES
         Section 2.01      CONVEYANCE OF TRUST FUND..............................................................46
         Section 2.02      ACCEPTANCE OF THE MORTGAGE LOANS......................................................48
         Section 2.03      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER SERVICER AND THE
                           SELLER................................................................................50
         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 THE MORTGAGE LOANS
         Section 3.01      THE MASTER SERVICER TO ACT AS MASTER SERVICER.........................................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 THE MASTER SERVICER TO BE
                           HELD FOR TRUSTEE......................................................................61
         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...................................................................67
         Section 3.13      ANNUAL CERTIFICATE AS TO COMPLIANCE...................................................67
         Section 3.14      ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING REPORT.....................67
         Section 3.15      BOOKS AND RECORDS.....................................................................68
         Section 3.16      REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION.................................68
         Section 3.17      UCC...................................................................................70

                                                         i

<PAGE>

         Section 3.18      OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS...........................................70
         Section 3.19      OBLIGATIONS OF THE MASTER SERVICER IN RESPECT OF MORTGAGE RATES AND
                           SCHEDULED PAYMENTS....................................................................70
         Section 3.20      RESERVE FUND..........................................................................71
         Section 3.21      ADVANCING FACILITY....................................................................72

                                                    ARTICLE IV

                                                     ACCOUNTS
         Section 4.01      COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT...............................74
         Section 4.02      PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT......................................76
         Section 4.03      COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS...................77
         Section 4.04      DISTRIBUTION ACCOUNT..................................................................78
         Section 4.05      PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION ACCOUNT.....................78
         Section 4.06      CLASS P CERTIFICATE ACCOUNT...........................................................79

                                                     ARTICLE V

                                            DISTRIBUTIONS AND ADVANCES
         Section 5.01      ADVANCES..............................................................................80
         Section 5.02      COMPENSATING INTEREST PAYMENTS........................................................81
         Section 5.03      REMIC DISTRIBUTIONS...................................................................81
         Section 5.04      DISTRIBUTIONS.........................................................................81
         Section 5.04A     ALLOCATION OF REALIZED LOSSES.........................................................86
         Section 5.05      MONTHLY STATEMENTS TO CERTIFICATEHOLDERS..............................................88
         Section 5.06      REMIC DESIGNATIONS AND REMIC DISTRIBUTIONS............................................91
         Section 5.07      POLICY MATTERS........................................................................93

                                                    ARTICLE VI

                                                 THE CERTIFICATES
         Section 6.01      THE CERTIFICATES......................................................................96
         Section 6.02      CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND EXCHANGE
                           OF CERTIFICATES.......................................................................97
         Section 6.03      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES....................................100
         Section 6.04      PERSONS DEEMED OWNERS................................................................101
         Section 6.05      ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES............................101
         Section 6.06      BOOK-ENTRY CERTIFICATES..............................................................101
         Section 6.07      NOTICES TO DEPOSITORY................................................................102
         Section 6.08      DEFINITIVE CERTIFICATES..............................................................102
         Section 6.09      MAINTENANCE OF OFFICE OR AGENCY......................................................103

                                                    ARTICLE VII

                                       THE DEPOSITOR AND THE MASTER SERVICER
         Section 7.01      LIABILITIES OF THE DEPOSITOR AND THE MASTER SERVICER.................................103

                                                        ii

<PAGE>

         Section 7.02      MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE MASTER SERVICER......................103
         Section 7.03      INDEMNIFICATION OF THE TRUSTEE AND THE MASTER SERVICER...............................103
         Section 7.04      LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE MASTER SERVICER AND OTHERS............104
         Section 7.05      MASTER SERVICER NOT TO RESIGN........................................................105
         Section 7.06      SUCCESSOR MASTER SERVICER............................................................106
         Section 7.07      SALE AND ASSIGNMENT OF MASTER SERVICING..............................................106

                                                   ARTICLE VIII

                                      DEFAULT; TERMINATION OF MASTER SERVICER
         Section 8.01      EVENTS OF DEFAULT....................................................................107
         Section 8.02      TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.............................................109
         Section 8.03      NOTIFICATION TO CERTIFICATEHOLDERS...................................................110
         Section 8.04      WAIVER OF DEFAULTS...................................................................110

                                                    ARTICLE IX

                                              CONCERNING THE TRUSTEE
         Section 9.01      DUTIES OF TRUSTEE....................................................................111
         Section 9.02      CERTAIN MATTERS AFFECTING THE TRUSTEE................................................113
         Section 9.03      TRUSTEE NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS................................114
         Section 9.04      TRUSTEE MAY OWN CERTIFICATES.........................................................115
         Section 9.05      TRUSTEE'S FEES AND EXPENSES..........................................................115
         Section 9.06      ELIGIBILITY REQUIREMENTS FOR TRUSTEE.................................................115
         Section 9.07      INSURANCE............................................................................116
         Section 9.08      RESIGNATION AND REMOVAL OF TRUSTEE...................................................116
         Section 9.09      SUCCESSOR TRUSTEE....................................................................117
         Section 9.10      MERGER OR CONSOLIDATION OF TRUSTEE...................................................117
         Section 9.11      APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE........................................117
         Section 9.12      TAX MATTERS..........................................................................119

                                                     ARTICLE X

                                                    TERMINATION
         Section 10.01     TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL MORTGAGE LOANS.....................121
         Section 10.02     FINAL DISTRIBUTION ON THE CERTIFICATES...............................................121
         Section 10.03     ADDITIONAL TERMINATION REQUIREMENTS..................................................123

                                                    ARTICLE XI

                                             MISCELLANEOUS PROVISIONS
         Section 11.01     AMENDMENT............................................................................124
         Section 11.02     RECORDATION OF AGREEMENT; COUNTERPARTS...............................................125
         Section 11.03     GOVERNING LAW........................................................................125
         Section 11.04     INTENTION OF PARTIES.................................................................126

                                                        iii

<PAGE>

         Section 11.05     NOTICES..............................................................................126
         Section 11.06     SEVERABILITY OF PROVISIONS...........................................................127
         Section 11.07     ASSIGNMENT...........................................................................127
         Section 11.08     LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS...........................................127
         Section 11.09     INSPECTION AND AUDIT RIGHTS..........................................................128
         Section 11.10     CERTIFICATES NONASSESSABLE AND FULLY PAID............................................128
         Section 11.11     CERTIFICATE INSURER RIGHTS...........................................................129
</TABLE>

                                                        iv

<PAGE>

EXHIBITS

Exhibit A-1       Form of Class A Certificates
Exhibit A-2       Form of Class M Certificates
Exhibit A-3       Form of Class CE Certificates
Exhibit A-4       Form of Class P Certificates
Exhibit A-5       Form of Class R Certificates
Exhibit B         Mortgage Loan Schedule
Exhibit C         [Reserved]
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 Class II-A Policy
Exhibit M         Form of Back-Up Certification

                                        v

<PAGE>

                  POOLING AND SERVICING AGREEMENT, dated as of December 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 master servicer (in such
capacity, the "Master Servicer") and LASALLE BANK NATIONAL ASSOCIATION, a
national banking association, 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 elect to treat the
segregated pool of assets consisting of the Mortgage Loans and certain other
related assets subject to this Agreement (other than the Reserve Fund) as a
REMIC for federal income tax purposes, and such segregated pool of assets will
be designated as "REMIC I". The Class R-I Certificates will be the sole class of
"residual interests" in REMIC I for purposes of the REMIC Provisions (as defined
herein). The following table irrevocably sets forth the designation, the
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 (as defined herein). None of the REMIC I Regular Interests
will be certificated.

<TABLE>
<CAPTION>
                                  Uncertificated
                                      REMIC I                Initial Uncertificated            Latest Possible
        Designation              Pass-Through Rate             Principal Balance              Maturity Date (1)
        -----------              -----------------             -----------------              -----------------
<S>                                 <C>                        <C>                             <C>
AA                                  Variable(2)                January 25, 2034                $207,411,533.36
I-A-1                               Variable(2)                January 25, 2034                $    389,345.00
I-A-2                               Variable(2)                January 25, 2034                $    369,055.00
II-A                                Variable(2)                January 25, 2034                $    908,300.00
M-1                                 Variable(2)                January 25, 2034                $    137,570.00
M-2                                 Variable(2)                January 25, 2034                $    116,405.00
M-3                                 Variable(2)                January 25, 2034                $     37,035.00
M-4                                 Variable(2)                January 25, 2034                $     30,690.00
M-5                                 Variable(2)                January 25, 2034                $     31,745.00
M-6                                 Variable(2)                January 25, 2034                $     27,515.00
ZZ                                  Variable(2)                January 25, 2034                $  2,185,228.44
P                                   Variable(2)                January 25, 2034                $        100.00
1A                                  Variable(2)                January 25, 2034                $      4,093.00
1B                                  Variable(2)                January 25, 2034                $     19,261.00
2A                                  Variable(2)                January 25, 2034                $      4,901.89

                                                        -1-

<PAGE>

2B                                   Variable(2)                January 25, 2034               $     23,067.89
XX                                   Variable(2)                January 25, 2034               $211,593,098.03
</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 "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 segregated pool of assets will be
designated as "REMIC II". The Class R-II 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 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 II
created hereunder.

<TABLE>
<CAPTION>
                                                          Initial Certificate Principal         Assumed Final
        Designation              Pass-Through Rate                   Balance                   Maturity Date(1)
        -----------              -----------------                   -------                   ----------------
<S>                                  <C>                         <C>                           <C>
           I-A-1                     Variable(2)                 January 25, 2034              $ 77,869,000.00
           I-A-2                     Variable(2)                 January 25, 2034              $ 73,811,000.00
           II-A                      Variable(2)                 January 25, 2034              $181,660,000.00
            M-1                      Variable(2)                 January 25, 2034              $ 27,514,000.00
            M-2                      Variable(2)                 January 25, 2034              $ 23,281,000.00
            M-3                      Variable(2)                 January 25, 2034              $  7,407,000.00
            M-4                      Variable(2)                 January 25, 2034              $  6,138,000.00
            M-5                      Variable(2)                 January 25, 2034              $  6,349,000.00
            M-6                      Variable(2)                 January 25, 2034              $  5,503,000.00
            CE                       Variable(2)                 January 25, 2034              $ 13,756,843.59
             P                       Variable(2)                 January 25, 2034              $        100.00
</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 REMIC II
         Regular Interest.
(2)      Calculated in accordance with the definition of "Pass-Through Rate"
         herein.
(3)      The Class CE Certificates will accrue interest at their variable
         Pass-Through Rate on the Notional Amount of the Class CE Certificates
         outstanding from time to time which shall equal the Uncertificated
         Balance of the REMIC I Regular Interests. The Class CE 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-HE1." The Certificates issued
hereunder may be referred to as "Asset-Backed Certificates, Series 2003-HE1"
(including for purposes of any endorsement or assignment of a Mortgage Note or
Mortgage).

                                       -2-

<PAGE>

         In consideration of the mutual agreements herein contained, the
Depositor, the Master Servicer, the Seller 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 SERVICING PRACTICES: With respect to each 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 Reserve Account, the Class P
Certificate Account, the Class II-A Policy Payments Account and the Protected
Account.

         ACCRUAL PERIOD: With respect to the Certificates (other than the Class
CE, Class P and the Residual Certificates) and any Distribution Date, the period
from and including the immediately preceding Distribution Date (or with respect
to the first Accrual Period, the Closing Date) to and including the day prior to
such Distribution Date. With respect to the Class CE Certificates and any
Distribution Date, the calendar month immediately preceding such Distribution
Date. All calculations of interest on the Certificates (other than the Class CE,
Class P and the Residual Certificates) will be made on the basis of the actual
number of days elapsed in the related Accrual Period. All calculations of
interest on the Class CE Certificates will be made on the basis of a 360- day
year consisting of twelve 30-day months.

         ACCRUAL RATE: The rate set forth in the Insurance Agreement. The
Accrual Rate shall be computed on the basis of the actual number of days elapsed
over the actual number of days in the current calendar year. In no event shall
the Accrual Rate exceed the maximum rate permissible under law applicable to
this Agreement limiting interest rates.

         ADVANCE: An advance of delinquent payments of principal or interest in
respect of a Mortgage Loan required to be made by the Master Servicer as
provided in Section 5.01 hereof.

         AGREEMENT: This Pooling and Servicing Agreement and any and all
amendments or supplements hereto made in accordance with the terms herein.

         ADJUSTABLE RATE MORTGAGE LOAN: Each of the Mortgage Loans identified in
the Mortgage Loan Schedule as having a Mortgage Rate that is subject to
adjustment.

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

                                       -4-

<PAGE>

         AMOUNT HELD FOR FUTURE DISTRIBUTION: As to any Distribution Date, the
aggregate amount held in the Protected Account at the close of business on the
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, Liquidation Proceeds and
Insurance 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 Offered Certificates, the sum of the Realized Losses with respect to
the Mortgage Loans which have been applied in reduction of the Certificate
Principal Balance of that Class of Certificates pursuant to Section 5.04A of
this Agreement which have not previously been reimbursed.

         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.

         AVOIDED PAYMENT: As defined in the Class II-A Policy.

         BASIS RISK SHORTFALL: With respect to any Distribution Date and any
Class of Offered Certificates, the excess, if any, of (a) the amount of Current
Interest that such Class would have been entitled to receive on such
Distribution Date had the Pass-Though Rate applicable to such Class been
calculated at a per annum rate equal to One-Month LIBOR plus the related
Certificate Margin, over (b) the amount of Current Interest that such Class
received on such Distribution Date at a per annum rate equal to the applicable
Net Rate Cap.

         BASIS RISK SHORTFALL CARRY FORWARD AMOUNT: With respect to any
Distribution Date and any Class of Offered Certificates, Basis Risk Shortfalls
for all previous Distribution Dates not previously paid, together with interest
thereon at a rate equal to the related Pass-Through Rate for such Distribution
Date.

         BANKRUPTCY CODE: Title 11 of the United States Code.

         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 6.06). As of the Closing
Date, each Class of Regular Certificates (other than the Class CE Certificates
and Class P 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 or the city in which the

                                       -5-

<PAGE>

Corporate Trust Office of the Trustee or the principal office of the Certificate
Insurer or the Master Servicer is located are authorized or obligated by law or
executive order to be closed.

         CALENDAR QUARTER: January 1 to March 31, April 1 to June 30, July 1 to
September 30, or October 1 to December 31, as applicable.

         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-5.

         CERTIFICATE INSURER: Ace Guaranty Corp., a Maryland domiciled insurance
company, or any successor thereto.

         CERTIFICATE INSURER CONTACT PERSON: The officer designated by the
Master Servicer to provide information to the Certificate Insurer pursuant to
Section 5.07(i).

         CERTIFICATE INSURER DEFAULT: As defined in Section 5.07(l).

         CERTIFICATE INSURER PREMIUM AMOUNT: With respect to the Class II-A
Policy and each Distribution Date, an amount equal to the product of the
Certificate Insurer Premium Rate and the Certificate Principal Balance of the
Class II-A Certificates immediately prior to such Distribution Date.

         CERTIFICATE INSURER PREMIUM RATE: A percentage equal to one twelfth
(1/12) of the "premium percentage" set forth in the Premium Letter.

         CERTIFICATE MARGIN: With respect to the Class I-A-1 Certificates and,
for purposes of the definition of "One-Month LIBOR Pass-Through Rate", REMIC I
Regular Interest I-A-1, 0.20%.

         With respect to the Class I-A-2 Certificates and, for purposes of the
definition of "One- Month LIBOR Pass-Through Rate", REMIC I Regular Interest
I-A-2, 0.55% in the case of each Distribution Date through and including the
first possible Optional Termination Date and 1.10% in the case of each
Distribution Date thereafter.

         With respect to the Class II-A Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest
II-A, 0.34% in the case of each Distribution Date through and including the
first possible Optional Termination Date and 0.68% in the case of each
Distribution Date thereafter.

         With respect to the Class M-1 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-1,
0.73% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 1.095% in the case of each Distribution
Date thereafter.

         With respect to the Class M-2 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-2,
1.60% in the case of each Distribution

                                       -6-

<PAGE>

Date through and including the first possible Optional Termination Date and
2.40% in the case of each Distribution Date thereafter.

         With respect to the Class M-3 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-3,
1.75% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 2.625% in the case of each Distribution
Date thereafter.

         With respect to the Class M-4 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-4,
1.90% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 2.85% in the case of each Distribution
Date thereafter.

         With respect to the Class M-5 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-5,
2.25% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 3.375% in the case of each Distribution
Date thereafter.

         With respect to the Class M-6 Certificates and, for purposes of the
definition of "One-Month LIBOR Pass-Through Rate", REMIC I Regular Interest M-6,
4.00% in the case of each Distribution Date through and including the first
possible Optional Termination Date and 6.00% in the case of each Distribution
Date thereafter.

         CERTIFICATE NOTIONAL BALANCE: With respect to the Class CE Certificates
and any Distribution Date, the Uncertificated Principal Balance of the REMIC I
Regular Interests (other than REMIC I Regular Interest P) for such Distribution
Date.

         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 CE Certificate 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 5.04, and (ii) any Applied Realized Loss Amounts allocated to such
Certificate on previous Distribution Dates. Exclusively for the purpose of
determining any subrogation rights of the Certificate Insurer arising under
Section 5.07 hereof, the Certificate Principal Balance of the Class II-A
Certificates shall not be reduced by the amount of any payments made by the
Certificate Insurer in respect of principal on such Certificates under the Class
II-A Policy, except to the extent such payment shall have been reimbursed to the
Certificate Insurer pursuant to the provisions of this Agreement.

         CERTIFICATE REGISTER: The register maintained pursuant to Section 6.02
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-

                                      -7-
<PAGE>

Entry Certificates) and, with respect to the Class II-A Certificates, the
Certificate Insurer to the extent of any Reimbursement Amount.

         CLASS: All Certificates bearing the same Class designation as set forth
in Section 6.01 hereof.

         CLASS A CERTIFICATES: Collectively, the Class I-A-1, Class I-A-2 and
Class II-A Certificates.

         CLASS A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the Principal Distribution Amount for such
Distribution Date and (y) the excess, if any, of (i) the aggregate Certificate
Principal Balance of the Class A Certificates immediately prior to such
Distribution Date, over (ii) the lesser of (a) the product of (1) 57.50% and (2)
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 $2,116,444.

         CLASS I-A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
with respect to the Class I-A Certificates and any Distribution Date, is the
product of the Class A Principal Distribution Amount and a fraction, the
numerator of which is the Principal Funds for Loan Group I for such Distribution
Date and the denominator of which is the Principal Funds for both Loan Groups
for such Distribution Date.

         CLASS I-A CERTIFICATE: Any of the Class I-A-1 Certificates or the Class
I-A-2 Certificates.

         CLASS I-A-1 CERTIFICATE: Any Certificate designated as a "Class I-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 I-A-1 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS I-A-2 CERTIFICATE: Any Certificate designated as a "Class I-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 I-A-2 Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS II-A CERTIFICATE: Any Certificate designated as a "Class II-A
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 II-A Certificates as set forth herein and evidencing a Regular
Interest in REMIC II.

         CLASS II-A POLICY: The irrevocable financial guaranty insurance policy,
No. D-2003-128, including any endorsements thereto, issued by the Certificate
Insurer with respect to the Class II-A Certificates, in the form attached hereto
as Exhibit L.

         CLASS II-A POLICY PAYMENTS ACCOUNT: The separate Eligible Account
created and maintained by the Trustee pursuant to Section 5.07(c) in the name of
the Trustee for the benefit of the Class II-A Certificateholders and designated
"LaSalle Bank National Association, in trust for registered holders of Bear
Stearns Asset Backed Securities Trust 2003-HE1, Asset-Backed Certificates,
Series 2003-

                                      -8-
<PAGE>

HE1, Class II-A." Funds in the Class II-A Policy Payments Account shall be held
in trust for the Class II-A Certificateholders for the uses and purposes set
forth in this Agreement.

         CLASS II-A PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date,
with respect to the Class II-A Certificates and any Distribution Date, is the
product of the Class A Principal Distribution Amount and a fraction, the
numerator of which is the Principal Funds for Loan Group II for such
Distribution Date and the denominator of which is the Principal Funds for both
Loan Groups for such Distribution Date.

         CLASS CE CERTIFICATE: Any Certificate designated as a "Class CE
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to its Percentage Interest of distributions provided for
the Class CE Certificates herein and evidencing a Regular Interest in REMIC II.

         CLASS CE DISTRIBUTION AMOUNT: With respect to any Distribution Date,
the sum of (i) the Current Interest for the Class CE 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 Offered Certificates has been
reduced to zero, the Class CE Distribution Amount shall include the
Overcollateralization Amount.

         CLASS M-1 CERTIFICATE: Any Certificate designated as a "Class M-1
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 M-1 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-1 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount and (y) the excess, if any, of (a) the sum of (1) the
aggregate Certificate Principal Balance of the Class A Certificates (after
taking into account the distribution of the Class A Principal Distribution
Amount on such Distribution Date and (2) the Certificate Principal Balance of
the Class M-1 Certificates immediately prior to such Distribution Date, over (b)
the lesser of (1) the product of (x) 70.50% and (y) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period minus $2,116,444.

         CLASS M-2 CERTIFICATE: Any Certificate designated as a "Class M-2
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 M-2 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-2 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount and the Class M-1 Principal Distribution Amount and (y) the
excess, if any, of (a) the sum of (1) the aggregate Certificate Principal
Balance

                                      -9-
<PAGE>

of the Class A Certificates (after taking into account the distribution of the
Class A Principal Distribution Amount on such Distribution Date), (2) the
Certificate Principal Balance of the Class M-1 Certificates (after taking into
account the distribution of the Class M-1 Principal Distribution Amount on such
Distribution Date) and (3) the Certificate Principal Balance of the Class M-2
Certificates immediately prior to such Distribution Date, over (b) the lesser of
(1) the product of (x) 81.50% and (y) the aggregate Stated Principal Balance of
the Mortgage Loans as of the last day of the related Due Period, and (2) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,116,444.

         CLASS M-3 CERTIFICATE: Any Certificate designated as a "Class M-3
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 M-3 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-3 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount and the Class
M-2 Principal Distribution Amount and (y) the excess, if any, of (a) the sum of
(1) the aggregate Certificate Principal Balance of the Class A Certificates
(after taking into account the distribution of the Class A Principal
Distribution Amount on such Distribution Date), (2) the Certificate Principal
Balance of the Class M-1 Certificates (after taking into account the
distribution of the Class M-1 Principal Distribution Amount on such Distribution
Date), (3) the Certificate Principal Balance of the Class M-2 Certificates
(after taking into account the distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date) and (4) the Certificate Principal
Balance of the Class M-3 Certificates immediately prior to such Distribution
Date, over (b) the lesser of (1) the product of (x) 85.00% and (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period minus $2,116,444.

         CLASS M-4 CERTIFICATE: Any Certificate designated as a "Class M-4
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 M-4 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-4 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount and the Class M-3 Principal Distribution Amount
and (y) the excess, if any, of (a) the sum of (1) the aggregate Certificate
Principal Balance of the Class A Certificates (after taking into account the
distribution of the Class A Principal Distribution Amount on such Distribution
Date), (2) the Certificate Principal Balance of the Class M-1 Certificates
(after taking into account the distribution of the Class M-1 Principal
Distribution Amount on such Distribution Date), (3) the Certificate Principal
Balance of the Class M-2 Certificates (after taking into account the
distribution of the Class M-2 Principal Distribution Amount on such Distribution
Date), (4) the Certificate Principal Balance of the Class M-3 Certificates
(after taking into account the distribution of the Class M-3 Principal
Distribution

                                      -10-
<PAGE>

Amount on such Distribution Date) and (5) the Certificate Principal Balance of
the Class M-4 Certificates immediately prior to such Distribution Date, over (b)
the lesser of (1) the product of (x) 87.90% and (y) the aggregate Stated
Principal Balance of the Mortgage Loans as of the last day of the related Due
Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period minus $2,116,444.

         CLASS M-5 CERTIFICATE: Any Certificate designated as a "Class M-5
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 M-5 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-5 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount, the Class M-3 Principal Distribution Amount and
the Class M-4 Principal Distribution Amount and (y) the excess, if any, of (a)
the sum of (1) the aggregate Certificate Principal Balance of the Class A
Certificates (after taking into account the distribution of the Class A
Principal Distribution Amount on such Distribution Date), (2) the Certificate
Principal Balance of the Class M-1 Certificates (after taking into account the
distribution of the Class M-1 Principal Distribution Amount on such Distribution
Date), (3) the Certificate Principal Balance of the Class M-2 Certificates
(after taking into account the distribution of the Class M-2 Principal
Distribution Amount on such Distribution Date), (4) the Certificate Principal
Balance of the Class M-3 Certificates (after taking into account the
distribution of the Class M-3 Principal Distribution Amount on such Distribution
Date), (5) the Certificate Principal Balance of the Class M-4 Certificates
(after taking into account the distribution of the Class M-4 Principal
Distribution Amount on such Distribution Date) and (6) the Certificate Principal
Balance of the Class M-5 Certificates immediately prior to such Distribution
Date, over (b) the lesser of (1) the product of (x) 90.90% and (y) the aggregate
Stated Principal Balance of the Mortgage Loans as of the last day of the related
Due Period, and (2) the aggregate Stated Principal Balance of the Mortgage Loans
as of the last day of the related Due Period minus $2,116,444.

         CLASS M-6 CERTIFICATE: Any Certificate designated as a "Class M-6
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 M-6 Certificates as set forth herein and evidencing a Regular Interest
in REMIC II.

         CLASS M-6 PRINCIPAL DISTRIBUTION AMOUNT: For any Distribution Date, an
amount equal to the lesser of (x) the remaining Principal Distribution Amount
for such Distribution Date after distribution of the Class A Principal
Distribution Amount, the Class M-1 Principal Distribution Amount, the Class M-2
Principal Distribution Amount, the Class M-3 Principal Distribution Amount, the
Class M-4 Principal Distribution Amount and the Class M-5 Principal Distribution
Amount and (y) the excess, if any, of (a) the sum of (1) the aggregate
Certificate Principal Balance of the Class A Certificates (after taking into
account the distribution of the Class A Principal Distribution Amount on such
Distribution Date), (2) the Certificate Principal Balance of the Class M-1
Certificates (after taking into account the distribution of the Class M-1
Principal Distribution Amount on such Distribution Date), (3) the Certificate
Principal Balance of the Class M-2

                                      -11-
<PAGE>

Certificates (after taking into account the distribution of the Class M-2
Principal Distribution Amount on such Distribution Date), (4) the Certificate
Principal Balance of the Class M-3 Certificates (after taking into account the
distribution of the Class M-3 Principal Distribution Amount on such Distribution
Date), (5) the Certificate Principal Balance of the Class M-4 Certificates
(after taking into account the distribution of the Class M-4 Principal
Distribution Amount on such Distribution Date), (6) the Certificate Principal
Balance of the Class M-5 Certificates (after taking into account the
distribution of the Class M-5 Principal Distribution Amount on such Distribution
Date) and (7) the Certificate Principal Balance of the Class M-6 Certificates
immediately prior to such Distribution Date, over (b) the lesser of (1) the
product of (x) 93.50% and (y) the aggregate Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period, and (2) the
aggregate Stated Principal Balance of the Mortgage Loans as of the last day of
the related Due Period minus $2,116,444.

         CLASS P CERTIFICATE: Any Certificate designated as a "Class P
Certificate" on the face thereof, in the form of Exhibit A-4 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 II.

         CLASS P CERTIFICATE ACCOUNT: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 4.05 in the name of the Trustee
for the benefit of the Class P Certificateholders.

         CLASS R-I CERTIFICATE: Any Certificate designated a "Class R-I
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-5 hereto, evidencing the Residual Interest in REMIC I and representing the
right to the Percentage Interest of distributions provided for the Class R-I
Certificates as set forth herein.

         CLASS R-II CERTIFICATE: Any Certificate designated a "Class R-II
Certificate" on the face thereof, in substantially the form set forth in Exhibit
A-5 hereto, evidencing the Residual Interest in REMIC II and representing the
right to the Percentage Interest of distributions provided for the Class R-II
Certificates as set forth herein.

         CLOSING DATE: December 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 Protected Account by the Master Servicer to the payment of a
Prepayment Interest Shortfall on a Mortgage Loan subject to this Agreement.

         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 135 South LaSalle Street, Suite 1625, Chicago, Illinois,
Attention: Global Securitization Trust Services Group - Bear Stearns Asset
Backed

                                      -12-
<PAGE>

Securities, Inc., Series 2003-HE1, or at such other address as the Trustee may
designate from time to time.

         CORRESPONDING CERTIFICATE: With respect to each Uncertificated REMIC I
Regular Interest, the Certificate with the corresponding designation.

         CURRENT INTEREST: As of any Distribution Date, with respect to
Certificates of each Class (other than the Class P Certificates and the Residual
Certificates), (i) the interest accrued on the Certificate Principal Balance or
Certificate Notional Balance, as applicable, during the related Accrual Period
at the applicable Pass-Through Rate plus any amount previously distributed with
respect to interest for such Certificate that has been recovered as a voidable
preference by a trustee in bankruptcy minus (ii) the sum of (a) any Prepayment
Interest Shortfall for such Distribution Date, to the extent not covered by
Compensating Interest and (b) any Relief Act Interest Shortfalls during the
related Due Period, provided, however, that for purposes of calculating Current
Interest for any such Class, amounts specified in clause (ii) hereof for any
such Distribution Date shall be allocated first to the Class CE Certificates and
Residentual Certificates in reduction of amounts otherwise distributable to such
Certificates on such Distribution Date and then any excess shall be allocated to
each Class of Offered Certificates pro rata based on the respective amounts of
interest accrued pursuant to clause (i) hereof for each such Class on such
Distribution Date.

         CURRENT SPECIFIED ENHANCEMENT PERCENTAGE: With respect to any
Distribution Date, the percentage obtained by dividing (x) the sum of (i) the
aggregate Certificate Principal Balance of the Class M Certificates and (ii) the
Overcollateralization Amount, in each case prior to the distribution of the
Principal Distribution Amount on such Distribution Date, by (y) the aggregate
Stated Principal Balance of the Mortgage Loans after giving effect to
distributions to be made on such Distribution Date.

         CUSTODIAL AGREEMENT: An agreement dated as of December 1, 2003 among
the Depositor, the Seller, the Master Servicer, 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 December 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 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.

                                      -13-
<PAGE>

         DEFICIENCY AMOUNT: As of any Distribution Date, the sum of (i) any
shortfall in the Interest Funds to pay the Current Interest due on the Class
II-A Certificates, except for any portion thereof payable under the Class II-A
Policy as an Avoided Payment and (ii) the amount of any Applied Realized Loss
Amount allocated to the Class II-A Certificates on such Distribution Date and
(iii) for the Last Scheduled Distribution Date, the Certificate Principal
Balance of the Class II-A Certificates to the extent unpaid on such Distribution
Date (after taking into account all distributions to be made on such
Distribution Date).

         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 6.06.

         DELETED MORTGAGE LOAN: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.

         DELINQUENCY EVENT: A Delinquency Event shall have occurred and be
continuing if at any time, (x) 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 the related
Due Period exceeds (y) 33% of the Current Specified Enhancement Percentage.

         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

                                      -14-
<PAGE>

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.

         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 4.04 in the name of the Trustee
for the benefit of the Certificateholders and the Certificate Insurer designated
"LaSalle Bank National Association, in trust for registered holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series 2003-
HE1". Funds in the Distribution Account shall be held in trust for the
Certificateholders and the Certificate Insurer for the uses and purposes set
forth in this Agreement.

         DISTRIBUTION ACCOUNT DEPOSIT DATE: The Business Day prior to each
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 January 2004.

         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, the Certificate Insurer and to each Rating Agency, the
Certificateholders have a claim with respect to the funds in such account or a
perfected first priority

                                      -15-
<PAGE>

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, as evidenced in writing. 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, and its
successors and assigns.

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

         ERISA RESTRICTED CERTIFICATE: Each of the Class CE, Class P and the
Residual Certificates.

         EVENT OF DEFAULT: As defined in Section 8.01 hereof.

         EXCESS CASHFLOW: With respect to any Distribution Date, an amount, if
any, equal to the sum of (a) the Remaining Excess Spread for such Distribution
Date and (b) the Overcollateralization Release Amount for such Distribution
Date.

         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.

         EXCESS SPREAD: With respect to any Distribution Date, the excess, if
any, of (i) the Interest Funds for such Distribution Date over (ii) the sum of
the Certificate Insurer Premium Amount, Current Interest on the Offered
Certificates and Interest Carry Forward Amounts on the Class A Certificates, in
each case for such Distribution Date.

         EXEMPTION: Prohibited Transaction Exemption 90-30, as amended from time
to time.

         EXTRA PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the lesser of (i) the excess, if any, of the Overcollateralization Target
Amount for such Distribution Date over the Overcollateralization Amount for such
Distribution Date (after giving effect to distributions of principal on the
Certificates other than any Extra Principal Distribution Amount) and (ii) the
Excess Spread 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 CERTIFICATION: The certification substantially in the form of
Exhibit Three to the Custodial Agreement.

                                      -16-
<PAGE>

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

         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 pursuant to or as contemplated by Section 2.03(c) or Section
10.01), a determination made by the Master Servicer pursuant that all Insurance
Proceeds, Liquidation Proceeds and other payments or recoveries which the Master
Servicer, in its reasonable good faith judgment, expects to be finally
recoverable in respect thereof have been so recovered. The Trustee shall
maintain records, based solely on information provided by the Master Servicer,
of each Final Recovery Determination made thereby.

         FISCAL AGENT: As defined in the Class II-A Policy.

         FREDDIE MAC: 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 Mortgage Loan.

         GROUP I PRINCIPAL DISTRIBUTION AMOUNT: With respect to any Distribution
Date, the product of the Principal Distribution Amount for such Distribution
Date and a fraction, the numerator of which is the Principal Funds for the Loan
Group I for such Distribution Date and the denominator of which is the Principal
Funds for both Loan Groups for such Distribution Date.

         GROUP II PRINCIPAL DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the product of the Principal Distribution Amount for such
Distribution Date and a fraction, the numerator of which is the Principal Funds
for the Loan Group II for such Distribution Date and the denominator of which is
the Principal Funds for both Loan Groups for such Distribution Date.

         INDEMNIFIED PERSONS: The Trustee, the Master Servicer, the Certificate
Insurer, the Trust Fund and their officers, directors, agents and employees and,
with respect to the Trustee, any separate co- trustee and its officers,
directors, agents and employees.

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

         INITIAL CERTIFICATION: The certification substantially in the form of
Exhibit One to the Custodial Agreement.

         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 AGREEMENT: The Insurance and Indemnity Agreement, dated
December 30, 2003, among the Certificate Insurer, the Seller, the Master
Servicer, the Depositor and the Trustee, as the same may be amended from time to
time in accordance with the terms thereof.

                                      -17-
<PAGE>

         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 Master 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 Master 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.

         INSURED PAYMENT: With respect to any Distribution Date, (i) any
Deficiency Amount and (ii) any Avoided Payment.

         INTEREST CARRY FORWARD AMOUNT: As of any Distribution Date and with
respect to each Class of Certificates (other than the Class CE, Class P and the
Residual Certificates), the sum of (i) the excess of (a) the Current Interest
for such Class with respect to prior Distribution Dates over (b) the amount
actually distributed to such Class of Certificates with respect to interest on
such prior Distribution Dates and (ii) interest thereon (to the extent permitted
by applicable law) at the applicable Pass-Through Rate for such Class for the
related Accrual Period including the Accrual Period relating to such
Distribution Date.

         INTEREST DETERMINATION DATE: Shall mean the second LIBOR Business Day
preceding the commencement of each Accrual Period.

         INTEREST FUNDS: With respect to each Loan Group and 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 Trustee 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 Master
Servicer pursuant to this 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), and (e) all amounts relating to interest with respect to each
Mortgage Loan in such Loan Group repurchased by the Seller pursuant to Sections
2.02 and 2.03 and by EMC pursuant to Section 3.18, in each case to the extent
remitted by the Master Servicer to the Distribution Account pursuant to this
Agreement minus (ii) all amounts relating to interest required to be reimbursed
pursuant to Sections 4.02 and 4.05 or as otherwise set forth in this Agreement.

         INTERIM CERTIFICATION: The certification substantially in the form of
Exhibit Two to the Custodial Agreement.

                                      -18-
<PAGE>

         LAST SCHEDULED DISTRIBUTION DATE: January 25, 2034.

         LATEST POSSIBLE MATURITY DATE: The Distribution Date in the month
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 and
REMIC II 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.

         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 Master 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 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.

         LOAN GROUP: Either Loan Group I or Loan Group II.

         LOAN GROUP I: The Mortgage Loans included as such on the Mortgage Loan
Schedule.

         LOAN GROUP II: The Mortgage Loans included as such on the Mortgage Loan
Schedule.

         LPMI FEE: 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
Master Servicer or the related subservicer of the related Mortgage Loan is
responsible for the payment of the LPMI Fee thereunder from collections on the
related Mortgage Loan.

         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 Uncertificated REMIC I Pass-Through Rate for each of REMIC I Regular
Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular

                                      -19-
<PAGE>

Interest II-A, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC
I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest
M-5, REMIC I Regular Interest M-6, and REMIC I Regular Interest ZZ, with the
rate on each such REMIC I Regular Interest (other than REMIC I Regular Interest
ZZ) subject to a cap equal to the lesser of (i) the related One-Month LIBOR
Pass-Through Rate and (ii) the applicable Net Rate Cap for the purpose of this
calculation for such Distribution Date and with the rate on REMIC I Regular
Interest ZZ subject to a cap of zero for the purpose of this calculation.

         MASTER SERVICER: EMC Mortgage Corporation, in its capacity as master
servicer, and its successors and assigns.

         MASTER SERVICER CERTIFICATION: A written certification covering
servicing of the Mortgage Loans by the Master Servicer 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.

         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.

         MAXIMUM UNCERTIFICATED ACCRUED INTEREST DEFERRAL AMOUNT: With respect
to any Distribution Date, the excess of (i) accrued interest at the
Uncertificated REMIC I Pass-Through Rate applicable to REMIC I Regular Interest
ZZ for such Distribution Date on a balance equal to the Uncertificated Principal
Balance of REMIC I Regular Interest ZZ minus the REMIC I Overcollateralized
Amount, in each case for such Distribution Date, over (ii) Uncertificated
Accrued Interest on REMIC I Regular Interest I-A-1, REMIC I Regular Interest
I-A-2, REMIC I Regular Interest II-A, REMIC I Regular Interest M-1, REMIC I
Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest
M-4, REMIC I Regular Interest M-5 and REMIC I Regular Interest M-6 for such
Distribution Date, with the rate on each such REMIC I Regular Interest subject
to a cap equal to the lesser of (i) the related One-Month LIBOR Pass-Through
Rate and (ii) the Net Rate Cap for the purpose of this calculation for such
Distribution Date.

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

                                      -20-
<PAGE>

         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.

         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.

         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 STATEMENT: The statement delivered to the Certificateholders
and the Certificate Insurer pursuant to Section 5.06.

         MOODY'S: Moody's Investors Service, Inc., and any successor thereto.

         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 Custodian to be added to the Mortgage File pursuant to this Agreement and
the Custodial 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.

         MORTGAGE LOAN PURCHASE AGREEMENT: The Mortgage Loan Purchase Agreement
dated as of December 30, 2003, between the Seller, as seller and the Depositor,
as purchaser.

         MORTGAGE LOAN PURCHASE PRICE: The price, calculated as set forth in
Section 10.01, to be paid in connection with the repurchase of the Mortgage
Loans pursuant to Section 10.01.

         MORTGAGE LOAN SCHEDULE: The list of Mortgage Loans (as from time to
time amended by the Seller 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:

                  (i) the loan number;

                  (ii) the Mortgage Rate in effect as of the Cut-off Date;

                                      -21-
<PAGE>

                  (iii) the 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;

                  (xi) the MIN with respect to each MOM Loan;

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

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

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

                  (xv) with respect to each Adjustable Rate Mortgage Loan, the
         next Adjustment Date; and

                  (xvi) with respect to each Adjustable Rate Mortgage Loan, the
         Periodic Rate Cap.

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: With respect to each fixed rate Mortgage Loan, the rate
set forth in the related Mortgage Note. With respect to each Adjustable Rate
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 (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, to equal the sum, rounded to the next
highest or nearest 0.125% (as provided in the Mortgage Note),

                                      -22-
<PAGE>

of the Index, determined as set forth in the related Mortgage Note, plus the
related Gross Margin subject to the limitations set forth in the related
Mortgage Note. With respect to each Mortgage Loan that becomes an REO Property,
as of any date of determination, the annual rate determined in accordance with
the immediately preceding sentence as of the date such Mortgage Loan became an
REO Property.

         MORTGAGED PROPERTY: The underlying property securing a Mortgage Loan.

         MORTGAGOR: The obligors on a Mortgage Note.

         NET MORTGAGE RATE: As to each Mortgage Loan, and at any time, the per
annum rate equal to the Mortgage Rate less the sum of (i) the Servicing Fee Rate
and (ii) the Trustee Fee Rate and (iii) the rate at which the LPMI Fee is
calculated, if any.

         NET RATE CAP: With respect to the Class I-A-1 Certificates and Class
I-A-2 Certificates and any Distribution Date, a rate per annum equal to the
product of (x) the weighted average of the Net Mortgage Rates on the then
outstanding Mortgage Loans in Loan Group I, 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 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 Accrual Period. For federal income tax purposes, however, such rate
shall be the economic equivalent of the foregoing, expressed as the weighted
average of (adjusted for the actual number of days elapsed in the related
Accrual Period) the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular
Interest 1B, weighted on the basis of the Uncertificated Principal Balance of
such REMIC I Regular Interest.

         With respect to the Class II-A Certificates and any Distribution Date,
a rate per annum equal to the product of (x) the weighted average of the Net
Mortgage Rates on the then outstanding Mortgage Loans in Loan Group II, 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, minus the
Certificate Insurer Premium Rate 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 Accrual Period. For federal income tax purposes, however, such rate
shall be the economic equivalent of the foregoing, expressed as the weighted
average of (adjusted for the actual number of days elapsed in the related
Accrual Period) the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular
Interest 2B, weighted on the basis of the Uncertificated Principal Balance of
such REMIC I Regular Interest, minus the Certificate Insurer Premium Rate. For
purposes of the definitions of the Marker Rate and Maximum Uncertificated
Accrued Interest Deferral Amount, the foregoing definitions in this paragraph
shall not be reduced by the Certificate Insurer Premium Rate.

         With respect to the Class M Certificates and any Distribution Date, a
rate per annum equal to the product of (x) the weighted average of the Net
Mortgage Rates on the then outstanding Mortgage Loans in each Loan Group,
weighted in proportion to the results of subtracting from the aggregate Stated
Principal Balance of each such Loan Group as of the first day of the calendar
month preceding the month in which the Distribution Date, the Current Principal
Amount of the related Class or Classes of Senior Certificates 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 Accrual Period. For federal

                                      -23-
<PAGE>

income tax purposes, however, such rate shall be the economic equivalent of the
foregoing, expressed as the weighted average of (adjusted for the actual number
of days elapsed in the related Accrual Period) the Uncertificated REMIC I
Pass-Through Rates on (a) REMIC I Regular Interest 1A, subject to a cap and a
floor equal to the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group I and (b) REMIC I Regular Interest 2A, subject to a cap and
a floor equal to the weighted average of the Net Mortgage Rates of the Mortgage
Loans in Loan Group II, weighted on the basis of the Uncertificated Balance of
each such REMIC I Regular Interest.

         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 Master Servicer pursuant to this Agreement, that, in
the good faith judgment of the Master 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, Insurance Proceeds or otherwise.

         OFFERED CERTIFICATES: The Class I-A-1, Class I-A-2, Class II-A, Class
M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6 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 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 Trustee 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 1.24% 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 Trustee), One-Month LIBOR for the applicable Accrual Period will be the
Reference Bank Rate. If no such quotations can be obtained by the Trustee 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 Trustee and the Trustee's calculation
of the rate of interest applicable to the Offered Certificates for the related
Accrual Period shall, in the absence of manifest error, be final and binding.

         ONE-MONTH LIBOR PASS-THROUGH RATE: With respect to the Class I-A-1
Certificates and, for purposes of the definition of "Marker Rate" and "Maximum
Uncertificated Accrued Interest Deferral Amount", REMIC I Regular Interest
I-A-1, a per annum rate equal to One-Month LIBOR plus the related Certificate
Margin.

                                      -24-
<PAGE>

         With respect to the Class I-A-2 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest I-A-2, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class II-A Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest II-A, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-1 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-1, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-2 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-2, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-3 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-3, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-4 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-4, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-5 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-5, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         With respect to the Class M-6 Certificates and, for purposes of the
definition of "Marker Rate" and "Maximum Uncertificated Accrued Interest
Deferral Amount", REMIC I Regular Interest M-6, a per annum rate equal to
One-Month LIBOR plus the related Certificate Margin.

         OPINION OF COUNSEL: A written opinion of counsel, who may be counsel
for the Seller, the Depositor or the Master Servicer, reasonably acceptable to
each addressee of such opinion; provided that with respect to Section 2.05,
7.05, 7.07 or 11.01, or the interpretation or application of the REMIC
Provisions, such counsel must (i) in fact be independent of the Seller,
Depositor and the Master Servicer, (ii) not have any direct financial interest
in the Seller, the Depositor or the Master Servicer or in any affiliate of
either, and (iii) not be connected with the Seller, the Depositor 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 10.01 hereof.

                                      -25-
<PAGE>

         OPTIONAL TERMINATION DATE: The Distribution Date on which the Stated
Principal Balance of all of the Mortgage Loans is equal to or less than 10% of
the Stated Principal Balance of all of the Mortgage Loans as of the Cut-off
Date.

         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.

         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.

         OVERCOLLATERALIZATION AMOUNT: With respect to any Distribution Date,
the excess, if any, of the aggregate Stated Principal Balances of the Mortgage
Loans as of the last day of the related Due Period (including any reduction due
to Realized Losses) over the Certificate Principal Balances of the Certificates
on such Distribution Date (after taking into account the payment of principal
other than any Extra Principal Distribution Amount on such Certificates).

         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 Overcollateralization 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, (a) prior to the Stepdown Date, 3.25% of the aggregate Stated Principal
Balance of the Mortgage Loans as of the Cut-off Date, (b) on or after the
Stepdown Date and if a Trigger Event is not in effect, the greater of (i) 6.50%
of the then current aggregate Stated Principal Balance of the Mortgage Loans as
of the last day of the related Due Period and (ii) $2,116,444 or (c) on or after
the Stepdown Date and if a Trigger Event is in effect, the Overcollateralization
Target Amount for the immediately preceding Distribution Date.

         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.

                                      -26-
<PAGE>

         PASS-THROUGH RATE: With respect to the Offered Certificates and any
Distribution Date, a rate per annum equal to the lesser of (i) the related
One-Month LIBOR Pass-Through Rate for such Distribution Date and (ii) the
related Net Rate Cap for such Distribution Date.

         With respect to the Class CE Certificates and any Distribution Date, a
rate per annum equal to the percentage equivalent of a fraction, the numerator
of which is the sum of the amounts calculated pursuant to clauses (a) through
(k) below, and the denominator of which is the aggregate Uncertificated
Principal Balances of REMIC I Regular Interest AA, REMIC I Regular Interest
I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A, REMIC I
Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest
M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest M-5, REMIC I Regular
Interest M-6 and REMIC I Regular Interest ZZ. For purposes of calculating the
Pass-Through Rate for the Class CE Certificates, the numerator is equal to the
sum of the following components:

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

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

         (c)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest I-A-2 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest I-A-2;

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

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

         (f)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-2 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-2;

         (g)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-3 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-3;

         (h)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-4 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-4;

                                      -27-
<PAGE>

         (i)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-5 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-5;

         (j)      the Uncertificated REMIC I Pass-Through Rate for REMIC I
                  Regular Interest M-6 minus the Marker Rate, applied to an
                  amount equal to the Uncertificated Principal Balance of REMIC
                  I Regular Interest M-6; and

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

         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.

         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: 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
         (determined without regard to the Class II-A Policy), as evidenced in
         writing;

                  (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(determined without regard to the
         Class II-A Policy), as evidenced in writing;

                  (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),

                                      -28-
<PAGE>

         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 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
         (determined without regard to the Class II-A Policy), as evidenced in
         writing;

                  (vi) 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 (determined without regard
         to the Class II-A Policy), as evidenced in writing;

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

                  (viii) securities (other than stripped bonds, stripped coupons
         or instruments sold at a purchase price in excess of 115% of the face
         amount thereof) bearing interest or sold at a discount issued by any
         corporation incorporated under the laws of the United States or any
         state thereof which, at the time of such investment, have one of the
         two highest short 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 (determined without
         regard to the Class II-A Policy), as evidenced by a signed writing
         delivered by each Rating Agency;

                  (ix) interests in any money market fund (including any such
         fund managed or advised by the Trustee 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 short 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 (determined without
         regard to the Class II-A Policy), as evidenced in writing;

                  (x) 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 the Master Servicer 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 (determined without
         regard to the Class II-A Policy), as evidenced in writing; and

                  (xi) such other investments having a specified stated maturity
         and bearing interest or sold at a discount acceptable to each Rating
         Agency and as will not result in the downgrading or withdrawal of the
         rating then assigned to the Certificates by any Rating

                                      -29-
<PAGE>

         Agency (determined without regard to the Class II-A Policy), as
         evidenced by a signed writing delivered by each Rating Agency;

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 or REMIC II 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.

                                      -30-
<PAGE>

         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.

         PREMIUM LETTER: The letter agreement dated December 30, 2003, among the
Seller, the Depositor, the Certificate Insurer and the Trustee.

         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, 3.18 or
10.01 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 Trustee Fee, (b) the Servicing Fee and (c) the LPMI Fee, if any.

         PREPAYMENT PERIOD: As to any Distribution Date, the period commencing
on the 16th day of the month prior to the month in which the related
Distribution Date occurs and ending on the 15th day of 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,
an amount equal to (x) the Principal Funds for such Distribution Date plus (y)
any Extra Principal Distribution Amount for such Distribution Date, less (z) any
Overcollateralization Release Amount.

         PRINCIPAL FUNDS: With respect to each Loan Group and 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
before 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 in the
related Loan Group that was repurchased by the Seller pursuant to Sections 2.02
and 2.03 or by EMC pursuant to Section 3.18, (e) the aggregate of all
Substitution Adjustment Amounts for the related

                                      -31-
<PAGE>

Determination Date in connection with the substitution of Mortgage Loans
pursuant to Section 2.03(c), (f) amounts in respect of principal paid by EMC
pursuant to Section 10.01 and (g) all Liquidation Proceeds collected during the
related Prepayment Period (to the extent such Liquidation Proceeds relate to
principal), in each case to the extent remitted by the Master Servicer to the
Distribution Account pursuant to this Agreement minus (ii) all amounts required
to be reimbursed pursuant to Sections 4.02 and 4.05 or as otherwise set forth in
this Agreement.

         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, 3.18 and 10.01 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 Master Servicer, as appropriate, in
accordance with the terms of the related Mortgage Note.

         PRINCIPAL REMITTANCE AMOUNT: With respect to each Distribution Date,
the sum of the amounts listed in clauses (a) through (g) of the definition of
Principal Funds.

         PRIVATE CERTIFICATE: Each of the Class P, Class CE and Residual
Certificates.

         PROSPECTUS SUPPLEMENT: The Prospectus Supplement dated December 26,
2003 relating to the public offering of the Offered Certificates.

         PROTECTED ACCOUNT: Each account established and maintained by the
Master Servicer with respect to the Mortgage Loans and REO Property in
accordance with Section 4.01 hereof.

         PUD: A Planned Unit Development.

         PURCHASE PRICE: With respect to any Mortgage Loan (x) required to be
repurchased by the Seller pursuant to Section 2.02 or 2.03 hereof or (y) that
EMC has a right to purchase pursuant to Section 3.18 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, Servicing Advances and Advances payable to the
purchaser of the Mortgage Loan plus (iii) any costs and damages (if any)
incurred by the Trust in connection with any violation of such Mortgage Loan of
any predatory 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.

         RATING EVENT: Any time any of the Class A Certificates is put on a
"watch list" by Moody's or S&P or downgraded below "Aaa" by Moody's or "AAA" by
S&P (and with respect to the Class II-A Certificates, without regard to the
Class II-A Policy).

                                      -32-
<PAGE>

         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
any, received in respect of such Mortgage Loan during the calendar month in
which such Final Recovery Determination was made, net of amounts that are
payable therefrom to the Master Servicer pursuant to this 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 any Distribution Date and the Offered
Certificates, so long as the Offered 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. With respect to the Class CE, Class P and Residual
Certificates and (a) the first Distribution Date, the Closing Date and (b) with
respect to any other Distribution Date, the close of business on the last
Business Day of the month preceding the month in which such Distribution Date
occurs.

                                      -33-
<PAGE>

         REFERENCE BANKS: Shall mean leading banks selected by the Trustee 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 Trustee and (iii) which are not controlling,
controlled by, or under common control with, the Depositor, the Seller or the
Master Servicer.

         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
aggregate Certificate Principal Balance of the Offered Certificates 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 Trustee, 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 amounts approximately equal to the aggregate Certificate
Principal Balance of the Offered Certificates for such Accrual Period.

         REGULAR CERTIFICATE: Any Certificate other than a Residual Certificate.

         REIMBURSEMENT AMOUNT: Shall mean the sum of (a) the aggregate
unreimbursed amount of any payments made by the Certificate Insurer under the
Class II-A Policy, together with interest on such amount from the date of
payment by the Certificate Insurer until paid in full at a rate of interest
equal to the Accrual Rate and (b) any other amounts owed to the Certificate
Insurer under this Agreement or the Insurance Agreement.

         RELIEF ACT: The Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, or similar state law.

         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 Due Period as a result of the
application of the Relief Act.

         REMAINING EXCESS SPREAD: With respect to any Distribution Date, the
Excess Spread less any Extra Principal Distribution Amount, in each case for
such Distribution Date.

         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 5.06(a).

         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 Accrual Period) equal to (a) the product of
(i) 50% of the aggregate Stated Principal Balance of the Mortgage Loans

                                      -34-
<PAGE>

and REO Properties then outstanding and (ii) the Uncertificated REMIC I
Pass-Through Rate for REMIC I Regular Interest AA minus the Marker Rate, divided
by (b) 12.

         REMIC I MARKER ALLOCATION PERCENTAGE: 50% of any amount payable or loss
attributable from the Mortgage Loans, which shall be allocated to REMIC I
Regular Interest AA, REMIC I Regular Interest I-A-1, REMIC I Regular Interest
I-A-2, REMIC I Regular Interest II-A, REMIC I Regular Interest M-1, REMIC I
Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest
M-4, REMIC I Regular Interest M-5, REMIC I Regular Interest M-6 and REMIC I
Regular Interest ZZ.

         REMIC I OVERCOLLATERALIZATION AMOUNT: With respect to any date of
determination, (i) 0.50% of the aggregate Uncertificated Principal Balances of
the REMIC I Regular Interests (other than REMIC I Regular Interest P) minus (ii)
the aggregate of the Uncertificated Principal Balances of REMIC I Regular
Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A,
REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular
Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest M-5 and
REMIC I Regular Interest M-6, 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 (a) the product of (i) 50% of 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 I Regular Interest
I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular Interest II-A, REMIC I
Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest
M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest M-5 and REMIC I
Regular Interest M-6, and the denominator of which is the aggregate of the
Uncertificated Principal Balances of REMIC I Regular Interest I-A-1, REMIC I
Regular Interest I-A-2, REMIC I Regular Interest II-A, REMIC I Regular Interest
M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular
Interest M-4, REMIC I Regular Interest M-5, REMIC I Regular Interest M-6 and
REMIC I Regular Interest ZZ.

         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 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. The designations for the respective REMIC I Regular Interests are set
forth in the Preliminary Statement hereto.

         REMIC I REGULAR INTEREST AA: 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 AA 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.

                                      -35-
<PAGE>

         REMIC I REGULAR INTEREST I-A-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 I-A-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 I-A-2: 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-A-2 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 II-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 II-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 M-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 M-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 M-2: 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 M-2 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 M-3: 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 M-3 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 M-4: 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 M-4 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

                                      -36-
<PAGE>

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 M-5: 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 M-5 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 M-6: 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 M-6 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 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 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 INTEREST XX: 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 XX 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 ZZ: 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 ZZ 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 1A: 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 1A 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.

                                      -37-
<PAGE>

         REMIC I REGULAR INTEREST 1B: 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 1B 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 2A: 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 2A 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 2B: 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 2B 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 SUB WAC ALLOCATION PERCENTAGE: 50% of any amount payable or
loss attributable from the Mortgage Loans, which shall be allocated to REMIC I
Regular Interest 1A, REMIC I Regular Interest 1B, REMIC I Regular Interest 2A,
REMIC I Regular Interest 2B and REMIC I Regular Interest XX.

         REMIC I SUBORDINATED BALANCE RATIO: The ratio among the Uncertificated
Principal Balances of each REMIC I Regular Interest ending with the designation
"A", equal to the ratio among, with respect to each such REMIC I Regular
Interest, the excess of (x) the aggregate Stated Principal Balance of the
Mortgage Loans in Loan Group I or the Mortgage Loans in Loan Group II, as
applicable over (y) the current Certificate Principal Balance of related Class A
Certificates.

         REMIC I REQUIRED OVERCOLLATERALIZATION AMOUNT: 0.50% of the
Overcollateralization Target Amount.

         REMIC II:  The segregated pool of assets described in Section 5.06(a).

         REMIC II CERTIFICATE: Any Regular Certificate or Class R Certificate.

         REMIC II CERTIFICATEHOLDER: The Holder of any REMIC II Certificate.

         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

                                      -38-
<PAGE>

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.

         REMITTANCE DATE: Shall mean the Business Day immediately preceding the
Distribution Account Deposit Date.

         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 PROPERTY: A Mortgaged Property acquired by the Master 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; (ix) if the
Replacement Mortgage Loan is an Adjustable Rate Mortgage Loan, have a Maximum
Mortgage Rate not less than the Maximum Mortgage Rate on the Deleted Mortgage
Loan, (x) if the Replacement Mortgage Loan is an Adjustable Rate Mortgage Loan,
have a Minimum Mortgage Rate not less than the Minimum Mortgage Rate of the
Deleted Mortgage Loan, (xi) if the Replacement Mortgage Loan is an Adjustable
Rate Mortgage Loan, have a Gross Margin equal to or greater than the Gross
Margin of the Deleted Mortgage Loan, (xii) if the Replacement Mortgage Loan is
an 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, (xiii)
comply with each representation and warranty set forth in Section 7 of the
Mortgage Loan Purchase Agreement and (xiv) the Custodian has delivered a Final
Certification noting no defects or exceptions.

         REPURCHASE PRICE: With respect to each Mortgage Loan, a price equal to
(i) the outstanding principal balance of such 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 Master Servicer in
respect of such repurchased Mortgage Loan which are being held in the Protected
Account for remittance to the Trustee plus (iv) any costs or damages (if any)
incurred by the Trust in connection with any violation of such Mortgage Loan of
any predatory lending laws.

                                      -39-
<PAGE>

         REQUEST FOR RELEASE: The Request for Release to be submitted by the
Seller 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 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 Master Servicer.

         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.

         RESERVE FUND: Shall mean the separate trust account created and
maintained by the Trustee pursuant to Section 3.20 hereof.

         RESIDUAL CERTIFICATES: The Class R-I Certificates and Class R-II
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 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,
and any successor thereto.

         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.

         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 I-A-1, Class I-A-2 and Class II-A
Certificates.

         SERVICING ADVANCES: All customary, reasonable and necessary "out of
pocket" costs and expenses (including reasonable legal fees) incurred in the
performance by the Master Servicer of its servicing obligations hereunder,
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.

                                      -40-
<PAGE>

         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: 0.50% per annum.

         SERVICING MODIFICATION: With respect to any Mortgage Loan that is in
default or, in the reasonable judgment of the Master Servicer, as to which
default is reasonably foreseeable, any modification which is effected by the
Master Servicer in accordance with the terms of this 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 Master Servicer involved in, or
responsible for, the administration and servicing of the Mortgage Loans whose
name and facsimile signature appear on a list of servicing officers furnished to
the Trustee and the Certificate Insurer by the Master Servicer on the Closing
Date pursuant to this Agreement, as such list may from time to time be amended.

         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 Master Servicer as recoveries of principal in accordance
with Section 3.09 with respect to such Mortgage Loan, that were received by the
Master 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.

         STEPDOWN DATE: The later to occur of (a) the Distribution Date in
January 2007 and (b) the first Distribution Date on which the aggregate
Certificate Principal Balance of the Class M Certificates and the
Overcollateralization Amount divided by the Stated Principal Balance of the
Mortgage Loans as of the last day of the related Due Period is greater than or
equal to 42.50%.

         SUBORDINATED CERTIFICATES: The Class M Certificates, Class CE
Certificates and Residual Certificates.

         SUBSERVICING AGREEMENT: Any agreement entered into between the Master
Servicer and a subservicer with respect to the subservicing of any Mortgage Loan
hereunder by such subservicer.

                                      -41-
<PAGE>

         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 8.01.

         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 Trustee, or any successor thereto or assignee thereof
shall serve as tax administrator hereunder and as agent for the related Tax
Matters Person.

         TRANSACTION DOCUMENTS: This Agreement, the Mortgage Loan Purchase
Agreement, the Custodial Agreement, the Insurance Agreement, the Indemnification
Agreement (as defined in the Insurance Agreement), the Underwriting Agreement
and the Premium Letter.

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

         TRANSFER AFFIDAVIT: As defined in Section 6.02(c).

         TRIGGER EVENT: With respect to any Distribution Date after the Stepdown
Date, a Trigger Event exists if (i) a Delinquency Event shall have occurred and
be continuing or (ii) the aggregate amount of Realized Losses on the Mortgage
Loans as a percentage of the initial aggregate Stated 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:

         DISTRIBUTION DATE                                    PERCENTAGE
         -----------------                                    ----------
         January 2007 to December 2007                        3.75%
         January 2008 to December 2008                        5.75%
         January 2009 to December 2009                        7.00%
         January 2010 to December 2010                        7.75%
         January 2011 and thereafter                          8.25%

         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 Distribution Account, the Class
II-A Policy Payments Account, the Class P Certificate Account, the Reserve Fund
and the Protected Account and all amounts deposited therein pursuant to the
applicable provisions of this Agreement; (iii) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed in lieu of foreclosure or
otherwise; (iv) the mortgagee's rights under the Insurance Policies with respect
to the Mortgage Loans; (v) for the benefit of the Class II-A Certificates only,
the Class II-A Policy; (vi) the rights under the Yield Maintenance Agreements;
(vii) the rights under the Mortgage Loan Purchase Agreement; and (viii) all
proceeds of the foregoing, including proceeds of conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.

         TRUSTEE: LaSalle Bank National Association, a national banking
association, not in its individual capacity, but solely in its capacity as
trustee for the benefit of the Certificateholders under

                                      -42-
<PAGE>

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.

         TRUSTEE FEE: As to each Mortgage Loan and any Distribution Date, a fee
per annum equal to 0.0043% multiplied by the Stated Principal Balance of such
Mortgage Loan as of the last day of the related Due Period.

         UNCERTIFICATED ACCRUED INTEREST: With respect to each REMIC I Regular
Interest on each Distribution Date, an amount equal to one month's interest at
the related Uncertificated REMIC Pass- Through Rate on the Uncertificated
Principal Balance of such REMIC I Regular Interest. In each case, Uncertificated
Accrued Interest will be reduced by any Prepayment Interest Shortfalls and
Relief Act Interest Shortfalls (allocated to such REMIC I Regular Interests as
set forth in Section 5.06).

         UNCERTIFICATED PRINCIPAL BALANCE: The amount of the REMIC I Regular
Interests outstanding as of any date of determination. As of the Closing Date,
the Uncertificated Principal Balance of each REMIC I Regular Interest 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 the REMIC I Regular Interest shall be reduced by all
distributions of principal made on such REMIC I Regular Interest on such
Distribution Date pursuant to Section 5.06 and, if and to the extent necessary
and appropriate, shall be further reduced on such Distribution Date by Realized
Losses as provided in Section 5.04A and the Uncertificated Principal Balance of
REMIC I Regular Interest ZZ shall be increased by interest deferrals as provided
in Section 5.06(b)(1)(i). The Uncertificated Principal Balance of each REMIC I
Regular Interest shall never be less than zero.

         UNCERTIFICATED REMIC I PASS-THROUGH RATE: With respect to REMIC I
Regular Interest AA, REMIC I Regular Interest I-A-1, REMIC I Regular Interest
I-A-2, REMIC I Regular Interest II-A, REMIC I Regular Interest M-1, REMIC I
Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest
M-4, REMIC I Regular Interest M-5, REMIC I Regular Interest M-6, REMIC I Regular
Interest ZZ, REMIC I Regular Interest 1A, REMIC I Regular Interest 2A and REMIC
I Regular Interest XX, the weighted average of the Net Mortgage Rates of the
Mortgage Loans. With respect to REMIC I Regular Interest 1B, the weighted
average of the Net Mortgage Rates of the Mortgage Loans in Loan Group I. With
respect to REMIC I Regular Interest 2B, the weighted average of the Net Mortgage
Rates of the Mortgage Loans in Loan Group II. With respect to REMIC I Regular
Interest P, 0.00%.

         UNDERWRITING AGREEMENT: the Underwriting Agreement dated as of October
29, 2003 between the Depositor and Bear, Stearns & Co. Inc. ("Bear Stearns"),
together with the related Terms Agreement, dated as of December 26, 2003 between
the Depositor and Bear Stearns.

         UNPAID REALIZED LOSS AMOUNT: With respect to any Class of Offered
Certificates and as to any Distribution Date, is the excess of Applied Realized
Loss Amounts with respect to such Class over the sum of all distributions in
reduction of the Applied Realized Loss Amounts on all previous Distribution
Dates.

         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) 95% to the Offered Certificates,
(ii) 3% to the Class CE Certificates until paid in full, and (iii) 1% to each
Class of Residual Certificates, with the allocation among the Certificates
(other than the Class CE, Class P and the Residual Certificates) to be in
proportion to the Certificate Principal Balance of each

                                      -43-
<PAGE>

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. With respect to Voting
Rights, the Class II-A Certificateholders are subject to Section 5.07(l) of this
Agreement.

         YIELD MAINTENANCE AGREEMENTS: The two Yield Maintenance Agreements,
each dated December 30, 2003 between the Trust (on behalf of the Class I-A-1,
Class I-A-2 and Class M Certificateholders) and Bear Stearns Financial Products
Inc.

         Section 1.02      ALLOCATION OF CERTAIN INTEREST SHORTFALLS.

         For purposes of calculating the amount of Current Interest for the
Class A Certificates, the Class M Certificates and the Class CE Certificates for
any Distribution Date, the aggregate amount of any Prepayment Interest
Shortfalls (to the extent not covered by payments by the Master Servicer
pursuant to Section 5.02) and any Relief Act Interest Shortfalls incurred in
respect of the Mortgage Loans for any Distribution Date shall be allocated
first, to the Class CE Certificates based on, and to the extent of, one month's
interest at the then applicable respective Pass-Through Rate on the Certificate
Notional Amount thereof and, thereafter, among the Offered Certificates, 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 of each such Certificate.

         For purposes of calculating the amount of Uncertificated Accrued
Interest for the REMIC I Regular Interests for any Distribution Date:

         (A) The REMIC I Marker Allocation Percentage of the aggregate amount of
any Prepayment Interest Shortfalls (to the extent not covered by payments by the
Master Servicer pursuant to Section 5.02) and the REMIC I Marker Allocation
Percentage of any Relief Act Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated first, to
Uncertificated Accrued Interest payable to REMIC I Regular Interest AA and REMIC
I Regular Interest ZZ up to an aggregate amount equal to the REMIC I Interest
Loss Allocation Amount, 98.00% and 2.00%, respectively, and thereafter among
REMIC I Regular Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
Interest II-A, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC
I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC I Regular Interest
M-5, REMIC I Regular Interest M-6 and REMIC I Regular Interest ZZ PRO RATA based
on, and 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; and

         (B) The REMIC I Sub WAC Allocation Percentage of the aggregate amount
of any Prepayment Interest Shortfalls (to the extent not covered by payments by
the Master Servicer pursuant to Section 5.02) and the REMIC I Sub WAC Allocation
Percentage of any Relief Act Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated to Uncertificated
Accrued Interest payable to REMIC I Regular Interest 1A, REMIC I Regular
Interest 1B, REMIC I Regular Interest 2A, REMIC I Regular Interest 2B, and REMIC
I Regular Interest XX, pro rata based on, and to the extent of, one month's
interest at the then

                                      -44-
<PAGE>

applicable respective Uncertificated REMIC I Pass-Through Rate on the respective
Uncertificated Principal Balance of each such REMIC I Regular Interest.

                                      -45-
<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 and the Certificate Insurer,
without recourse, all the right, title and interest of the Depositor in and to
the Trust Fund. In addition, on or prior to the Closing Date, the Depositor
shall cause the Certificate Insurer to deliver the Class II-A Policy to the
Trustee.

         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 "LaSalle Bank National Association, as Trustee for
certificateholders of Bear Stearns Asset Backed Securities, Inc. Asset Backed
Certificates, Series 2003-HE1," and showing 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 "LaSalle Bank National Association,
as Trustee for certificateholders of Bear Stearns Asset Backed Securities, Inc.
Asset Backed Certificates, Series 2003-HE1," 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, 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 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,

                                      -46-
<PAGE>

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 Protected 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 (a) any assignment
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, the
Certificate Insurer 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 the 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
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 Master 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 and the Certificate Insurer 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 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.

                                      -47-
<PAGE>

         Section 2.02 ACCEPTANCE OF THE MORTGAGE LOANS.

         (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 and the Certificate Insurer. On the Closing
Date, the Trustee or the Custodian on its behalf will deliver an Initial
Certification in the form of Exhibit One to the Custodial Agreement 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 and the Certificate Insurer, review each Mortgage File
delivered to it and execute and deliver to the Seller, the Master Servicer and
the Certificate Insurer and, if reviewed by the Custodian, the Trustee, an
Interim Certification substantially in the form of Exhibit Two to the Custodial
Agreement. 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 the Interim Certification.
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 and the Certificate Insurer 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 (such determination to be made without regard to the Class II-A
Policy) 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.

                                      -48-
<PAGE>

         (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
and the Certificate Insurer, the Mortgage Files and will execute and deliver or
cause to be executed and delivered to the Seller, the Master Servicer and the
Certificate Insurer and, if reviewed by the Custodian, the Trustee, a Final
Certification substantially in the form of Exhibit Three to the Custodial
Agreement. 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 and the Certificate Insurer. 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 and the Certificate Insurer 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 (such determination to be made without regard to the Class II-A
Policy) 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. Notwithstanding anything to the contrary, the
Trustee shall have no responsibility with respect to the custody or review of
Mortgage Files held by the Custodian pursuant to the Custodial Agreement. The
Trustee shall have no liability for the failure of the Custodian to perform its
obligations under the Custodial Agreement.

         (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 Protected Account and shall provide written notice to the Trustee and the
Certificate Insurer detailing the components of the Purchase Price, signed by a
Servicing Officer. Upon deposit of the Purchase Price in the Protected 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 Protected Account was made. The Trustee shall
promptly notify the Rating Agencies and the Certificate Insurer of such
repurchase.

                                      -49-
<PAGE>

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 and the
Certificate Insurer or to the Trustee on their behalf.

         (d) The Seller shall deliver to the Trustee or the Custodian on its
behalf, 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.

         Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE MASTER
SERVICER AND THE SELLER.

         (a) The Master Servicer hereby represents and warrants to the
Depositor, the Trustee and the Certificate Insurer 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 and any other
         Transaction Documents to which it is a party in accordance with the
         terms hereof or thereof.

                  (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
         any other Transaction Documents to which it is a party and has duly
         authorized by all necessary corporate action on its part the execution,
         delivery and performance of this Agreement and any other Transaction
         Documents to which it is a party; and this Agreement and any other
         Transaction Documents to which it is a party, assuming the due
         authorization, execution and delivery hereof by the other parties
         hereto or thereto, as applicable, 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 and any
         other Transaction Documents to which it is a party by it, the servicing
         of the Mortgage Loans by it under this Agreement, the consummation of
         any other of the transactions contemplated by this Agreement and any
         other Transaction Documents to which it is a party , and the
         fulfillment of or compliance with the terms hereof and thereof are in
         its ordinary course of business and will not (A) result in a breach of
         any term or provision of its charter or by-laws or (B)

                                      -50-
<PAGE>

         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 it is a party or by which it may be bound, or (C)
         constitute a 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 and any other Transaction Documents to which it is a party.

                  (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.

                  (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 and any other
         Transaction Documents to which it is a party or its ability to service
         the Mortgage Loans or to perform any of its other obligations under
         this Agreement and any other Transaction Documents to which it is a
         party in accordance with the terms hereof or thereof.

                  (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 and any other
         Transaction Documents to which it is a party or the consummation of the
         transactions contemplated hereby or thereby, 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
Trustee and the Certificate Insurer 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 and any other Transaction Documents to which it is a
         party in accordance with the terms hereof or thereof.

                  (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 any other Transaction Documents to which it is a party
         and has duly authorized by all necessary corporate action on the part
         of the Seller the execution, delivery and performance of this Agreement
         and any other Transaction

                                      -51-
<PAGE>

         Documents to which it is a party; and this Agreement and any other
         Transaction Documents to which it is a party, assuming the due
         authorization, execution and delivery hereof by the other parties
         hereto or thereto, as applicable, 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 and any
         other Transaction Documents to which it is a party 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 any other Transaction Documents to which it is a party,
         and the fulfillment of or compliance with the terms hereof and thereof
         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) conflict with, result in a breach,
         violation or acceleration of, or result in a default under, the terms
         of any other material agreement or instrument to which the Seller is a
         party or by which it may be bound, or (C) constitute a 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
         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 and any other Transaction Documents to which it is
         a party.

                  (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 and any other Transaction Documents to which it is a party or
         the ability of the Seller to sell the Mortgage Loans or to perform any
         of its other obligations under this Agreement and any other Transaction
         Documents to which it is a party in accordance with the terms hereof or
         thereof.

                  (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 and any other Transaction Documents to which it is a
         party or the consummation of the transactions contemplated hereby or
         thereby, or if any such consent, approval, authorization or order is
         required, the Seller has obtained the same.

                                      -52-
<PAGE>

                  (vii) With respect to each Mortgage Loan as of the Closing
         Date, the Seller hereby remakes and restates each of the
         representations and warranties set forth in Section 7 of the Mortgage
         Loan Purchase Agreement to the Depositor, the Certificate Insurer and
         the Trustee to the same extent as if fully set forth herein.

         (c) Upon discovery by any of the parties hereto or the Certificate
Insurer of a breach of a representation or warranty set forth in the Mortgage
Loan Purchase Agreement with respect to the Mortgage Loans that materially and
adversely affects the interests of the Certificateholders or the Certificate
Insurer in any Mortgage Loan (such determination to be made without regard to
the Class II-A Policy), the party discovering such breach shall give prompt
written notice thereof to the other parties and the Certificate Insurer. Any
breach of a representation or warranty contained in clauses (hh) through (mm) of
Section 7 of the Mortgage Loan Purchase Agreement in respect of a Group II Loan,
shall be deemed to materially adversely affect the interests of the
Certificateholders and the Certificate Insurer. The Seller hereby covenants with
respect to the representations and warranties set forth in the Mortgage Loan
Purchase Agreement with respect to the Mortgage Loans, 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
(such determination to be made without regard to the Class II-A Policy) or the
Certificate Insurer 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 and the Certificate Insurer 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 Trustee shall give prompt written notice to the parties hereto and
the Certificate Insurer of the Seller's failure to cure such breach as set forth
in the preceding sentence. 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 Master Servicer 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 Master Servicer whether it intends either to
repurchase, or to substitute for, the Mortgage Loan affected by such breach.
With respect to the representations and warranties with respect to the Mortgage
Loans 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 Trustee, the
Custodian or the Certificate Insurer 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 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 or the Custodian on its behalf for the benefit of
the Certificateholders and the Certificate Insurer 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

                                      -53-
<PAGE>

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 Master Servicer shall amend the
Mortgage Loan Schedule for the benefit of the Certificateholders and the
Certificate Insurer to reflect the removal of such Deleted Mortgage Loan and the
substitution of the Replacement Mortgage Loan or Loans and the Master Servicer
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 7 of the Mortgage Loan Purchase Agreement with respect to such Mortgage
Loan. Upon any such substitution and the deposit into the Protected 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 Protected 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 Protected Account, 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 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, 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

                                      -54-
<PAGE>

is continuing shall constitute the sole remedies against the Seller respecting
such breach available to the Certificateholders, the Depositor or the Trustee.

         (d) The representations and warranties set forth in this 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
and the Certificate Insurer.

         Section 2.04 REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR.

         The Depositor hereby represents and warrants to the Master Servicer,
the Trustee and the Certificate Insurer 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
         and any other Transaction Document to which it is a party.

                  (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 any other Transaction
         Document to which it is a party and has duly authorized, by all
         necessary corporate action on its part, the execution, delivery and
         performance of this Agreement and any other Transaction Document to
         which it is a party; and this Agreement and any other Transaction
         Document to which it is a party, assuming the due authorization,
         execution and delivery hereof and thereof by the other parties hereto
         or thereto, 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 and any
         other Transaction Document to which it is a party by the Depositor, the
         consummation of the transactions contemplated by this Agreement and any
         other Transaction Document to which it is a party, and the fulfillment
         of or compliance with the terms hereof and thereof 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) 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 Depositor is a party or
         by which it may be bound or (C) constitute a 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, 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

                                      -55-
<PAGE>

         or meet any of its obligations under this Agreement and any other
         Transaction Document to which it is a party.

                  (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 and any other Transaction Document to
         which it is a party or the ability of the Depositor to perform its
         obligations under this Agreement and any other Transaction Document to
         which it is a party in accordance with the terms hereof or thereof.

                  (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 and any other Transaction Document to which it is
         a party or the consummation of the transactions contemplated hereby or
         thereby, 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 and the
Certificate Insurer 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 this Section 2.04 shall survive delivery of the Mortgage Files to the
Trustee or the Custodian for the benefit of the Certificateholders and the
Certificate Insurer. Upon discovery by the Depositor, the Trustee or the
Certificate Insurer of a breach of such representations and warranties, the
party discovering such breach shall give prompt written notice to the others, to
each Rating Agency and to the Certificate Insurer.

         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 and the Certificate
Insurer an Opinion of Counsel, addressed to the Trustee and the Certificate
Insurer, to the effect that such repurchase or substitution would not (i) result
in the imposition of the tax on "prohibited transactions" of REMIC I or REMIC II
or contributions after the Closing Date, as defined in sections 860F(a)(2) and
860G(d) of the Code, respectively or (ii) cause either REMIC I or REMIC II 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 and the Certificate Insurer 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.

                                      -56-
<PAGE>

         (b) Upon discovery by the Depositor, the Seller, the Certificate
Insurer or the Master Servicer that any Mortgage Loan does not constitute a
"qualified mortgage" within the meaning of section 860G(a)(3) of the Code, the
party discovering such fact shall promptly (and in any event within 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
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 in accordance with 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 in accordance with
Section 2.03.

         Section 2.06 COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES.

         (a) 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 the Certificate Insurer and to perform the duties set forth
in this Agreement in accordance with its terms.

         (b) The Seller, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Seller in and
to the REMIC I Regular Interests, and the other assets of REMIC II for the
benefit of the holders of the REMIC II Certificates. The Trustee acknowledges
receipt of the REMIC I Regular Interests (which are uncertificated) and the
other assets of REMIC II and declares that it holds and will hold the same in
trust for the exclusive use and benefit of the holders of the REMIC III
Certificates.

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                                   ARTICLE III

               ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

         Section 3.01 THE MASTER SERVICER TO ACT AS MASTER SERVICER.

         The Master Servicer shall service and administer the 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 Master Servicer 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, the Trustee and the Certificate Insurer, 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 Mortgage Loan; provided that the Master
Servicer shall take no action that is inconsistent with or prejudices the
interests of the Trust Fund, the Certificate Insurer or the Certificateholders
in any Mortgage Loan or the rights and interests of the Depositor, the Trustee
or the Certificate Insurer under this Agreement and any other Transaction
Document to which it is a party.

         Without limiting the generality of the foregoing, the Master Servicer,
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 Master Servicer 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 Mortgage Loans, and with respect to
the Mortgaged Properties held for the benefit of the Certificateholders and the
Certificate Insurer. The Master Servicer 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 Master Servicer
to service and administer the Mortgage Loans. Upon receipt of such documents,
the Depositor and/or the Trustee shall execute such documents and deliver them
to the Master Servicer.

         In accordance with the standards of the first paragraph of this Section
3.01, the Master Servicer shall advance or cause to be advanced funds as
necessary for the purpose of effecting the payment of taxes and assessments on
the Mortgaged Properties, which advances shall be reimbursable in the first
instance from related collections from the Mortgagors pursuant to Section 5.03,
and further as provided in Section 5.02. All costs incurred by the Master
Servicer, if any, in effecting the timely payments of taxes and assessments on
the Mortgaged Properties and related insurance premiums shall not, for the
purpose of calculating monthly distributions to the

                                      -58-
<PAGE>

Certificateholders, be added to the Stated Principal Balance under the related
Mortgage Loans, notwithstanding that the terms of such Mortgage Loans so permit.

         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 Master Servicer shall to the extent that it has knowledge of such
conveyance, enforce any due-on-sale clause contained in any Mortgage Note or
Mortgage, to the extent permitted under applicable law and governmental
regulations, but only to the extent that such enforcement will not adversely
affect or jeopardize coverage under any Required Insurance Policy.
Notwithstanding the foregoing, the Master Servicer is not required to exercise
such rights with respect to a Mortgage Loan if the Person to whom the related
Mortgaged Property has been conveyed or is proposed to be conveyed satisfies the
terms and conditions contained in the Mortgage Note and Mortgage related thereto
and the consent of the mortgagee under such Mortgage Note or Mortgage is not
otherwise so required under such Mortgage Note or Mortgage as a condition to
such transfer. In the event that the Master Servicer is prohibited by law from
enforcing any such due-on-sale clause, or if coverage under any Required
Insurance Policy would be adversely affected, or if nonenforcement is otherwise
permitted hereunder, the Master Servicer is authorized, subject to Section
3.02(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 Master Servicer enters such agreement) by the applicable Required
Insurance Policies. The Master Servicer, 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 Master Servicer shall not be deemed to be in
default under this Section 3.02(a) by reason of any transfer or assumption that
the Master Servicer reasonably believes it is restricted by law from preventing.

         (b) Subject to the Master Servicer'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 Mortgage Loan, the Master Servicer shall
prepare and deliver or cause to be prepared and delivered to the Trustee for
signature and shall direct, in writing, the Trustee to execute the assumption
agreement with the Person to whom the Mortgaged Property is to be conveyed and
such modification agreement or supplement to the Mortgage Note or Mortgage or
other instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
(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 Master

                                      -59-
<PAGE>

Servicer in accordance with its servicing standards as then in effect. The
Master Servicer shall notify the Trustee that any such substitution or
assumption agreement has been completed by forwarding to the Trustee the
original of such substitution or assumption agreement, which in the case of the
original shall be added to the related Mortgage File and shall, for all
purposes, be considered a part of such Mortgage File to the same extent as all
other documents and instruments constituting a part thereof. Any fee collected
by the Master Servicer for entering into an assumption or substitution of
liability agreement will be retained by the Master Servicer as additional
servicing compensation.

         Section 3.03 SUBSERVICERS.

         The Master Servicer 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 Master Servicer of a
subservicer shall not release the Master Servicer from any of its obligations
hereunder and the Master Servicer shall remain responsible hereunder for all
acts and omissions of each subservicer as fully as if such acts and omissions
were those of the Master Servicer. The Master Servicer 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 Master Servicer hereunder.

         At the cost and expense of the Master Servicer, without any right of
reimbursement from its Protected Account, the Master Servicer 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 Master Servicer, at the Master Servicer's option, from electing to
service the related Mortgage Loans itself. In the event that the Master
Servicer's responsibilities and duties under this Agreement are terminated
pursuant to Section 8.03, the Master Servicer shall at its own cost and expense
terminate the rights and responsibilities of each subservicer effective as of
the date of termination of the Master Servicer. The Master Servicer shall pay
all fees, expenses or penalties necessary in order to terminate the rights and
responsibilities of each subservicer from the Master Servicer's own funds
without reimbursement from the Trust Fund.

         Notwithstanding the foregoing, the Master Servicer 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 Mortgage Loans. The Master Servicer shall be entitled to enter
into an agreement with a subservicer for indemnification of the Master Servicer
by the subservicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.

         Any subservicing agreement and any other transactions or services
relating to the Mortgage Loans involving a subservicer shall be deemed to be
between such subservicer and the Master Servicer alone, and the Trustee shall
not have any obligations, duties or liabilities with respect to such subservicer
including any obligation, duty or liability of the Trustee to pay such
subservicer's fees and expenses. Each subservicing agreement shall provide that
such agreement may be assumed or terminated without cause or penalty by the
Trustee or other Successor Master Servicer in the event the Master Servicer is
terminated in accordance with this Agreement. For purposes of remittances to the
Trustee pursuant to this Agreement, the Master Servicer shall be deemed to have
received a payment on a Mortgage Loan when a subservicer has received such
payment.

                                      -60-
<PAGE>

         Section 3.04 DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF THE MASTER
                      SERVICER TO BE HELD FOR TRUSTEE.

         Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee or the Custodian on behalf of the Trustee
as required by this Agreement all documents and instruments in respect of a
Mortgage Loan coming into the possession of the Master Servicer from time to
time and shall account fully to the Trustee for any funds received by the Master
Servicer or that otherwise are collected by the Master Servicer 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
Master Servicer in respect of any Mortgage Loans, whether from the collection of
principal and interest payments or from Liquidation Proceeds, including but not
limited to, any funds on deposit in the Protected Account, shall be held by the
Master Servicer for and on behalf of the Trustee and shall be and remain the
sole and exclusive property of the Trustee, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Protected 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 and the Certificate Insurer, 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, a Mortgage Loan, except,
however, that the Master Servicer shall be entitled to set off against and
deduct from any such funds any amounts that are properly due and payable to the
Master Servicer under this Agreement.

         Section 3.05 MAINTENANCE OF HAZARD INSURANCE.

         The Master Servicer shall cause to be maintained, for each 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 Master Servicer shall also cause flood insurance
to be maintained on property acquired upon foreclosure or deed in lieu of
foreclosure of any Mortgage Loan, to the extent described below. Pursuant to
Section 4.01, any amounts collected by the Master Servicer 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 Master Servicer's normal servicing
procedures) shall be deposited in the Protected Account. Any cost incurred by
the Master Servicer in maintaining any such insurance shall not, for the purpose
of calculating monthly distributions to the Certificateholders or remittances to
the Trustee for their benefit, be added to the principal balance of the Mortgage
Loan, notwithstanding that the terms of the Mortgage Loan so permit. Such costs
shall be recoverable by the Master Servicer out of late payments by the related
Mortgagor or out of Liquidation Proceeds to the extent permitted by Section
4.02. 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 Mortgage Loan in a federally

                                      -61-
<PAGE>

designated special flood hazard area and such area is participating in the
national flood insurance program, the Master Servicer 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 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 Master Servicer 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 Master Servicer 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 the amount not otherwise payable under the blanket policy
because of such deductible clause. Such deposit shall be from the Master
Servicer's own funds without reimbursement therefor. In connection with its
activities as administrator and servicer of the Mortgage Loans, the Master
Servicer agrees to present, on behalf of itself, the Depositor and the Trustee
for the benefit of the Certificateholders and the Certificate Insurer, claims
under any such blanket policy.

         Section 3.06 PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.

         The Master Servicer shall prepare and present on behalf of the Trustee,
the Certificateholders and the Certificate Insurer 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
Master Servicer in respect of such Insurance Policies shall be promptly
deposited in the Protected 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 3.07 MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.

         (a) The Master Servicer 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 Master Servicer would have been covered
thereunder. The Master Servicer 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 Mortgage Loan.
The Master Servicer 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 Master Servicer agrees to present on behalf of the Trustee, the
Certificateholders and the Certificate Insurer, claims to the insurer under any
Primary Mortgage Insurance Policies and,

                                      -62-
<PAGE>

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 4.01, any amounts collected by the Master
Servicer under any Primary Mortgage Insurance Policies shall be deposited in the
Protected Account, subject to withdrawal pursuant to Section 4.02 hereof.

         Section 3.08 FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE.

         The Master Servicer 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 Mortgage Loans and who handle funds, money,
documents and papers relating to the Mortgage Loans. The fidelity bond and
errors and omissions insurance shall be in the form of the Mortgage Banker's
Blanket Bond and shall protect and insure the Master Servicer against losses,
including forgery, theft, embezzlement, fraud, errors and omissions and
negligent acts of such persons. Such fidelity bond shall also protect and insure
the Master Servicer against losses in connection with the failure to maintain
any insurance policies required pursuant to this Agreement and the release or
satisfaction of a Mortgage Loan 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 Master
Servicer from its duties and obligations as set forth in this Agreement. The
minimum coverage under any such bond and insurance policy shall be at least
equal to the corresponding amounts required by Accepted Servicing Practices. The
Master Servicer 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 Trustee. The Master Servicer shall notify 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 and the Certificate Insurer 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 Master Servicer shall use reasonable efforts 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. In
connection with such foreclosure or other conversion, the Master Servicer 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 Master Servicer shall not be required to expend its own funds in
connection with any foreclosure or towards the restoration of any property
unless it shall determine (i) that such restoration and/or foreclosure will
increase the proceeds of liquidation of the Mortgage Loan after reimbursement to
itself of such expenses and (ii) that such expenses will be recoverable to it
through Insurance Proceeds, Liquidation Proceeds (respecting which it shall have
priority for purposes of withdrawals from the Protected Account pursuant to
Section 4.02). If the Master Servicer reasonably believes that Liquidation
Proceeds with respect to

                                      -63-
<PAGE>

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 Master Servicer will give notice of any such charge-off to
the Trustee and the Certificate Insurer. The Master Servicer shall be
responsible for all other costs and expenses incurred by it in any such
proceedings; provided that 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 4.02.
If the Master Servicer has knowledge that a Mortgaged Property that the Master
Servicer 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 Master Servicer, the Master Servicer will,
prior to acquiring the Mortgaged Property, consider such risks and only take
action in accordance with its established environmental review procedures.

         With respect to any REO Property, the deed or certificate of sale shall
be taken in the name of the Trustee for the benefit of the Certificateholders
and the Certificate Insurer (or the Trustee's nominee on behalf of the
Certificateholders and the Certificate Insurer). The Trustee's name shall be
placed on the title to such REO Property solely as the Trustee hereunder and not
in its individual capacity. The Master Servicer shall ensure that the title to
such REO Property references this Agreement and the Trustee's capacity
hereunder. Pursuant to its efforts to sell such REO Property, the Master
Servicer shall either itself or through an agent selected by the Master Servicer
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 and the Certificate Insurer, rent the same, or any part
thereof, as the Master Servicer deems to be in the best interest of the Master
Servicer and the Certificateholders and the Certificate Insurer for the period
prior to the sale of such REO Property. The Master Servicer shall prepare for
and deliver to the Trustee a statement with respect to each REO Property that
has been rented showing the aggregate rental income received and all expenses
incurred in connection with the management and maintenance of such REO Property
at such times as is necessary to enable the Trustee to comply with the reporting
requirements of the REMIC Provisions. The net monthly rental income, if any,
from such REO Property shall be deposited in the Protected Account no later than
the close of business on each Determination Date. The Master Servicer 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 a
Mortgage Loan, the Master Servicer 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 and the Certificate Insurer shall have been supplied
with an Opinion of Counsel addressed to the Trustee and the Certificate Insurer
(such opinion not to be an expense of the Trustee or the Certificate Insurer) 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 or REMIC II as defined in section 860F
of the Code or cause either REMIC I or REMIC II 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

                                      -64-
<PAGE>

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 either
REMIC I or REMIC II to the imposition of any federal, state or local income
taxes on the income earned from such Mortgaged Property under section 860G(c) of
the Code or otherwise, unless the Master Servicer has agreed to indemnify and
hold harmless the Trust Fund with respect to the imposition of any such taxes.

         The decision of the Master Servicer to foreclose on a defaulted
Mortgage Loan shall be subject to a determination by the Master Servicer that
the proceeds of such foreclosure would exceed the costs and expenses of bringing
such a proceeding. The income earned from the management of any Mortgaged
Properties acquired through foreclosure or other judicial proceeding, net of
reimbursement to the Master Servicer for expenses incurred (including any
property or other taxes) in connection with such management and net of
unreimbursed 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 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. 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 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 Master Servicer as provided above, shall be deposited in
the Protected Account 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 Master Servicer 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 Master Servicer for any related unreimbursed Servicing Advances
and Servicing Fees, pursuant to Section 4.02 or this Section 3.09; second, to
reimburse the Master Servicer for any unreimbursed Advances, pursuant to Section
4.02 or this Section 3.09; third, to accrued and unpaid interest (to the extent
no Advance has been made for such amount) on the 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 Master Servicer shall determine the
respective aggregate amounts of Excess Liquidation Proceeds and Realized Losses,
if any, for the related Prepayment Period.

                                      -65-
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         (c) The Master Servicer has no intent to foreclose on any Mortgage Loan
based on the delinquency characteristics as of the Closing Date; provided, that
the foregoing does not prevent the Master Servicer from initiating foreclosure
proceedings on any date hereafter if the facts and circumstances of such
Mortgage Loans including delinquency characteristics in the Master Servicer's
discretion so warrant such action.

         Section 3.10 SERVICING COMPENSATION.

         As compensation for its activities hereunder, the Master Servicer shall
be entitled to retain or withdraw from the Protected Account out of each payment
of interest on a 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 shall be retained by the Master Servicer to the extent
not required to be deposited in the Protected Account pursuant to Section 4.02.
The Master Servicer 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
4.02.

         Section 3.11 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 and the Certificate Insurer. The Master Servicer 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 Master Servicer shall protect and conserve such REO Property in the manner
and to the extent required herein, in accordance with the REMIC Provisions.

         (b) The Master Servicer shall deposit all funds collected and received
in connection with the operation of any REO Property into the Protected Account.

         (c) The Master Servicer, 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.

                                      -66-
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         Section 3.12 LIQUIDATION REPORTS.

         Upon the foreclosure of any Mortgaged Property or the acquisition
thereof by the Trust Fund pursuant to a deed-in-lieu of foreclosure, the Master
Servicer shall submit a liquidation report to the Trustee and Certificate
Insurer containing such information as shall be mutually acceptable to the
Master Servicer and the Trustee with respect to such Mortgaged Property.

         Section 3.13 ANNUAL CERTIFICATE AS TO COMPLIANCE.

         (a) The Master Servicer will deliver to the Trustee, the Rating
Agencies and the Certificate Insurer 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 Master Servicer during the preceding calendar year or portion thereof and of
its performance under this Agreement has been made under such officer's
supervision, and (ii) to the best of such officer's knowledge, based on such
review, the Master Servicer has fulfilled all of its obligations under this
Agreement in all material respects throughout such year or portion thereof, 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 except for such defaults as such officer in its good faith judgment
believe to be immaterial.

         (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 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 Master Servicer 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 Trustee, the Rating Agencies
and the Certificate Insurer to the effect that, with respect to the preceding
calendar year, such firm has examined certain documents and records relating to
the Master Servicer's servicing of mortgage loans of the same type as the
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 Master Servicer'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 and (iii) such exceptions
that the Uniform Single Attestation Program for Mortgage Bankers 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 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).

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         Section 3.15 BOOKS AND RECORDS.

         The Master Servicer shall be responsible for maintaining, and shall
maintain, a complete set of books and records for the Mortgage Loans which shall
be appropriately identified in the Master Servicer's computer system to clearly
reflect the ownership of the Mortgage Loans by the Trust. In particular, the
Master Servicer shall maintain in its possession, available for inspection by
the Trustee and the Certificate Insurer and shall deliver to the Trustee and the
Certificate Insurer 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 Master Servicer 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 Master Servicer complies with the requirements of Accepted Servicing
Practices.

         The Master Servicer shall maintain with respect to each Mortgage Loan
and shall make available for inspection by the Trustee and the Certificate
Insurer the related servicing file during the time such Mortgage Loan is subject
to this Agreement and thereafter in accordance with applicable law.

         Section 3.16 REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION.

         (a) The Depositor shall prepare or cause to be prepared the initial
current report on Form 8-K. Within 15 days after each Distribution Date, the
Trustee shall, in accordance with industry standards, file with the Commission
via the Electronic Data Gathering and Retrieval System ("EDGAR"), a Form 8-K
with a copy of the monthly statement to be furnished by the Trustee to the
Certificateholders for such Distribution Date as an exhibit thereto. Prior to
January 30 in each year, the Trustee shall, in accordance with industry
standards, 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 Trustee with a Master Servicer
Certification, together with a copy of the annual independent accountant's
servicing report and annual statement of compliance to be delivered by the
Master Servicer pursuant to Sections 3.13 and 3.14. 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 Trustee shall, subject to subsection (d)
below, file a Form 10-K, in substance conforming to industry standards, with
respect to the Trust Fund. Such Form 10-K shall include the Master Servicer
Certification and other documentation provided by the Master Servicer pursuant
to the second preceding sentence and the Form 10-K certification signed by the
Depositor. The Depositor hereby grants to the Trustee a limited power of
attorney to execute and file each such document on behalf of the Depositor. Such
power of attorney shall continue until either the earlier of (i) receipt by the
Trustee from the Depositor of written termination of such power of attorney and
(ii) the termination of the Trust Fund. The Depositor agrees to promptly furnish
to the Trustee, from time to time upon request, such further information,
reports and financial statements within its control related to this Agreement,
the Mortgage Loans as the Trustee reasonably deems appropriate to prepare and
file all necessary reports with the Commission. The Trustee shall have no
responsibility to file any items other than those specified in this Section
3.16; provided, however, the Trustee will cooperate with the Depositor in
connection with any additional filings with respect to the Trust Fund as the

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Depositor deems necessary under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Copies of all reports filed by the Trustee 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 Trustee in connection
with this Section 3.16 shall not be reimbursable from the Trust Fund.

         (b) In connection with the filing of any 10-K hereunder, the Trustee
shall sign a certification (in the form attached hereto as Exhibit M) for the
Depositor regarding certain aspects of the Form 10-K certification signed by the
Depositor, provided, however, that the Trustee shall not be required to
undertake an analysis of any accountant's report attached as an exhibit to the
Form 10-K.

         (c) (i) The Trustee shall indemnify and hold harmless the Depositor 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 Trustee's obligations under this Section 3.16 or the Trustee's
negligence, bad faith or willful misconduct in connection therewith.
                  (ii) The Depositor shall indemnify and hold harmless the
Trustee 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 obligations of the Depositor under this Section 3.16 or the
Depositor's negligence, bad faith or willful misconduct in connection therewith.

                  (iii) The Master Servicer shall indemnify and hold harmless
         the Trustee and the Depositor and their respective 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 obligations of the Master Servicer under this Section
         3.16 or the Master Servicer's negligence, bad faith or willful
         misconduct in connection therewith.

                  (iv) If the indemnification provided for herein is unavailable
         or insufficient to hold harmless the Depositor or the Trustee, as
         applicable, then the defaulting party, in connection with a breach of
         its respective obligations under this Section 3.16 or its respective
         negligence, bad faith or willful misconduct in connection therewith,
         agrees that it shall contribute to the amount paid or payable by the
         other parties 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 on the one
         hand and the Trustee on the other.

         (d) Nothing shall be construed from the foregoing subsections (a), (b)
and (c) to require the Trustee or any officer, director or Affiliate thereof to
sign any Form 10-K or any certification contained therein. Furthermore, the
inability of the Trustee to file a Form 10-K as a result of the lack of required
information as set forth in Section 3.16(a) or required signatures on such Form
10-K or

                                      -69-
<PAGE>

any certification contained therein shall not be regarded as a breach by the
Trustee of any obligation under this Agreement.

         (e) Notwithstanding the provisions of Section 11.01, this Section 3.16
may be amended without the consent of the Certificateholders or the Certificate
Insurer.

         Section 3.17 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 3.18 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 Scheduled 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 Protected 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 Protected 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.

         Section 3.19 OBLIGATIONS OF THE MASTER SERVICER IN RESPECT OF MORTGAGE
                      RATES AND SCHEDULED 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, Scheduled Payments or Stated Principal Balances that were made
by the Master Servicer in a manner not consistent with the terms

                                      -70-
<PAGE>

of the related Mortgage Note and this Agreement, the Master Servicer, upon
discovery or receipt of notice thereof, immediately shall deliver to the Trustee
for deposit in the Distribution Account from its own funds the amount of any
such shortfall and shall indemnify and hold harmless the Trust Fund, the
Trustee, the Depositor and any successor Master Servicer in respect of any such
liability. Such indemnities shall survive the termination or discharge of this
Agreement. Notwithstanding the foregoing, this Section 3.19 shall not limit the
ability of the Master Servicer to seek recovery of any such amounts from the
related Mortgagor under the terms of the related Mortgage Note and Mortgage, to
the extent permitted by applicable law.

         Section 3.20 RESERVE FUND.

         (a) On or before the Closing Date, the Trustee shall establish a
Reserve Fund on behalf of the Holders of the Class I-A Certificates and Class M
Certificates. The Reserve Fund must be an Eligible Account. The Reserve Fund
shall be entitled "Reserve Fund, LaSalle Bank National Association as Trustee
for the benefit of holders of Bear Stearns Asset Backed Securities, Inc.,
Asset-Backed Certificates, Series 2003-HE1". The Trustee shall demand payment of
all money payable by Bear Stearns Financial Products Inc. (the "Counterparty")
under the Yield Maintenance Agreements. The Trustee shall deposit in the Reserve
Fund all payments received from the Counterparty pursuant to the Yield
Maintenance Agreements. On each Distribution Date the Trustee shall remit
amounts received from the Counterparty to the Holders of the Class I-A
Certificates, Class M Certificates and Class CE Certificates in the manner
provided in clause FIRST 4. of Section 5.04(a) hereof. In addition, on each
Distribution Date as to which there is a Basis Risk Shortfall Carry Forward
Amount payable to any Class of Certificates, the Trustee shall deposit the
amounts distributable pursuant to clauses FIFTH and SEVENTH of Section 5.04(a)
into the Reserve Fund and the Trustee has been directed by the Class CE
Certificateholder to distribute such amounts to the Holders of the Offered
Certificates in the amounts and priorities set forth in clauses FIFTH and
SEVENTH of Section 5.04(a).

         (b) The 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 Reserve Fund. The Class CE Certificateholder shall be the
beneficial owner of the Reserve Fund, subject to the power of the Trustee to
transfer amounts under Section 5.04. Amounts in the Reserve Fund shall, at the
direction of the Class CE 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 Class CE 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 Reserve Fund shall be taxable to the Class
CE Certificateholder. Any losses on such investments shall be deposited in the
Reserve Fund by the Class CE Certificateholder out of its own funds immediately
as realized.

         (c) For federal tax return and information reporting, the right of the
holders of the Offered Certificates to receive payments from the Reserve Fund in
respect of any Basis Risk Shortfall Carry Forward Amount shall be assigned a
value of zero.

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<PAGE>

         Section 3.21 ADVANCING FACILITY.

         (a) The Master Servicer and/or the Trustee on behalf of the Trust Fund,
in either case, with the consent of the Master Servicer in the case of the
Trustee and, in each case, with the consent of the Certificate Insurer (which
consent shall not be unreasonably withheld) and notice to the Rating Agencies,
is hereby authorized to enter into a facility (the "Advancing Facility") with
any Person which provides that such Person (an "Advancing Person") may fund
Advances and/or Servicing Advances to the Trust Fund under this Agreement,
although no such facility shall reduce or otherwise affect the Master Servicer's
obligation to fund such Advances and/or Servicing Advances. If the Master
Servicer enters into such an Advancing Facility pursuant to this Section 3.21,
upon reasonable request of the Advancing Person, the Trustee shall execute a
letter of acknowledgment, confirming its receipt of notice of the existence of
such Advancing Facility. To the extent that an Advancing Person funds any
Advance or any Servicing Advance and provides the Trustee with notice
acknowledged by the Servicer that such Advancing Person is entitled to
reimbursement, such Advancing Person shall be entitled to receive reimbursement
pursuant to this Agreement for such amount to the extent provided in Section
3.21(b). Such notice from the Advancing Person must specify the amount of the
reimbursement, the Section of this Agreement that permits the applicable Advance
or Servicing Advance to be reimbursed and the section(s) of the Advancing
Facility that entitle the Advancing Person to request reimbursement from the
Trustee, rather than the Master Servicer, and include the Master Servicer's
acknowledgment thereto or proof of an Event of Default under the Advancing
Facility. The Trustee shall have no duty or liability with respect to any
calculation of any reimbursement to be paid to an Advancing Person and shall be
entitled to rely without independent investigation on the Advancing Person's
notice provided pursuant to this Section 3.21. An Advancing Person whose
obligations hereunder are limited to the funding of Advances and/or Servicing
Advances shall not be required to meet the qualifications of a Master Servicer
or a subservicer pursuant to Section 8.02 hereof and will not be deemed to be a
subservicer under this Agreement.

         (b) If an Advancing Facility is entered into, then the Master Servicer
shall not be permitted to reimburse itself therefor under Section 4.02(a)(ii),
Section 4.02(a)(iii) and Section 4.02(a)(v) prior to the remittance to the Trust
Fund, but instead the Master Servicer shall include such amounts in the
applicable remittance to the Trustee made pursuant to Section 4.02. The Trustee
is hereby authorized to pay to the Advancing Person, reimbursements for Advances
and Servicing Advances from the Distribution Account to the same extent the
Master Servicer would have been permitted to reimburse itself for such Advances
and/or Servicing Advances in accordance with Section 4.02(a)(ii), Section
4.02(a)(iii) or Section 4.02(a)(v), as the case may be, had the Master Servicer
itself funded such Advance or Servicing Advance. The Trustee is hereby
authorized to pay directly to the Advancing Person such portion of the Servicing
Fee as the parties to any advancing facility agree.

         (c) All Advances and Servicing Advances made pursuant to the terms of
this Agreement shall be deemed made and shall be reimbursed on a "first in-first
out" (FIFO) basis.

         (d) Any amendment to this Section 3.21 or to any other provision of
this Agreement that may be necessary or appropriate to effect the terms of an
Advancing Facility as described generally in this Section 3.21, including
amendments to add provisions relating to a successor master servicer,

                                      -72-
<PAGE>

may be entered into by the Trustee and the Master Servicer without the consent
of any Certificateholder but with the consent of the Certificate Insurer,
notwithstanding anything to the contrary in this Agreement.

                                   ARTICLE IV

                                    ACCOUNTS

         Section 4.01 COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT.

         (a) The Master Servicer 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 Master Servicer 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
Master Servicer 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 5.01. The Master
Servicer shall not be required to institute or join in litigation with respect
to collection of any payment (whether under a Mortgage, Mortgage Note or
otherwise or against any public or governmental authority with respect to a
taking or condemnation) if it reasonably believes that enforcing the provision
of the Mortgage or other instrument pursuant to which such payment is required
is prohibited by applicable law. In addition, if (x) a Mortgage Loan is in
default or default is imminent and (y) the Master Servicer delivers to the
Trustee and the Certificate Insurer a certification addressed to the Trustee and
the Certificate Insurer, 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 either REMIC I or REMIC II, the Master
Servicer 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 Master Servicer 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 Master Servicer for the benefit of the Trustee on
behalf of the Certificateholders and the Certificate Insurer and designated
"LaSalle Bank National Association, in trust for registered holders of Bear
Stearns Asset Backed Securities, Inc., Asset-Backed Certificates Series
2003-HE1". The Master Servicer 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 Mortgage Loans
subsequent to the Cut-off Date (other than in respect of principal and interest
due on the Mortgage Loans on or before the Cut- off Date) and the following
amounts required to be deposited hereunder:

                                      -73-
<PAGE>

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

                  (ii) all payments on account of interest on the Mortgage Loans
         net of the Servicing Fee permitted under Section 3.10 and LPMI Fees, if
         any;

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

                  (iv) any amount required to be deposited by the Master
         Servicer pursuant to Section 4.01(c) in connection with any losses on
         Permitted Investments;

                  (v) any amounts required to be deposited by the Master
         Servicer pursuant to Section 3.05;

                  (vi) any Prepayment Charges collected on the Mortgage Loans;
         and

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

         The foregoing requirements for remittance by the Master Servicer 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
Master Servicer. In the event that the Master Servicer shall remit any amount
not required to be remitted and not otherwise subject to withdrawal pursuant to
Section 4.02, 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 Master Servicer 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 and the Certificate Insurer until withdrawn in accordance
with Section 4.02.

         (c) The institution that maintains the Protected Account shall invest
the funds in the Protected Account, in the manner directed by the Master
Servicer, 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 and the Certificate Insurer. All income and
gain net of any losses realized from any such investment shall be for the
benefit of the Master Servicer as servicing compensation and shall be remitted
to it monthly as provided herein. The amount of any losses incurred in the
Protected Account in respect of any such investments shall be deposited by the
Master Servicer into the Protected Account, out of the Master Servicer's own
funds.

         (d) The Master Servicer shall give at least 30 days advance notice to
the Trustee, the Seller, each Rating Agency, the Certificate Insurer and the
Depositor of any proposed change of location of the Protected Account prior to
any change thereof.

                                      -74-
<PAGE>

         Section 4.02 PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.

         (a) The Master Servicer 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 Master Servicer), 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 Master Servicer for Advances made by it
         with respect to the Mortgage Loans, provided, however, that the Master
         Servicer'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 and Insurance
         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 Master Servicer for any previously made
         portion of a Servicing Advance or an Advance made by the Master
         Servicer that, in the good faith judgment of the Master Servicer, will
         not be ultimately recoverable by it from the related Mortgagor, any
         related Liquidation Proceeds, Insurance Proceeds or otherwise (a
         "Nonrecoverable Advance"), to the extent not reimbursed pursuant to
         clause (ii) or clause (v);

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

                  (v) to pay the Master Servicer any unpaid Servicing Fees and
         to reimburse it for any unreimbursed Servicing Advances, provided,
         however, that the Master Servicer'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,
         Insurance 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 3.18 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 Master Servicer
         pursuant to Section 7.04 of this Agreement;

                                      -75-
<PAGE>

                  (viii) to withdraw pursuant to Section 4.01 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 10.01 hereof.

         In addition, no later than 1:00 p.m. Eastern time on the Distribution
Account Deposit Date, the Master Servicer shall withdraw from the Protected
Account and remit to the Trustee the amount of Interest Funds for each Loan
Group (without taking into account any reduction in the amount of Interest Funds
attributable to the application of clause (c) of the definition thereof
contained in Article I of this Agreement) and Principal Funds for each Loan
Group collected, to the extent on deposit, and the Trustee shall deposit such
amount in the Distribution Account. In addition, on or before the Distribution
Account Deposit Date, the Master Servicer shall remit to the Trustee for deposit
in the Distribution Account any Advances or any payments of Compensating
Interest required to be made by the Master Servicer with respect to the Mortgage
Loans. Furthermore, on each Distribution Account Deposit Date, the Master
Servicer shall remit to the Trustee all Prepayment Charges collected by the
Master Servicer with respect to the Mortgage Loans during the related Prepayment
Period.

         The Master Servicer shall keep and maintain separate accounting, on a
Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any
withdrawal from the 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 Master Servicer 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 Master Servicer to be a
Nonrecoverable Advance and identifying the related Mortgage Loan(s), and their
respective portions of such Nonrecoverable Advance.

         Section 4.03 COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW
                      ACCOUNTS.

         With respect to each Mortgage Loan, to the extent required by the
related Mortgage Note, the Master Servicer 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 Master Servicer) for the
payment of taxes, assessments, hazard insurance premiums or comparable items for
the account of the Mortgagors. Nothing herein shall require the Master Servicer
to compel a Mortgagor to establish an Escrow Account in violation of applicable
law.

         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 Master Servicer out of related collections for any payments made with
respect to each 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 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

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termination of this Agreement in accordance with Section 10.01 thereof. The
Escrow Account shall not be a part of the Trust Fund.

         Section 4.04 DISTRIBUTION ACCOUNT.

         (a) The Trustee shall establish and maintain in the name of the
Trustee, for the benefit of the Certificateholders and the Certificate Insurer,
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 and the Certificate Insurer 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 invested in the name of the Trustee,
in such Permitted Investments, or deposited in demand deposits with such
depository institutions, as determined by the Trustee. All Permitted Investments
shall mature or be subject to redemption or withdrawal on or before, and shall
be held until, the next succeeding Distribution Date if the obligor for such
Permitted Investment is the Trustee or, if such obligor is any other Person, the
Business Day preceding such Distribution Date. 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 Trustee. The Trustee
shall be permitted to withdraw or 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 Trustee shall deposit
the amount of the loss in the Distribution Account not later than the applicable
Distribution Date on which the moneys so invested are required to be distributed
to the Certificateholders. 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 and the Certificate Insurer 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 4.05 PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION
                      ACCOUNT.

         (a) The Trustee will make or cause to be made such withdrawals or
transfers from the Distribution Account for the following purposes:

                  (i) to pay to itself the Trustee Fee;

                  (ii) to reimburse the Trustee for expenses, costs and
         liabilities incurred by or reimbursable to it pursuant to this
         Agreement;

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                  (iii) to pay investment income to the Trustee;

                  (iv) to remove amounts deposited in error; and

                  (v) to clear and terminate the Distribution Account pursuant
to Section 10.01.

         (b) On each Distribution Date, the Trustee shall distribute Interest
Funds and Principal Funds in the Distribution Account for each Loan Group to the
holders of the Certificates and the Certificate Insurer in accordance with
Section 5.04.

         Section 4.06 CLASS P CERTIFICATE ACCOUNT.

         (a) The Trustee shall establish and maintain in the name of the
Trustee, for the benefit of the Class P Certificateholders, the Class P
Certificate Account as a segregated trust account or accounts.

         (b) On the Closing Date, the Depositor will deposit, or cause to be
deposited in the Class P Certificate Account, an amount equal to $100. All
amounts deposited to the Class P Certificate Account shall be held by the
Trustee in the name of the Trustee in trust for the benefit of the Class P
Certificateholders in accordance with the terms and provisions of this
Agreement. The amount on deposit in the Class P Certificate Account shall be
held uninvested.

                                    ARTICLE V

                           DISTRIBUTIONS AND ADVANCES

         Section 5.01 ADVANCES.

         The Master Servicer shall, or shall cause the related subservicer
pursuant to the Subservicing Agreement to, make an Advance and deposit such
Advance in the Protected Account. Each such Advance shall be remitted to the
Distribution Account no later than 1:00 p.m. Eastern time on the Distribution
Account Deposit Date in immediately available funds. The Master Servicer shall
be obligated to make any such Advance only to the extent that such advance would
not be a Nonrecoverable Advance. If the Master 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 Master
Servicer shall deliver (i) to the Trustee for the benefit of the
Certificateholders and the Certificate Insurer funds constituting the remaining
portion of such Advance, if applicable, and (ii) to the Depositor, each Rating
Agency, the Certificate Insurer and the Trustee an Officer's Certificate setting
forth the basis for such determination. Subject to the Master Servicer's
recoverability determination, in the event that a subservicer fails to make a
required Advance, the Master Servicer shall be required to remit the amount of
such Advance to the Distribution Account.

         In lieu of making all or a portion of such Advance from its own funds,
the Master Servicer may (i) cause to be made an appropriate entry in its records
relating to the Protected Account that any Amount Held for Future Distributions
has been used by the Master Servicer in discharge of its

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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 Master Servicer by deposit in the
Distribution Account, no later than the close of business on the Business Day
immediately preceding the Distribution Date on which such funds are required to
be distributed pursuant to this Agreement.

         The Master Servicer 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 4.02. 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 5.01.

         Subject to and in accordance with the provisions of Article VIII
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 5.01.

         Section 5.02 COMPENSATING INTEREST PAYMENTS.

         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 Mortgage Loan, the Master Servicer shall, to the extent of the
Servicing Fee for such Distribution Date, deposit into the Distribution Account,
as a reduction of the Servicing Fee for such Distribution Date, no later than
the close of business on the Business Day immediately preceding such
Distribution Date, an amount equal to the Prepayment Interest Shortfall; and in
case of such deposit, the Master Servicer shall not be entitled to any recovery
or reimbursement from the Depositor, the Trustee, the Seller, the Trust Fund or
the Certificateholders.

         Section 5.03 REMIC DISTRIBUTIONS.

         On each Distribution Date the Trustee shall be deemed to have allocated
distributions to the REMIC I Regular Interests in accordance with Section 5.06
hereof.

         Section 5.04 DISTRIBUTIONS.

         (a) On each Distribution Date, an amount equal to the Interest Funds
and Principal Funds for each Loan Group for such Distribution Date shall be
withdrawn by the Trustee from the Distribution Account and distributed in the
following order of priority:

         FIRST, to pay the Certificate Insurer and any accrued and unpaid
interest on the Offered Certificates, in the following order of priority:

                  1. From Interest Funds in respect of:

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<PAGE>

                  (a) Loan Group I, to the Class I-A-1 Certificates and Class
                  I-A-2 Certificates, the Current Interest and any Interest
                  Carry Forward Amount for each such Class, on a pro rata basis
                  based on the entitlement of each such Class; and

                  (b) Loan Group II, first, to the Certificate Insurer, the
                  Certificate Insurer Premium Amount, second, to the Class II-A
                  Certificates, the Current Interest and any Interest Carry
                  Forward Amount for such Class, and third, to the Certificate
                  Insurer, with respect to any Reimbursement Amount in
                  connection with any draws relating to interest on the Class
                  II-A Policy;

                  2. From remaining Interest Funds in respect of:

                  (a) Loan Group I, first, to the Certificate Insurer, with
                  respect to any Reimbursement Amount in connection with any
                  draws relating to interest on the Class II-A Policy, and
                  second, to the Class II-A Certificates, the remaining Interest
                  Carry Forward Amount, if any, for such Class; and

                  (b) Loan Group II, to the Class I-A-1 Certificates and Class
                  I-A-2 Certificates, the remaining Interest Carry Forward
                  Amount, if any, for each such Class, on a pro rata basis based
                  on the entitlement of each such Class;

                  3. From remaining Interest Funds in respect of both Loan
                  Groups, to the Class M-1, Class M-2, Class M-3, Class M-4,
                  Class M-5 and Class M-6 Certificates, sequentially, in that
                  order, the Current Interest for each such Class;

                  4. From amounts received under the Yield Maintenance
                  Agreements, as follows:

                  (a) first, from amounts received under the related Yield
                  Maintenance Agreement, to the Class I-A Certificates pro rata
                  based on the amount of Basis Risk Shortfall Carryforward
                  Amount for such Classes of Certificates, and to the Class M-1,
                  Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6
                  Certificates, in that order, the sum of (i) any Basis Risk
                  Shortfall for such Distribution Date and (ii) any Basis Risk
                  Shortfall Carryforward Amount for such Distribution Date;

                  (b) second, from any remaining amounts received from the
                  non-related Yield Maintenance Agreement, to the Class I-A
                  Certificates pro rata based on the amount of Basis Risk
                  Shortfall Carryforward Amount for such Classes of
                  Certificates, and to the Class M-1, Class M-2, Class M-3,
                  Class M-4, Class M-5 and Class M-6 Certificates, in that
                  order, the sum of (i) any Basis Risk Shortfall for such
                  Distribution Date and (ii) any Basis Risk Shortfall
                  Carryforward Amount for such Distribution Date to the extent
                  not covered in clause (a) above; and

                  (c) third, any remaining amounts received under the Yield
                  Maintenance Agreements, to the Class CE Certificates.

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                  5. Any Excess Spread to the extent necessary to meet a level
         of overcollateralization equal to the Overcollateralization Target
         Amount will be the Extra Principal Distribution Amount and will be
         included as part of the Principal Distribution Amount; provided,
         however, any such Excess Spread that would otherwise be distributed to
         the Class II-A Certificates to pay the Extra Principal Distribution
         Amount for any Distribution Date will be used to pay the Certificate
         Insurer the Reimbursement Amount related to interest or principal draws
         on the Class II-A Policy, if any, prior to paying such Extra Principal
         Distribution Amount to the Class II-A Certificates; and

                  6. Any Remaining Excess Spread together with any
         Overcollateralization Release Amount will be applied as Excess Cashflow
         pursuant to clauses THIRD through NINTH below.

         On any Distribution Date, any Relief Act Interest Shortfalls and any
Prepayment Interest Shortfalls to the extent not covered by Compensating
Interest will be allocated as set forth in the definition of "Current Interest"
herein.

         SECOND, to pay as principal on the Offered Certificates entitled to
payments of principal, in the following order of priority:

                  (A) For each Distribution Date (i) prior to the Stepdown Date
         or (ii) on which a Trigger Event is in effect:

                  1. To the Class A Certificates, the Principal Distribution
         Amount for such Distribution Date to be distributed as follows:

                  (a) from the Group I Principal Distribution Amount for such
         Distribution Date, sequentially, to the Class I-A-1 Certificates and
         Class I-A-2 Certificates, in that order, in each case until the
         Certificate Principal Balance thereof is reduced to zero; and

                  (b) from the Group II Principal Distribution Amount for such
         Distribution Date, to the Class II-A Certificates, until the
         Certificate Principal Balance thereof is reduced to zero;

                  2. To the Class M-1 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero;

                  3. To the Class M-2 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero;

                  4. To the Class M-3 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero;

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<PAGE>

                  5. To the Class M-4 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero;

                  6. To the Class M-5 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero; and

                  7. To the Class M-6 Certificates, from any remaining Principal
         Funds in respect of both Loan Groups for such Distribution Date, the
         remaining Principal Distribution Amount until the Certificate Principal
         Balance thereof is reduced to zero.

         (B) For each Distribution Date on or after the Stepdown Date, so long
as a Trigger Event is not in effect:

                  1. To the Class A Certificates, the Principal Distribution
         Amount for such Distribution Date to be distributed as follows:

                  (a) from the Group I Principal Distribution Amount for such
         Distribution Date sequentially, to the Class I-A-1 Certificates and
         Class I-A-2 Certificates, in that order, the Class I-A Principal
         Distribution Amount for such Distribution Date, in each case until the
         Certificate Principal Balance thereof is reduced to zero; and

                  (b) from the Group II Principal Distribution Amount for such
         Distribution Date, to the Class II-A Certificates, the Class II-A
         Principal Distribution Amount for such Distribution Date, until the
         Certificate Principal Balance thereof is reduced to zero;

                  2. To the Class M-1 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-1
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero;

                  3. To the Class M-2 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-2
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero;

                  4. To the Class M-3 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-3
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero;

                  5. To the Class M-4 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-4
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero;

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<PAGE>

                  6. To the Class M-5 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-5
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero; and

                  7. To the Class M-6 Certificates, from any remaining Principal
         Distribution Amount in respect of both Loan Groups, the Class M-6
         Principal Distribution Amount, until the Certificate Principal Balance
         thereof is reduced to zero.

         (C) Notwithstanding the provisions of clauses SECOND (A) and (B) above,
if on any Distribution Date the Class A Certificates related to a Loan Group are
no longer outstanding, the pro rata portion of the Principal Distribution Amount
or the applicable Class A Principal Distribution Amount, as applicable,
otherwise allocable to such Class A Certificates will be allocated , first, to
the Certificate Insurer in respect of any Reimbursement Amounts related to
principal draws on the Class II-A Policy, if any, and then to the remaining
Class or Classes of Class A Certificates in the same order described above; and

         (D) Notwithstanding the provisions of clauses SECOND (A) and (B), if on
any Distribution Date the pro rata portion of the applicable Class A Principal
Distribution Amount allocated to a Class of Class A Certificates is insufficient
to pay to such Class A Certificates the principal to which they are entitled
under clause SECOND (B) (1), any Excess Cashflow will be allocated in an amount
equal to the lesser of the deficiency and the aggregate amount of such Excess
Cashflow, and if the pro rata portion of the applicable Class A Principal
Distribution Amount is insufficient for all Classes of Class A Certificates,
then pro rata based upon the respective amounts of such deficiencies.

         THIRD, from any remaining Excess Cashflow, to the Class A Certificates,
(a) any remaining Interest Carry Forward Amount for such classes, pro rata, in
accordance with the Interest Carry Forward Amount due with respect to each such
Class, to the extent not fully paid pursuant to subclauses FIRST 1. and 2. above
and (b) any Unpaid Realized Loss Amount for such Classes for such Distribution
Date, pro rata , in accordance with the Applied Realized Loss Amount allocated
to each such Class;

         FOURTH, from any remaining Excess Cashflow, sequentially to the Class
M-1, Class M-2, Class M-3, Class M-4, Class M-5 and Class M-6 Certificates, in
that order, an amount equal to the Interest Carry Forward Amount for each such
Class for such Distribution Date;

         FIFTH, from any remaining Excess Cashflow otherwise distributable to
the Class CE Certificates, to the Reserve Fund to pay to the Class I-A-1, Class
I-A-2 and Class II-A Certificates, any Basis Risk Shortfall Carry Forward Amount
for each such Class for such Distribution Date, on a pro rata basis, based on
the amount of the Basis Risk Shortfall Carry Forward Amount for each such Class,
and in the case of the Class I-A-1 Certificates, to the extent not covered by
the Yield Maintenance Agreements;

         SIXTH, from any such remaining Excess Cashflow, to pay the Certificate
Insurer any Reimbursement Amount to the extent not paid above;

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         SEVENTH, from any remaining Excess Cashflow otherwise distributable to
the Class CE Certificates, to the Reserve Fund to pay to the Class M-1, Class
M-2, Class M-3, Class M-4, Class M-5 and Class M-6 Certificates, sequentially in
that order, any Basis Risk Shortfall Carry Forward Amount for each such Class
for such Distribution Date, if any, in each case to the extent not covered by
the Yield Maintenance Agreements;

         EIGHTH, from any remaining Excess Cashflow, to the Class CE
Certificates, an amount equal to the Class CE Distribution Amount reduced by
amounts distributed in clauses FIFTH and SEVENTH above; and

         NINTH, any remaining amounts to each of the Class R-I Certificates and
Class R-II Certificates, based on the related REMIC in which such amounts
remain.

         On each Distribution Date, all amounts in respect of Prepayment Charges
shall be distributed to the Holders of the Class P Certificates, provided that
such distributions shall not be in reduction of the principal balance thereof.
On the Distribution Date immediately following the expiration of the latest
Prepayment Charge term as identified on the Mortgage Loan Schedule, any amount
on deposit in the Class P Certificate Account will be distributed to the Holders
of the Class P Certificates in reduction of the principal balance thereof.

         In addition, notwithstanding the foregoing, on any Distribution Date
after the Distribution Date on which the Certificate Principal Balance of a
Class of Offered Certificates has been reduced to zero, that Class of Offered
Certificates will be retired and will no longer be entitled to distributions,
including distributions in respect of Prepayment Interest Shortfalls or Basis
Risk Shortfalls.

         (b) Subject to Section 10.02 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 such Holder has so notified
the Trustee at least 5 Business Days prior to the related Record Date, 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 10.02 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.

         (c) 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 Trustee in electronic form (or by such other means as the Master
Servicer and the Trustee may agree from time to time) containing such data and
information, as agreed to by the Master Servicer and the Trustee such as to
permit the Trustee to prepare the Monthly Statement to Certificateholders and to
make the required distributions for the related Distribution Date.

         Section 5.04A  ALLOCATION OF REALIZED LOSSES.

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         (a) All Realized Losses on the Mortgage Loans allocated to any REMIC I
Regular Interest pursuant to Section 5.04A(b) on the Mortgage Loans shall be
allocated by the Trustee on each Distribution Date as follows: first, to Excess
Spread; second, to the Class CE Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; third, to the Class M-6 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero;
fourth, to the Class M-5 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; fifth, to the Class M-4 Certificates, until
the Certificate Principal Balance thereof has been reduced to zero; sixth, to
the Class M-3 Certificates, until the Certificate Principal Balance thereof has
been reduced to zero; seventh, to the Class M-2 Certificates, until the
Certificate Principal Balance thereof has been reduced to zero; eighth, to the
Class M-1 Certificates, until the Certificate Principal Balance thereof has been
reduced to zero; and ninth, to the Class A Certificates, on a pro rata basis,
until the Certificate Principal Balance of each such Class 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.

         (b) Any allocation of Realized Losses to a Class of Offered
Certificates 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 CE Certificates shall be made by reducing the amount otherwise
payable in respect thereof pursuant to clause SEVENTH Section 5.04(a). No
allocations of any Realized Losses shall be made to the Certificate Principal
Balance of the Class P Certificates.

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

         (c) (i) The REMIC I Marker Percentage of all Realized Losses on the
Mortgage Loans (without duplication of losses allocated pursuant to Section
1.02) 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 Accrued Interest payable to the REMIC I Regular
Interest AA and REMIC I Regular Interest ZZ up to an aggregate amount equal to
the REMIC I Interest Loss Allocation Amount, 98.00% and 2.00%, respectively;
second, to the Uncertificated Principal Balances of the REMIC I Regular Interest
AA and REMIC I Regular Interest ZZ up to an aggregate amount equal to the REMIC
I Principal Loss Allocation Amount, 98.00% and 2.00%, respectively; third, to
the Uncertificated Principal Balances of REMIC I Regular Interest AA, REMIC I
Regular Interest M-6 and REMIC I Regular Interest ZZ, 98.00%, 1.00% and 1.00%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest M-6 has been reduced to zero; fourth, to the Uncertificated Principal
Balances of REMIC I Regular Interest AA, REMIC I Regular Interest M-5 and REMIC
I Regular Interest ZZ, 98.00%, 1.00% and 1.00%, respectively, until the

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Uncertificated Principal Balance of REMIC I Regular Interest M-5 has been
reduced to zero; fifth, to the Uncertificated Principal Balances of REMIC I
Regular Interest AA, REMIC I Regular Interest M-4 and REMIC I Regular Interest
ZZ, 98.00%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest M-4 has been reduced to zero; sixth to the
Uncertificated Principal Balances of REMIC I Regular Interest AA, REMIC I
Regular Interest M-3 and REMIC I Regular Interest ZZ, 98.00%, 1.00%, and 1.00%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest M-3 has been reduced to zero; seventh to the Uncertificated Principal
Balances of REMIC I Regular Interest AA, REMIC I Regular Interest M-2 and REMIC
I Regular Interest ZZ, 98.00%, 1.00% and 1.00%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest M-2 has been
reduced to zero; eighth to the Uncertificated Principal Balances of REMIC I
Regular Interest AA, REMIC I Regular Interest M-1 and REMIC I Regular Interest
ZZ, 98.00%, 1.00% and 1.00%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest M-1 has been reduced to zero; ninth with
respect to any Realized Losses on the Mortgage Loans, to the Uncertificated
Principal Balance of REMIC I Regular Interest AA, 98.00%, to the Uncertificated
Principal Balances of REMIC I Regular Interests I-A-1, I-A-2 and II-A, 1.00% pro
rata, and to the Uncertificated Principal Balance of REMIC I Regular Interest
ZZ, 1.00%, until the Uncertificated Principal Balances of REMIC I Regular
Interests I-A-1, I-A-2 and II-A have been reduced to zero.

                  (ii) The REMIC I Sub WAC Allocation Percentage of all Realized
         Losses shall be applied after all distributions have been made on each
         Distribution Date first, so as to keep the Uncertificated Principal
         Balance of each REMIC I Regular Interest ending with the designation
         "B" equal to 0.01% of the aggregate Stated Principal Balance of the
         Mortgage Loans in the related Loan Group; second, to each REMIC I
         Regular Interest ending with the designation "A," so that the
         Uncertificated Principal Balance of each such REMIC I Regular Interest
         is equal to 0.01% of the excess of (x) the aggregate Stated Principal
         Balance of the Mortgage Loans in the related Loan Group over (y) the
         current Certificate Principal Balance of the Class A Certificates
         related to such Loan Group (except that if any such excess is a larger
         number than in the preceding distribution period, the least amount of
         Realized Losses shall be applied to such REMIC I Regular Interests such
         that the REMIC I Subordinated Balance Ratio is maintained); and third,
         any remaining Realized Losses shall be allocated to REMIC I Regular
         Interest XX.

         Section 5.05 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

         (a) Not later than each Distribution Date, the Trustee shall prepare
and make available to each Holder of Certificates, the Certificate Insurer, 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) the
         Extra Principal Distribution Amount (if any);

                  (ii) the amount of such distribution to Holders of each Class
         allocable to interest and the portion thereof, if any, provided by the
         Yield Maintenance Agreements;

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                  (iii) the Interest Carry Forward Amount and any Basis Risk
         Shortfall Carry Forward Amount for each Class of Certificates;

                  (iv) 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;

                  (v) the aggregate of the Stated Principal Balances of all of
         the Mortgage Loans for the following Distribution Date;

                  (vi) the related amount of the Servicing Fees paid to or
         retained by the Master Servicer for the related Due Period;

                  (vii) the Pass-Through Rate for each Class of Offered
         Certificates with respect to the current Accrual Period, and, if
         applicable, whether such Pass-Through Rate was limited by the
         applicable Net Rate Cap;

                  (viii) the amount of Advances included in the distribution on
         such Distribution Date;

                  (ix) the cumulative amount of Applied Realized Loss Amounts to
         date;

                  (x) 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;

                  (xi) 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;

                  (xii) 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;

                  (xiii) 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;

                                      -87-
<PAGE>

                  (xiv) the Realized Losses during the related Prepayment Period
         and the cumulative Realized Losses through the end of the preceding
         month;

                  (xv) whether a Trigger Event exists;

                  (xvi) the amount of the distribution made on such Distribution
         Date to the Holders of the Class P Certificates allocable to Prepayment
         Charges;

                  (xvii) the Certificate Insurer Premium Amount; and

                  (xviii) the Reimbursement Amount, separately indicating the
         amount related to (a) interest draws on the Class II-A Policy, (b)
         principal draws on the Class II-A Policy and (c) all other amounts
         representing such Reimbursement Amount.

         The Trustee 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 and the Certificate Insurer
via the Trustee's internet website. The Trustee's internet website shall
initially be located at "www.etrustee.net". Assistance in using the website can
be obtained by calling the Trustee's customer service desk at (312) 904-7053.
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 may change the way Monthly
Statements are distributed in order to make such distributions more convenient
or more accessible to the above parties.

         (b) The Trustee'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 Trustee
will make available a copy of each statement provided pursuant to this Section
5.05 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, a statement
containing the information set forth in clauses (a)(i) and (a)(ii) of this
Section 5.05 aggregated for such calendar year or applicable portion thereof
during which such Person was a Certificateholder. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent that substantially
comparable information shall be provided by the Trustee pursuant to any
requirements of the Code as from time to time in effect.

         (d) Upon filing with the Internal Revenue Service, the Trustee 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;

                                      -88-
<PAGE>

                  (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 9.12.

         Section 5.06 REMIC DESIGNATIONS AND REMIC DISTRIBUTIONS.

         (a) The Trustee shall elect that each of REMIC I and REMIC II 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 (other than the Prepayment
Charges) and all interest owing in respect of and principal due thereon, the
Distribution Account, the Protected Account, any REO Property, any proceeds of
the foregoing and any other assets subject to this Agreement (other than the
Reserve Fund). The REMIC I Regular Interests shall constitute the assets of
REMIC II.

         (b) (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 Certificates, as the
case may be:

                  (i) to Holders of REMIC I Regular Interest AA, REMIC Regular
         Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
         Interest II-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
         M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC
         I Regular Interest M-5, REMIC I Regular Interest M-6 and REMIC I

                                      -89-
<PAGE>

         Regular Interest ZZ, PRO RATA, in an amount equal to (A) the
         Uncertificated Accrued Interest for such Distribution Date, plus (B)
         any amounts in respect thereof remaining unpaid from previous
         Distribution Dates. Amounts payable as Uncertificated Accrued Interest
         in respect of REMIC I Regular Interest ZZ shall be reduced when the
         REMIC I Overcollateralization Amount is less than the REMIC I Required
         Overcollateralization Amount, by the lesser of (x) the amount of such
         difference and (y) the Maximum Uncertificated Accrued Interest Deferral
         Amount and such amount will be payable to the Holders of REMIC I
         Regular Interest I-A-1, REMIC I Regular Interest I-A-2, REMIC I Regular
         Interest II-A, REMIC I Regular Interest M-1, REMIC I Regular Interest
         M-2, REMIC I Regular Interest M-3, REMIC I Regular Interest M-4, REMIC
         I Regular Interest M-5 and REMIC I Regular Interest M-6, in the same
         proportion as the Overcollateralization Increase Amount is allocated to
         the Corresponding Certificates and the Uncertificated Principal Balance
         of REMIC I Regular Interest ZZ shall be increased by such amount;

                  (ii) to Holders of REMIC I Regular Interest 1A, REMIC I
         Regular Interest 1B, REMIC I Regular Interest 2A, REMIC I Regular
         Interest 2B and REMIC I Regular Interest XX, pro rata, an amount equal
         to (A) the Uncertificated Accrued Interest for such Distribution Date,
         plus (B) any amounts in respect thereof remaining unpaid from previous
         Distribution Dates;

                  (iii) to the Holders of REMIC I Regular Interests, in an
         amount equal to the remainder of the REMIC I Marker Allocation
         Percentage of the Interest Funds and Principal Funds for both Loan
         Groups 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 AA, 98.00% of such
remainder, until the Uncertificated Principal Balance of such REMIC I Regular
Interest is reduced to zero;

         (b) to the Holders of REMIC I Regular Interest I-A-1, REMIC I Regular
Interest I-A-2, REMIC I Regular Interest II-A, REMIC I Regular Interest M-1,
REMIC I Regular Interest M-2, REMIC I Regular Interest M-3, REMIC I Regular
Interest M-4, REMIC I Regular Interest M-5 and REMIC I Regular Interest M-6,
1.00% of such remainder, in the same proportion as principal payments are
allocated to the Corresponding Certificates, until the Uncertificated Principal
Balances of such REMIC I Regular Interests are reduced to zero;

         (c) to the Holders of REMIC I Regular Interest ZZ, 1.00% of such
remainder, until the Uncertificated Principal Balance of such REMIC I Regular
Interest is reduced to zero; then

         (d) any remaining amount to the Holders of the Class R-I Certificates;

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

                  (iv) to the Holders of REMIC I Regular Interests, in an amount
         equal to the remainder of the REMIC I Sub WAC Allocation Percentage of
         the Interest Funds and

                                      -90-
<PAGE>

         Principal Funds for both Loan Groups for such Distribution Date after
         the distributions made pursuant to clause (ii) above, first, so as to
         keep the Uncertificated Principal Balance of each REMIC I Regular
         Interest ending with the designation "B" equal to 0.01% of the
         aggregate Stated Principal Balance of the Mortgage Loans in the related
         Loan Group; second, to each REMIC I Regular Interest ending with the
         designation "A," so that the Uncertificated Principal Balance of each
         such REMIC I Regular Interest is equal to 0.01% of the excess of (x)
         the aggregate Stated Principal Balance of the Mortgage Loans in the
         related Loan Group over (y) the current Certificate Principal Balance
         of the Class A Certificate related to such Loan Group (except that if
         any such excess is a larger number than in the preceding distribution
         period, the least amount of principal shall be distributed to such
         REMIC I Regular Interests such that the REMIC I Subordinated Balance
         Ratio is maintained); and third, any remaining principal to REMIC I
         Regular Interest XX.

                  (v) Any amounts distributed to the Class P Certificates shall
         be deemed to be distributed to the Holders of REMIC I Regular Interest
         P.

         Section 5.07 POLICY MATTERS.

         (a) If, on the third Business Day before any Distribution Date, the
Trustee determines that a Deficiency Amount exists on such Distribution Date,
the Trustee shall give notice to the Certificate Insurer and the Fiscal Agent
(as defined in the Class II-A Policy), if any, by telephone or telecopy of the
amount of such Deficiency Amount, confirmed in writing by notice substantially
in the form of Exhibit A to the Class II-A Policy by 12:00 noon, New York City
time on such third Business Day. The Trustee's responsibility for delivering the
notice to the Certificate Insurer as provided in the preceding sentence is
contingent upon its receipt of available, timely and accurate information from
the Master Servicer.

         (b) In the event the Trustee receives a certified copy of an order of
the appropriate court regarding any Avoided Payment (as defined in the Class
II-A Policy), the Trustee shall (i) promptly notify the Certificate Insurer and
the Fiscal Agent, if any, and (ii) comply with the provisions of the Class II-A
Policy to obtain payment by the Certificate Insurer of such Avoided Payment. In
addition, the Trustee shall mail notice to all Holders of the Class II-A
Certificates so affected that, in the event that any such Holder's scheduled
payment is an Avoided Payment, such Holder will be entitled to payment pursuant
to the terms of the Class II-A Policy, a copy of which shall be made available
to such Holders by the Trustee. The Trustee shall furnish to the Certificate
Insurer and the Fiscal Agent, if any, its records listing the payments on the
affected Class II-A Certificates, if any, that have been made by the Trustee and
subsequently recovered from the affected Holders, and the dates on which such
payments were made by the Trustee.

         (c) At the time of the execution hereof, and for the purposes hereof,
the Trustee shall establish a separate special purpose trust account in the name
of the Trustee for the benefit of Holders of the Class II-A Certificates (the
"Class II-A Policy Payments Account") over which the Trustee shall have
exclusive control and sole right of withdrawal. The Class II-A Policy Payments
Account shall be an Eligible Account. The Trustee shall deposit any amount paid
under the Class II-A Policy into the Class II-A Policy Payments Account and
distribute such amount only for the purposes of making the payments to Holders
of the Class II-A Certificates in respect of the Insured

                                      -91-
<PAGE>

Payment for which the related claim was made under the Class II-A Policy. Such
amounts shall be allocated by the Trustee to Holders of Class II-A Certificates
affected by such shortfalls in the same manner as interest and principal
payments are to be allocated with respect to such Certificates pursuant to
Section 5.04. It shall not be necessary for such payments to be made by checks
or wire transfers separate from the checks or wire transfers used to make
regular payments hereunder with funds withdrawn from the Distribution Account.
However, any payments made on the Class II-A Certificates from funds in the
Class II-A Policy Payments Account shall be noted as provided in subsection (e)
below. Funds held in the Class II-A Policy Payments Account shall not be
invested by the Trustee.

         (d) Any funds received from the Certificate Insurer for deposit into
the Class II-A Policy Payments Account pursuant to the Class II-A Policy in
respect of a Distribution Date or otherwise as a result of any claim under the
Class II-A Policy shall be applied by the Trustee directly to the payment in
full (i) of the Deficiency Amount due on such Distribution Date on the Class
II-A Certificates, or (ii) of other amounts payable under the Class II-A Policy.
Funds received by the Trustee as a result of any claim under the Class II-A
Policy shall be used solely for payment to the Holders of the Class II-A
Certificates and may not be applied for any other purpose, including, without
limitation, satisfaction of any costs, expenses or liabilities of the Trustee,
the Depositor, the Seller, any subservicer, the Master Servicer or the Trust
Fund. Any funds remaining in the Class II-A Policy Payments Account on the first
Business Day after each Distribution Date shall be remitted promptly to the
Certificate Insurer pursuant to the written instruction of the Certificate
Insurer.

         (e) The Trustee shall keep complete and accurate records in respect of
(i) all funds remitted to it by the Certificate Insurer and deposited into the
Class II-A Policy Payments Account and (ii) the allocation of such funds to (A)
payments of interest on and principal in respect of any Class II-A Certificates
and (B) the amount of funds available to make distributions on the Class II-A
Certificates pursuant to Section 5.04. The Certificate Insurer shall have the
right to inspect such records at reasonable times during normal business hours
upon three Business Days' prior notice to the Trustee.

         (f) The Trustee acknowledges, and each Holder of a Class II-A
Certificate by its acceptance of the Class II-A Certificate agrees, that,
without the need for any further action on the part of the Certificate Insurer
or the Trustee to the extent the Certificate Insurer makes payments, directly or
indirectly, on account of principal of or interest on any Class II-A
Certificates, the Certificate Insurer will be fully subrogated to the rights of
the Holders of such Class II-A Certificates to receive such principal and
interest from the Trust Fund. The Holders of the Class II-A Certificates, by
acceptance of the Class II-A Certificates, assign their rights as Holders of the
Class II-A Certificates to the extent of the Certificate Insurer's interest with
respect to amounts paid under the Class II-A Policy. Anything herein to the
contrary notwithstanding, solely for purposes of determining the Certificate
Insurer's rights, as applicable, as subrogee for payments distributable pursuant
to Section 5.04, any payment with respect to distributions to the Class II-A
Certificates which is made with funds received pursuant to the terms of the
Class II-A Policy, shall not be considered payment of the Class II-A
Certificates from the Trust Fund and shall not result in the distribution or the
provision for the distribution in reduction of the Certificate Principal Balance
of the Class II-A Certificates as described in this Article V.

                                      -92-
<PAGE>

         The Trustee and the Master Servicer shall cooperate in all respects
with any reasonable request by the Certificate Insurer for action to preserve or
enforce the Certificate Insurer's rights or interests under this Agreement or
the Insurance Agreement without limiting the rights or affecting the interests
of the Holders as otherwise set forth herein.

         (g) Upon its becoming aware of the occurrence of an Event of Default,
the Trustee shall promptly notify the Certificate Insurer of such Event of
Default.

         (h) The Trustee shall promptly notify the Certificate Insurer of either
of the following as to which a Responsible Officer has actual knowledge: (A) the
commencement of any proceeding by or against the Depositor commenced under the
United States bankruptcy code or any other applicable bankruptcy, insolvency,
receivership, rehabilitation or similar law (an "Insolvency Proceeding") and (B)
the making of any claim in connection with any proceeding seeking the avoidance
as a preferential transfer (a "Preference Claim") of any distribution made with
respect to the Class II-A Certificates as to which it has actual knowledge. Each
Holder of a Class II-A Certificate, by its purchase of Class II-A Certificates,
and the Trustee hereby agrees that the Certificate Insurer (so long as no
Certificate Insurer Default exists) may at any time during the continuation of
any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim, including, without limitation, (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Certificate Insurer shall be subrogated
to the rights of the Trustee and each Holder of a Class II-A Certificate in the
conduct of any Preference Claim, including, without limitation, all rights of
any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Claim.

         (i) The Master Servicer shall designate a Certificate Insurer Contact
Person who shall be available to the Certificate Insurer to provide reasonable
access to information regarding the Mortgage Loans. The initial Certificate
Insurer Contact Person is to the attention of EMC Mortgage Corporation, 909
Hidden Ridge Drive, Irving, Texas 75038, Attention: Christa Fellers, telephone:
972-444-3329.

         (j) The Trustee shall promptly surrender the Class II-A Policy to the
Certificate Insurer for cancellation upon the reduction of the Certificate
Principal Balance of the Class II-A Certificates to zero.

         (k) The Trustee shall send to the Certificate Insurer the statements
prepared pursuant to Section 5.05, as well as any other statements or
communications sent to Holders of the Class II-A Certificates, in each case at
the same time such reports, statements and communications are otherwise sent.

         (l) For so long as there is not continuing default by the Certificate
Insurer under its obligations under the Class II-A Policy (a "Certificate
Insurer Default"), each Holder of a Class II-A Certificate agrees that the
Certificate Insurer shall be treated by the Depositor, the Master Servicer and
the Trustee as if the Certificate Insurer were the Holder of all Class II-A
Certificates for the purpose (and solely for the purpose) of the giving of any
consent, the making of any direction or the exercise of any voting or other
control rights otherwise given the Holders of the Class II-A

                                      -93-
<PAGE>

Certificates hereunder without any further consent of the Holders of the Class
II-A Certificates and such holders shall not exercise such rights without the
prior written consent of the Certificate Insurer.

         With respect to this Section 5.07, (i) the terms "Receipt" and
"Received" shall mean actual delivery to the Certificate Insurer and Certificate
Insurer's Fiscal Agent, if any, received prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day or
after 12:00 noon, New York City time, shall be deemed to be Received on the next
succeeding Business Day. If any notice or certificate given under the Class II-A
Policy by the Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received. The
Certificate Insurer or its Fiscal Agent, if any, shall promptly so advise the
Trustee and the Trustee may submit an amended notice and (ii) "Business Day"
means any day other than (A) a Saturday or Sunday, (B) a day on which the
Certificate Insurer is closed or (C) a day on which banking institutions in the
City of New York, New York, or in which the Corporate Trust Office of the
Trustee is located, are authorized or obligated by law or executive order to be
closed.

         (m) Unless otherwise designated in writing by the President or a
Managing Director of the Certificate Insurer to the Trustee, the Certificate
Insurer Premium Amount to be paid pursuant to clause FIRST of Section 5.04(a)
shall be paid by the Trustee to the Certificate Insurer in accordance with the
terms of the Premium Letter.

                                   ARTICLE VI

                                THE CERTIFICATES

         Section 6.01 THE CERTIFICATES.

         The Certificates shall be substantially in the forms attached hereto as
Exhibits A-1 through A-5. 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
        -----             ------------          -----------------        -----------------
<S>                       <C>                           <C>               <C>
        I-A-1             $  25,000                     $1.00             $ 77,869,000.00
        I-A-2             $  25,000                     $1.00             $ 73,811,000.00
        II-A              $  25,000                     $1.00             $181,660,000.00
         M-1              $  25,000                     $1.00             $ 27,514,000.00
         M-2              $  25,000                     $1.00             $ 23,281,000.00
         M-3              $  25,000                     $1.00             $  7,407,000.00
         M-4              $  25,000                     $1.00             $  6,138,000.00
         M-5              $  25,000                     $1.00             $  6,349,000.00
         M-6              $  25,000                     $1.00             $  5,503,000.00
         CE                   10%                         1%              $ 13,756,843.59
          P               $     100                      N/A              $        100.00
         R-I                100%                         N/A                      N/A

                                      -94-
<PAGE>

        R-II                  100%                     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 6.02 CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND
                      EXCHANGE OF CERTIFICATES.

         (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 6.09 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

                                      -95-
<PAGE>

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 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 an Opinion of Counsel addressed
to the Trustee 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 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 and
the Master Servicer shall cooperate with the Depositor in providing the Rule
144A information referenced in the preceding sentence, including providing to
the Depositor such information regarding the Certificates, the Mortgage Loans
and other matters regarding the Trust Fund as the Depositor shall reasonably
request to meet its obligation under the preceding sentence. Each Holder of a
Private Certificate desiring to effect such Transfer shall, and does hereby
agree to, indemnify the Trustee, 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 an ERISA Restricted Certificate shall be made unless
either (i) the Trustee and the Master Servicer shall have received a
representation from the transferee of such Certificate acceptable to and in form
and substance satisfactory to the Trustee and the Master Servicer, 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 and the Master Servicer and on which they may relay, satisfactory to the
Trustee, to the effect that the purchase and holding of such ERISA Restricted
Certificate will not constitute or result in the assets of the Trust being
deemed to be "plan assets" under ERISA or the Code, will not result in any
prohibited transactions under ERISA or Section 4975 of the Code and will not
subject the Trustee, the Master Servicer or the Depositor 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 or the
Depositor. Notwithstanding anything else to the contrary herein, any purported
transfer of an ERISA Restricted Certificate to or on behalf of an employee
benefit plan subject to 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. Neither the Trustee nor the Master Servicer shall be
required to monitor, determine or inquire as to compliance with the transfer

                                      -96-
<PAGE>

restrictions with respect to any ERISA Restricted Certificate that is a
Book-Entry Certificate, and neither the Trustee nor 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. Neither the Trustee nor 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 6.02(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 shall 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 shall be paid and delivered by the Trustee 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 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 Ratings or Moody's, 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

                                      -97-
<PAGE>

         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 6.02(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 Certificate that is in fact
         not permitted by Section 6.02(b) and this Section 6.02(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 6.02(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 and the Certificate Insurer of an
Opinion of Counsel addressed to the Trustee and the Certificate Insurer, which
Opinion of Counsel shall not be an expense of the Trustee, the Seller, the
Certificate Insurer or the Master Servicer to the effect that the elimination of
such restrictions will not cause REMIC I or REMIC II, 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 the Certificate Insurer and
furnished to the Trustee and the Certificate Insurer, 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.

                                      -98-
<PAGE>

         (d) The preparation and delivery of all certificates and opinions
referred to above in this Section 6.02 shall not be an expense of the Trust
Fund, the Trustee, the Depositor, the Seller or the Master Servicer.

         Section 6.03 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 Trustee (and with respect to any Class II-A Certificates, to the Certificate
Insurer) 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 6.03, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees and expenses of
the Trustee) connected therewith. Any replacement Certificate issued pursuant to
this Section 6.03 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 6.03 shall be
canceled and destroyed by the Trustee in accordance with its standard procedures
without liability on its part.

         Section 6.04 PERSONS DEEMED OWNERS.

         The Trustee, the Certificate Insurer and any agent of the Trustee or
the Certificate Insurer 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 Trustee, the Certificate Insurer nor any agent of
the Trustee or the Certificate Insurer shall be affected by any notice to the
contrary.

         Section 6.05 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, the Certificate Insurer 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
Certificate Insurer, 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.

                                      -99-
<PAGE>

         Section 6.06 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
6.08. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the Certificate Owners of such Certificates
pursuant to Section 6.08:

         (a) the provisions of this Section shall be in full force and effect;

         (b) the Depositor 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;

         (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 6.08, 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.

                                     -100-
<PAGE>

         Section 6.07 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 6.08 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 or (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, 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.

         In addition, if an Event of Default has occurred and is continuing,
each Certificate Owner materially adversely affected thereby may at its option
request a definitive Certificate evidencing such Certificate Owner's Voting
Rights in the related Class of Certificates. In order to make such request, such
Certificate Owner shall, subject to the rules and procedures of the Depository,
provide the Depository or the related Depository Participant with directions for
the Trustee to exchange or cause the exchange of the Certificate Owner's
interest in such Class of Certificates for an equivalent Voting Right in fully
registered definitive form. Upon receipt by the Trustee of instructions from the
Depository directing the Trustee to effect such exchange (such instructions to
contain information regarding the Class of Certificates and the Current
Principal Amount being exchanged, the Depository Participant account to be
debited with the decrease, the registered holder of and delivery instructions
for the definitive Certificate, and any other information reasonably required by
the Trustee), (i) the Trustee shall instruct the Depository to reduce the
related Depository Participant's account by the aggregate Current Principal
Amount of the definitive Certificate, (ii) the Trustee shall execute,
authenticate and deliver, in accordance with the registration and delivery
instructions provided by the Depository, a definitive Certificate evidencing
such Certificate Owner's Voting Rights in such Class of Certificates and (iii)
the Trustee shall execute and authenticate a new Book-Entry Certificate
reflecting the reduction in the Current Principal Amount of such Class of
Certificates by the amount of the definitive Certificates.

                                     -101-
<PAGE>

         Section 6.09 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 the Corporate Trust Office where
Certificates may be surrendered for registration of transfer or exchange. The
Trustee initially designates its Corporate Trust Office, as the office for such
purposes. The Trustee will give prompt written notice to the Certificateholders
and the Certificate Insurer of any change in such location of any such office or
agency.

                                   ARTICLE VII

                      THE DEPOSITOR AND THE MASTER SERVICER

         Section 7.01 LIABILITIES OF THE DEPOSITOR AND THE MASTER SERVICER. Each
of the Depositor, 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 7.02 MERGER OR CONSOLIDATION OF THE DEPOSITOR OR THE MASTER
                      SERVICER.

         (a) Each of the Depositor 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 and the other Transaction Documents to which it
is a party, the Certificates or any of the Mortgage Loans and to perform its
duties under this Agreement and the other Transaction Documents to which it is a
party.

         (b) Any Person into which the Depositor or the Master Servicer may be
merged or consolidated, or any corporation resulting from any merger or
consolidation to which the Depositor or the Master Servicer shall be a party, or
any Person succeeding to the business of the Depositor or the Master Servicer,
shall be the successor of the Depositor or the Master Servicer 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 7.03 INDEMNIFICATION OF THE TRUSTEE AND THE MASTER SERVICER.

         (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 any powers of attorney delivered
pursuant to this Agreement, 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

                                     -102-
<PAGE>

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 survive the resignation or removal of the
Trustee or Master Servicer and the termination of this Agreement.

         (b) The Seller will indemnify any Indemnified Person for any loss,
liability or expense of any Indemnified Person not otherwise paid or covered
pursuant to Subsection (a) above.

         Section 7.04 LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE MASTER
SERVICER AND OTHERS. Subject to the obligation of the Master Servicer to
indemnify the Indemnified Persons pursuant to Section 7.03:

         (a) Neither the Depositor, the Master Servicer nor any of the
directors, officers, employees or agents of the Depositor 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
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 Master Servicer and any director, officer,
employee or agent of the Depositor 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 Master Servicer, the Trustee, the Custodian, the
Certificate Insurer and any director, officer, employee or agent of the
Depositor, the Master Servicer, the 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 Custodial Agreement or
the Certificates, other than (i) any such loss, liability or expense related to
the Master Servicer's or the Certificate Insurer's failure to perform its duties
in compliance with this Agreement or the Insurance Agreement, as applicable
(except as any such loss, liability or expense shall be otherwise reimbursable
pursuant to this Agreement or the Insurance Agreement, as applicable), or (ii)
any such loss, liability or expense incurred by reason of the Master Servicer's
or the Certificate Insurer's willful misfeasance, bad faith or gross negligence
in the performance of duties hereunder or the Insurance Agreement, as
applicable, or by reason of reckless disregard of obligations and duties
hereunder or the Insurance Agreement, as applicable.

         (d) Neither the Depositor 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

                                     -103-
<PAGE>

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 Protected Account as provided by Section 4.02.
Nothing in this Subsection 7.04(d) shall affect the Master Servicer's obligation
to service and administer the Mortgage Loans pursuant to Article III.

         (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.

         Section 7.05 MASTER SERVICER NOT TO RESIGN. Except as provided in
Section 7.07, the Master Servicer shall not resign from the obligations and
duties hereby imposed on it except (i) with the prior consent of the Trustee and
the Certificate Insurer (which consents 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, addressed to and delivered to, the Trustee
and the Certificate Insurer. No such resignation by the Master Servicer shall
become effective until the Trustee or a successor to the Master Servicer
reasonably satisfactory to the Trustee and the Certificate Insurer shall have
assumed the responsibilities and obligations of the Master Servicer in
accordance with Section 8.02 hereof. The Trustee shall notify the Rating
Agencies and the Certificate Insurer of the resignation of the Master Servicer.

         Section 7.06 SUCCESSOR MASTER SERVICER. In connection with the
appointment of any successor Master Servicer or the assumption of the duties of
the Master Servicer, the Trustee may make such arrangements for the compensation
of such successor master servicer out of payments on the Mortgage Loans as 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 the Certificate Insurer and all of
the Certificateholders.

         Section 7.07 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; 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 and the
Certificate Insurer (as evidenced in a writing signed by the Trustee and the
Certificate Insurer); and (d) shall execute and deliver to the Trustee and the
Certificate Insurer an agreement, in form and substance reasonably satisfactory
to the Trustee and the Certificate Insurer, which contains an assumption by such
Person of the due and punctual performance and observance of each covenant and
condition to be performed or observed by it as master servicer under this

                                     -104-
<PAGE>

Agreement, any custodial agreement from and after the effective date of such
agreement; (ii) each Rating Agency and the Certificate Insurer 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 (determined without
regard to the Class II-A Policy) 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, the Trustee and the Certificate
Insurer; and (iii) the Master Servicer assigning and selling the master
servicing shall deliver to the Trustee and the Certificate Insurer an Officer's
Certificate and an Opinion of Counsel addressed to the Trustee and the
Certificate Insurer, 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. No such assignment or delegation
shall affect any liability of the Master Servicer arising prior to the effective
date thereof.

                                  ARTICLE VIII

                     DEFAULT; TERMINATION OF MASTER SERVICER

         Section 8.01 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 (other
         than any Advance), 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;

                  (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;

                  (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;

                  (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

                                     -105-
<PAGE>

         similar proceedings of or relating to the Master Servicer or all or
         substantially all of the property of the Master Servicer;

                  (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;

                  (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 7.05 or 7.07;

                  (vii) The Master Servicer fails to deposit, or cause to be
         deposited, in the Distribution Account any Advance (other than a
         Nonrecoverable Advance) by 5:00 p.m. New York City time on the
         Distribution Account Deposit Date; or

                  (viii) any draw on the Class II-A Policy, if Certificate
         Insurer Default has occurred and is not continuing; provided that if
         the Master Servicer is EMC Mortgage Corporation, the Master Servicer
         shall not be in default pursuant to this clause if the parent of EMC
         Mortgage Corporation is rated at least "BBB" by Standard & Poor's or
         "Baa2" by Moody's.

         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
in the case of any Event of Default described in clauses (i) through (vii) above
or upon receipt of written instructions from the Certificate Insurer in the case
of an Event of Default described in clause (viii) above, by notice in writing to
the Master Servicer (with a copy to each Rating Agency and the Certificate
Insurer), terminate all of the rights and obligations of the Master Servicer
under this Agreement and in and to the Mortgage Loans and the proceeds thereof,
other than its rights as a Certificateholder hereunder. On or after the receipt
by the Master Servicer of such written notice, all authority and power of the
Master Servicer hereunder, whether with respect to the Mortgage Loans or
otherwise, shall pass to and be vested in the Trustee, or any successor
appointed pursuant to Section 8.02 (a "Successor Master Servicer"); provided, to
the extent the Certificate Insurer directs the Trustee to terminate the Master
Servicer due to an Event of Default described in clause (viii) above, the
Certificate Insurer will be required to appoint a Successor Master Servicer
which is reasonably acceptable to the Trustee. Such Successor Master Servicer
shall thereupon if such Successor Master Servicer is a successor to the Master
Servicer, make any Advance required by Article V, subject, in the case of the
Trustee, to Section 8.02. The Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the terminated Master Servicer, as attorney-
in- fact or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement or assignment of 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 VII or Article IX. The Master Servicer agrees to cooperate with the
Trustee in effecting the termination of the Master Servicer's responsibilities
and rights hereunder, including, without limitation, the transfer to the

                                     -106-
<PAGE>

applicable Successor Master Servicer of all cash amounts which shall at the time
be credited to the Protected Account maintained pursuant to Section 4.02, or
thereafter be received with respect to the applicable Mortgage Loans. The
Trustee shall promptly notify the Rating Agencies and the Certificate Insurer 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 4.02 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.

         Notwithstanding the foregoing, if an Event of Default described in
clause (vii) of this Section 8.01 shall occur, the Trustee shall, by notice in
writing to the Master Servicer, which may be delivered by telecopy, immediately
terminate all of the rights and obligations of the Master Servicer thereafter
arising under this Agreement, but without prejudice to any rights it may have as
a Certificateholder or to reimbursement of Advances and other advances of its
own funds, and the Trustee shall act as provided in Section 8.02 to carry out
the duties of the Master Servicer, including the obligation to make any Advance
the nonpayment of which was an Event of Default described in clause (vii) of
this Section 8.01. Any such action taken by the Trustee must be prior to the
distribution on the relevant Distribution Date.

         Section 8.02 TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR.

         Except with respect to an Event of Default described in Section
8.01(viii) above for which the Certificate Insurer is required to appoint a
Successor Master Servicer, on and after the time the Master Servicer receives a
notice of termination pursuant to Section 8.01 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 V 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 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 indemnification 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 V 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

                                     -107-
<PAGE>

Certificates by each Rating Agency (determined without regard to the Class II-A
Policy) 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, (ii) be acceptable to the Trustee
and the Certificate Insurer (which consent shall not be unreasonably withheld)
and (iii) be willing to act as successor servicer of any Mortgage Loans under
this Agreement, and shall have executed and delivered to the Depositor, the
Trustee and the Certificate Insurer 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 8.01 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 (determined without regard to the Class II-A Policy) 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 8.02, 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 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 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 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 9.05. 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 3.08.

                                     -108-
<PAGE>

         Section 8.03 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, the Certificate Insurer 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 and the Certificate
Insurer 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 8.04 WAIVER OF DEFAULTS.

         The Trustee shall transmit by mail to all Certificateholders and the
Certificate Insurer, 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 Certificate Insurer or the Holders of Certificates
evidencing not less than 51% of the Voting Rights (with the consent of the
Certificate Insurer, which consent shall not be unreasonably withheld) 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 and the
Certificate Insurer.

                                   ARTICLE IX

                             CONCERNING THE TRUSTEE

         Section 9.01 DUTIES OF TRUSTEE.

         (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,
undertakes to perform such duties and only such duties as are specifically set
forth in this Agreement as duties of the Trustee. 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 pursuant to any provision of this
Agreement, the Trustee shall examine them to determine whether they are in the
form required by this Agreement; provided, however, that the Trustee shall not
be responsible for the accuracy or content of any resolution, certificate,
statement, opinion, report, document, order

                                     -109-
<PAGE>

or other instrument furnished by the Master Servicer; provided, further, that
the Trustee shall not 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 5.04 and 10.01 herein.

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

                  (i) 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, 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 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 and, in the absence of bad faith on the part of the Trustee,
         the Trustee may conclusively rely, as to the truth of the statements
         and the correctness of the opinions expressed therein, upon any
         certificates or opinions furnished to the Trustee and conforming to the
         requirements of this Agreement;

                  (ii) The Trustee shall not be liable in its individual
         capacity 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;

                  (iii) The Trustee shall not be liable with respect to any
         action taken, suffered or omitted to be taken by it in good faith in
         accordance with the 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 exercising any trust or other power conferred upon the
         Trustee 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 be liable for special,
         indirect or consequential loss or damage of any kind

                                     -110-
<PAGE>

         whatsoever (including but not limited to lost profits), even if the
         Trustee has been advised of the likelihood of such loss or damage and
         regardless of the form of action; and

                  (vii) None of 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.

The Trustee shall not be required to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if there is reasonable ground
for believing that the repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any of the
obligations of the Master Servicer.

         (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 9.02 CERTAIN MATTERS AFFECTING THE TRUSTEE.

         (a) Except as otherwise provided in Section 10.01:

                  (i) The Trustee may rely and shall be protected in acting or
         refraining from acting in reliance on any resolution or certificate of
         the Seller or the Master 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 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) The Trustee shall not 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 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;

                                     -111-
<PAGE>

                  (iv) The Trustee shall not 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) 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 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 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 reasonably assured
         to the Trustee by the security afforded to it by the terms of this
         Agreement. The Trustee may require reasonable indemnity against such
         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 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 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. The Trustee
         shall not be liable or responsible for the misconduct or negligence of
         any of the Trustee's agents or attorneys or paying agent appointed
         hereunder by the Trustee with due care and, when required, with the
         consent of the Master Servicer;

                  (vii) Should the Trustee deem the nature of any action
         required on its part to be unclear, the Trustee may require prior to
         such action that it be provided by the Depositor with reasonable
         further instructions; the right of the Trustee to perform any
         discretionary act enumerated in this Agreement shall not be construed
         as a duty, and the Trustee shall not be accountable for other than its
         negligence or willful misconduct in the performance of any such act;

                  (viii) The Trustee shall not 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 9.07; and

                  (ix) The Trustee shall not 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.

         (b) The Trustee is hereby directed to execute and deliver the Insurance
Agreement and the Yield Maintenance Agreements.

                                     -112-
<PAGE>

         Section 9.03 TRUSTEE 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 the Trustee shall not have any
responsibility for their correctness. The Trustee makes no representation as to
the 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, or the Custodian on
its behalf, of the obligation to review the Mortgage Files pursuant to Section
2.02 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. 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 with respect to the Mortgage Loans. Subject to Section 2.06,
the Trustee shall not 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. The Trustee shall not at any time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Mortgage or any Mortgage Loan, or the perfection and priority of any
Mortgage or the maintenance of any such perfection and priority, or for or with
respect to the sufficiency of the Trust Fund or its ability to generate the
payments to be distributed to Certificateholders, under this Agreement. The
Trustee shall not be responsible 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 9.04 TRUSTEE MAY OWN CERTIFICATES.

         The Trustee in its individual capacity or in any capacity other than as
Trustee hereunder may become the owner or pledgee of any Certificates with the
same rights it would have if it were not the Trustee and may otherwise deal with
the parties hereto.

         Section 9.05 TRUSTEE'S FEES AND EXPENSES.

         The Trustee will be entitled to recover from the Distribution Account
pursuant to Section 4.05, the Trustee Fee, all reasonable out-of-pocket
expenses, disbursements and advances and the expenses of the Trustee in
connection with any Event of Default (or anything related thereto, including any
determination that an Event of Default does or does not exist), 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 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 hereunder. If funds in the Distribution
Account are insufficient therefor, the Trustee shall recover such expenses,
disbursements or advances from the Depositor and the Depositor hereby agrees to
pay such expenses, disbursements or advances. Such

                                     -113-
<PAGE>

compensation and reimbursement obligation shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust.

         Section 9.06 ELIGIBILITY REQUIREMENTS FOR TRUSTEE.

         The Trustee and any successor Trustee 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
$50,000,000, subject to supervision or examination by federal or state authority
and 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 other than pursuant to Section 9.10, rated in one of
the two highest long-term debt categories of, or otherwise acceptable to, each
of the Rating Agencies and the Certificate Insurer (which consent shall not be
unreasonably withheld). 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 9.06 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 shall cease to be
eligible in accordance with the provisions of this Section 9.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
9.08.

         Section 9.07 INSURANCE.

         The Trustee, at its 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"); provided, that
such insurance may be provided through self-insurance so long as the Trustee is
rated "A" or better by S&P and "A1" or better by Moody's. 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 as to the Trustee's compliance with this Section 9.07 shall be
furnished to any Certificateholder and the Certificate Insurer upon reasonable
written request.

         Section 9.08 RESIGNATION AND REMOVAL OF 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 Seller and
the Master Servicer, with a copy to the Rating Agencies and the Certificate
Insurer. Upon receiving such notice of resignation, the Depositor shall promptly
appoint a successor trustee by written instrument, in triplicate, one copy of
which instrument shall be delivered to each of the resigning Trustee and the
successor trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

                                     -114-
<PAGE>

         If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 9.06 hereof and shall fail to resign after
written request thereto by the Depositor, (ii) the Trustee shall become
incapable of acting, or shall be adjudged as bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, or
(iii)(A) a tax is imposed with respect to the Trust Fund by any state in which
the Trustee or the Trust Fund is located, (B) the imposition of such tax would
be avoided by the appointment of a different trustee and (C) the Trustee fails
to indemnify the Trust Fund against such tax, then the Depositor or the Master
Servicer may remove the Trustee and appoint a successor trustee by written
instrument, in multiple copies, a copy of which instrument shall be delivered to
the Trustee, the Master Servicer and the successor trustee.

         The Holders evidencing at least 51% of the Voting Rights of each Class
of Certificates may at any time remove the Trustee and appoint a successor
trustee 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 to the Master Servicer,
the Trustee so removed and the successor trustee so appointed. Notice of any
removal of the Trustee shall be given to each Rating Agency and the Certificate
Insurer by the Trustee or successor trustee.

         Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 9.08 shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 9.09 hereof.

         Section 9.09 SUCCESSOR TRUSTEE.

         Any successor trustee appointed as provided in Section 9.08 hereof
shall execute, acknowledge and deliver to the Depositor, to its predecessor
trustee, the Master Servicer and the Certificate Insurer 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.

         No successor trustee shall accept appointment as provided in this
Section 9.09 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 9.07 hereof and its appointment
shall not adversely affect the then current rating of the Certificates
(determined without regard to the Class II-A Policy).

         Upon acceptance of appointment by a successor trustee as provided in
this Section 9.09, the successor trustee shall mail notice of the succession of
such trustee hereunder to all Holders of Certificates and the Certificate
Insurer. If the successor trustee 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.

                                     -115-
<PAGE>

         Section 9.10 MERGER OR CONSOLIDATION OF TRUSTEE.

         Any corporation, state bank or national banking association into which
the Trustee 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 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, shall be the
successor of the Trustee hereunder, provided that such corporation shall be
eligible under the provisions of Section 9.06 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 9.11 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 and the Certificate Insurer, such title to the
Trust Fund or any part thereof, whichever is applicable, and, subject to the
other provisions of this Section 9.11, 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 9.06 and no notice to Certificateholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 9.09.

         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;

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                  (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 IX. 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 9.12 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
Trustee covenants and agrees that it shall act as agent (and the Trustee is
hereby appointed to act as agent) on behalf of the Trust Fund. The Trustee, as
agent on behalf of the Trust Fund, shall do or refrain from doing, as
applicable, the following: (a) the Trustee 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 Trustee 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

                                     -117-
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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 Trustee 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 Trustee 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) 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) the Trustee shall not 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 9.12, 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 or any other appropriate Person from
contesting any such tax in appropriate proceedings and shall not prevent the
Trustee from withholding payment of such tax, if permitted by law, pending the
outcome of such proceedings); (i) the Trustee shall maintain records relating to
each REMIC formed hereunder including but not limited to the income, expenses,
assets and liabilities of each 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; (j) the Trustee shall, for federal income tax purposes, maintain
books and records with respect to the REMICs on a calendar year and on an
accrual basis; (k) the Trustee shall not 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 (l) as and when necessary and appropriate, the Trustee, at the expense
of the Trust Fund, 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 the Trustee to perform its duties as set forth
herein, the Depositor shall provide, or cause to be provided, to the Trustee
within 10 days after the Closing Date all information or data that the Trustee
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 promptly upon written request therefor, any such additional
information or data that the Trustee may, from time to time, request in order to
enable the Trustee to perform its duties as set forth herein. The Depositor
hereby indemnifies the

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Trustee for any losses, liabilities, damages, claims or expenses of the Trustee
arising from any errors or miscalculations of the Trustee that result from any
failure of the Depositor to provide, or to cause to be provided, accurate
information or data to the Trustee on a timely basis.

         In the event that any tax is imposed on "prohibited transactions" of
any of REMIC I or REMIC II 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 or REMIC II 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 or REMIC II, and is not paid as
otherwise provided for herein, such tax shall be paid by (i) the Trustee, if any
such other tax arises out of or results from a breach by the Trustee of any of
its obligations under this Agreement, (ii) any party hereto (other than the
Trustee) 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 to all
other Certificateholders in the following order of priority: first, to the Class
M-6 Certificates, second, to the Class M-5 Certificates, third, to the Class M-4
Certificates, fourth, to the Class M-3 Certificates, fifth, to the Class M-2
Certificates, sixth, to the Class M-1 Certificates, and seventh to the Class A
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. The Trustee shall 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 agrees that, in the event it should obtain any information
necessary for the other party to perform its obligations pursuant to this
Section 9.12, it will promptly notify and provide such information to such other
party.

                                    ARTICLE X

                                   TERMINATION

         Section 10.01 TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL
                       MORTGAGE LOANS.

         Subject to Section 10.03, the obligations and responsibilities of the
Depositor, the Master Servicer, the Seller and the Trustee created hereby with
respect to the Trust Fund shall terminate upon the earlier of (a) the purchase
by the Master Servicer of all 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, (iv)

                                     -119-
<PAGE>

unreimbursed out-of pocket costs of 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, (v) any
unreimbursed costs and expenses of the Trustee payable pursuant to Section 9.05
and (vi) the amount of any Reimbursement Amount due to the Certificate Insurer
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
and to the Certificate Insurer 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 in the preceding paragraph shall be conditioned upon the Stated
Principal Balance of all of the Mortgage Loans in the Trust Fund, at the time of
any such repurchase, aggregating 10% or less of the aggregate Cut- off Date
Principal Balance of all of the Mortgage Loans.

         Section 10.02 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 Protected Account, the Master Servicer
shall direct the Trustee to send a final distribution notice promptly to the
Certificate Insurer and each Certificateholder or (ii) the Trustee determines
that a Class of Certificates shall be retired after a final distribution on such
Class, the Trustee shall notify the Certificateholders (and the Certificate
Insurer with respect to the Class II-A Certificates) 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 Corporate Trust Office of the Trustee. If the Master
Servicer elects to terminate the Trust Fund pursuant to Section 10.01, at least
20 days prior to the date notice is to be mailed to the Certificateholders, the
Master Servicer shall notify the Depositor, the Certificate Insurer and the
Trustee of the date the Master Servicer 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 Master Servicer.

         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 Trustee by letter to Certificateholders and the Certificate Insurer
mailed not later than two Business Days after the Determination Date in 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

                                     -120-
<PAGE>

presentation and surrender of the Certificates at the office therein specified.
The Trustee 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 Protected 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
and any Reimbursement Amounts due to the Certificate Insurer. 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 EMC 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 and to the
Certificate Insurer the amounts allocable to such Certificates and to the
Certificate Insurer held in the Distribution Account in the order and priority
set forth in Section 5.04 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 Trustee shall give a second written notice
to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. If within
six months after the second notice all the applicable Certificates shall not
have been surrendered for cancellation, the Trustee may take appropriate steps,
or may appoint an agent to take appropriate steps, to contact the remaining
Certificateholders concerning surrender of their Certificates, and the cost
thereof shall be paid out of the funds and other assets 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.

         Section 10.03 ADDITIONAL TERMINATION REQUIREMENTS.

         (a) Upon exercise by the Master Servicer of its purchase option as
provided in Section 10.01, the Trust Fund shall be terminated in accordance with
the following additional requirements, unless the Trustee and the Certificate
Insurer have been supplied with an Opinion of Counsel addressed to the Trustee
and the Certificate Insurer, at the expense of the Master Servicer, to the
effect that the failure of the Trust Fund to comply with the requirements of
this Section 10.03 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 Master Servicer shall establish a 90-day liquidation period and
notify the Trustee thereof, and the Trustee shall in turn specify the first day
of such period in a statement attached to the tax return for each of REMIC I and
REMIC II pursuant to Treasury Regulation Section 1.860F-1. The Master Servicer
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 obtained at the expense of the Master Servicer;

                                     -121-
<PAGE>

         (2) During such 90-day liquidation period, and at or prior to the time
of making the final payment on the Certificates, the Trustee shall sell all of
the assets of REMIC I and REMIC II for cash; and

         (3) At the time of the making of the final payment on the Certificates,
the Trustee shall distribute or credit, or cause to be distributed or credited,
to the Holders of the Residual Certificates all cash on hand (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 and REMIC II,
which authorization shall be binding upon all successor Certificateholders.

         (c) The Trustee as agent for each REMIC hereby agrees to adopt and sign
such a plan of complete liquidation upon the written request of the Master
Servicer, and the receipt of the Opinion of Counsel referred to in Section
10.03(a)(1) and to take such other action in connection therewith as may be
reasonably requested by the Master Servicer.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

         Section 11.01 AMENDMENT.

         This Agreement may be amended from time to time by parties hereto, with
the consent of the Certificate Insurer but 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 Protected Account 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 (determined without regard to the Class II-A
Policy).

         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 and REMIC II as a REMIC under the Code or to avoid or
minimize the risk of the imposition of any tax on any of REMIC I or REMIC II
pursuant to the Code that would be a claim against either REMIC I or REMIC II at
any time prior to the final redemption of the Certificates, provided that the
Trustee and the Certificate Insurer has been provided an Opinion of Counsel
addressed to the Trustee and the Certificate Insurer, which opinion shall be an
expense of the party requesting such opinion but in any case shall not be an
expense of the Trustee or the Trust

                                     -122-
<PAGE>

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 with the consent of the Certificate Insurer 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 either REMIC I or REMIC II
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 and the
Certificate Insurer shall have first received an Opinion of Counsel addressed to
the Trustee and the Certificate Insurer, which opinion shall be an expense of
the party requesting such amendment but in any case shall not be an expense of
the Trustee, 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 or REMIC II or the Certificateholders
or cause REMIC I or REMIC II 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
(a copy of which shall be addressed to and delivered to the Certificate
Insurer), 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, the
Certificate Insurer 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 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
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

                                     -123-
<PAGE>

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 11.03 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).

         Section 11.04 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 and the
Certificate Insurer, 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 and the
Certificate Insurer 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.

                                     -124-
<PAGE>

         Section 11.05 NOTICES.

         (a) The Trustee shall use its best efforts to promptly provide notice
to each Rating Agency and the Certificate Insurer 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 or
         the Trustee and the appointment of any successor;

                  (iv) The repurchase or substitution of Mortgage Loans pursuant
         to Sections 2.02, 2.03, 3.18 and 10.01; 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, New York 10179, Attention: Chief Counsel; (ii) in the case of
the Seller or the Master Servicer, 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 Certificate Insurer, Ace Guaranty Corp., 1325 Avenue of
the Americas, New York, New York 10019, Attention: General Counsel, with a copy
to Risk Management at the same address, or such other address as may be
hereafter furnished to the Trustee by the Certificate Insurer 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 Trustee or the Certificate Insurer 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.

                                     -125-
<PAGE>

         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 ASSIGNMENT.

         Notwithstanding anything to the contrary contained herein, except as
provided pursuant to Section 7.02, this Agreement may not be assigned by the
Master Servicer, the Seller or the Depositor.

         Section 11.08 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.

         No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless such Holder previously shall have given to the Trustee a written notice
of an Event of Default and of the continuance thereof, as 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 to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby, and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have neglected or refused to institute any
such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Trustee, that no one or more Holders of Certificates
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provisions of this Agreement to affect, disturb or prejudice
the rights of the Holders of any other of the Certificates, or to obtain or seek
to obtain priority over or preference to any other such Holder or to enforce any
right under this Agreement, except in the manner herein provided and for the
common benefit of all Certificateholders. For the protection and

                                     -126-
<PAGE>

enforcement of the provisions of this Section 11.08, each and every
Certificateholder or the Trustee shall be entitled to such relief as can be
given either at law or in equity.

         Section 11.09 INSPECTION AND AUDIT RIGHTS. The Master Servicer agrees
that, on reasonable prior notice, it will permit any representative of the
Depositor, the Trustee or the Certificate Insurer 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, the Trustee or the
Certificate Insurer 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,
the Trustee or the Certificate Insurer of any right under this Section 11.09
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 9.05 hereof or in the case of the Certificate Insurer, solely if a
Rating Event exists, as provided in the Insurance Agreement).

         Section 11.10 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.

         Section 11.11 CERTIFICATE INSURER RIGHTS.

         (a) All notices, statements, reports, certificates, lists or opinions
required by this Agreement to be sent to the parties hereto, the Rating Agencies
or the Class II-A Certificateholders shall also be sent at such time to the
Certificate Insurer at the notice address set forth in Section 11.05.

         (b) The Certificate Insurer shall be an express third party beneficiary
of this Agreement for the purpose of enforcing the provisions hereof to the
extent of the Certificate Insurer's or any Class II-A Certificateholder's rights
explicitly specified herein as if a party hereto.

         (c) All references herein to the ratings assigned to the Certificates
and to the interests of any Certificateholders shall be without regard to the
Class II-A Policy.

         (d) The Trustee, the Depositor and the Master Servicer shall cooperate
in all respects with any reasonable request by the Certificate Insurer for
action to preserve or enforce the Certificate Insurer's rights or interests
hereunder without limiting the rights or affecting the interests of the
Certificateholders as otherwise set forth herein.

         (e) The Certificate Insurer will have the right to exercise all rights,
including voting rights, which the Holders of the Class II-A Certificates are
entitled to exercise under this Agreement,

                                     -127-
<PAGE>

under the Mortgage Loan Purchase Agreement or any other instrument, document or
agreement relating to the foregoing. In addition, the Certificate Insurer shall
have the right to participate in, to direct the enforcement or defense of, and,
at the Certificate Insurer's sole option, to institute or assume the defense of,
any action, proceeding or investigation for any remedy available to the Trustee
with respect to any matter that could adversely affect the Trust, the Trust Fund
or the rights or obligations of the Certificate Insurer hereunder, under the
Mortgage Loan Purchase Agreement, under the Insurance Agreement or under the
Class II-A Policy or any other instrument, document or agreement relating to the
foregoing or under the other Transaction Documents, including (without
limitation) any insolvency or bankruptcy proceeding in respect of the Seller,
the Master Servicer, the Depositor or any Affiliate thereof provided, that such
participation or direction shall not be in conflict with any rule of law or with
the terms of this Agreement. Following written notice to the Trustee, the
Certificate Insurer shall have the exclusive right to determine, in its sole
discretion, the actions necessary to preserve and protect the Trust and the
Trust Fund.

         (f) The Trustee hereby agrees to provide to the Certificate Insurer
prompt written notice of any action, proceeding or investigation of which it has
actual knowledge that names the Trust or the Trustee as a party or that could
adversely affect the Trust or the Trust Fund.

         (g) Notwithstanding anything contained herein or in any of the other
Transaction Documents to the contrary, the Trustee shall not, without the
Certificate Insurer's prior written consent or unless directed in writing by the
Certificate Insurer, undertake or join any litigation or agree to any settlement
of any action, proceeding or investigation affecting the Trust or the Trust Fund
to the extent any such settlement, action, proceeding or investigation could
reasonably be expected to have a material adverse affect on the rights or
obligations of the Certificate Insurer hereunder or under the Class II-A Policy
or the Transaction Documents.

         (h) Each Holder of a Certificate, by acceptance of its Certificate, and
the Trustee agree that Certificate Insurer shall have such rights as set forth
in this Section, which are in addition to any rights of the Certificate Insurer
pursuant to the other provisions of the Transaction Documents, that the rights
set forth in this Section may be exercised by the Certificate Insurer, in its
sole discretion, without the need for the consent or approval of any
Certificateholder or the Trustee, notwithstanding any other provision contained
herein or in any of the other Transaction Documents, and that nothing contained
in this Section shall be deemed to be an obligation of the Certificate Insurer
to exercise any of the rights provided for herein.

                                      * * *

                                     -128-
<PAGE>

         IN WITNESS WHEREOF, the Depositor, the Master Servicer, the Seller 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 Master Servicer

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

                                       LASALLE BANK NATIONAL ASSOCIATION
                                                as Trustee

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

                                     -129-
<PAGE>

STATE OF NEW YORK                   )
                                    ) ss.:
COUNTY OF NEW YORK                  )

         On this 30th day of December, 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]

                                     -130-
<PAGE>

STATE OF                            )
                                    ) ss.:
COUNTY OF                           )

         On this 30th day of December, 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]

                                     -131-
<PAGE>

STATE OF                            )
                                    ) ss.:
COUNTY OF                           )

         On this 30th day of December, 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 LaSalle Bank
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]

                                     -132-

<PAGE>

                                                                     EXHIBIT A-1

                          Form of Class A 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.

                                      A-1-1

<PAGE>

<TABLE>
<CAPTION>
<S>                                           <C>
Certificate No.1                              Variable Pass-Through Rate

Class [I-A-1][I-A-2][II-A] Senior

Date of Pooling and Servicing Agreement       Aggregate Initial Certificate Principal Balance
and Cut-off Date:                             of this Certificate as of the Cut-off Date:
December 1, 2003                              $___________________

First Distribution Date:                      Initial Certificate Principal Balance of this
January 26, 2004                              Certificate as of the Cut-off Date:
                                              $___________________

Master Servicer:
EMC Mortgage Corporation                      CUSIP: ____________

Assumed Final Distribution Date:
January 25, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class Class [I-A-1][I-A-2][II-A] Certificates
         with respect to a Trust Fund consisting primarily of a pool of
         conventional, closed-end one- to four-family first and second
         lien, fixed and adjustable 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 or the Trustee 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 or the
Trustee 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, closed-end first and second lien, fixed
and adjustable rate mortgage loans secured by one- to four- family residences
(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. EMC will act as master servicer of the Mortgage
Loans (the "Master Servicer," which term includes any successors

                                      A-1-2

<PAGE>

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 Master Servicer and LaSalle Bank National
Association, 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,
commencing on the Distribution Date of the prior month, 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 so long as such Certificate remains in book-entry form (and
otherwise, the close of business on the last Business Day of the month
immediately preceding the month of 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 applicable
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.

                  [This Certificate is entitled to the benefits of an
irrevocable and unconditional financial guaranty insurance policy issued by ACE
Guaranty Corp. (the "Policy").]

                  The Certificateholder, by its acceptance of this Certificate,
agrees that it will look solely to the Trust Fund [and the Policy] for payment
hereunder and that the Trustee is not liable to

                                      A-1-3

<PAGE>

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 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

                                      A-1-4

<PAGE>

the first Distribution Date on which the aggregate Stated Principal Balance of
the Mortgage Loans is less than 10% of the aggregate Stated Principal Balance 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-1-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003                 LASALLE BANK NATIONAL ASSOCIATION
                                         not in its individual capacity but
                                         solely as Trustee

                                         By: ___________________________________
                                                    Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class [I-A-1][I-A-2][II-A] Certificates
referred to in the within- mentioned Agreement.

                                         LASALLE BANK NATIONAL ASSOCIATION
                                         Authorized signatory of LaSalle Bank
                                         National Association, not in its
                                         individual capacity but solely as
                                         Trustee

                                         By: ___________________________________
                                                    Authorized Signatory

                                      A-1-6

<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 M Certificates

                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
SENIOR CERTIFICATES [,] [AND] [CLASS M-1 CERTIFICATES] [,] [AND] [CLASS M-2
CERTIFICATES] [,] [AND] [CLASS M-3 CERTIFICATES] [,] [AND] [CLASS M-4
CERTIFICATES] [AND] [CLASS M-5 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 APPLICABLE
THERETO. 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 RATINGS OR
MOODY'S, 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

                                      A-2-1

<PAGE>

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-2-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                               <C>
Certificate No.1                                  Variable Pass-Through Rate

Class M-[1][2][3][4][5][6] 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:
December 1, 2003                                  $_________________

First Distribution Date:                          Initial Certificate Principal Balance of this
January 26, 2004                                  Certificate as of the Cut-off Date:
                                                  $_________________

Master Servicer:
EMC Mortgage Corporation                          CUSIP: ______________

Assumed Final Distribution Date:
January 25, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class M-[1][2][3][4][5][6] Certificates with
         respect to a Trust Fund consisting primarily of a pool of
         conventional, closed-end one- to four-family first and second
         lien, fixed and adjustable 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 or the Trustee 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 or the
Trustee 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, closed-end first and second lien, fixed
and adjustable rate mortgage loans secured by one- to four- family residences
(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. EMC will act as master servicer of the Mortgage
Loans (in that capacity, the "Master Servicer," which term

                                      A-2-3

<PAGE>

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 Master Servicer, and
LaSalle Bank National Association 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,
commencing on the Distribution Date of the prior month, 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 so long as such Certificate remains in book-entry form (and
otherwise, the close of business on the last Business Day of the month
immediately preceding the month of 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 and any realized losses applicable 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-2-4

<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 Ratings or Moody's, 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.

                                      A-2-5

<PAGE>

                  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 first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than 10% of the
aggregate Stated Principal Balance 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-2-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003                 LASALLE BANK NATIONAL ASSOCIATION
                                         not in its individual capacity but
                                         solely as Trustee

                                         By: ___________________________________
                                                    Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class M-[1][2][3][4][5][6] Certificates
referred to in the within- mentioned Agreement.

                                         LASALLE BANK NATIONAL ASSOCIATION
                                         Authorized signatory of LaSalle Bank
                                         National Association, 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 CE Certificates

                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
SENIOR CERTIFICATES AND THE CLASS M 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.

                  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

                                      A-3-1

<PAGE>

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 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE 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 TRUSTEE, MASTER SERVICER OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.

                                      A-3-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                           <C>
Certificate No.1                              Percentage Interest: 100%

Class CE                                      Variable Pass-Through Rate

Date of Pooling and Servicing Agreement       Initial Certificate Principal Balance of this
and Cut-off Date:                             Certificate as of the Cut-off Date:
December 1, 2003                              $______________

First Distribution Date:                      Initial Certificate Notional Balance of this
January 26, 2003                              Certificate as of the Cut-off Date:
                                              $______________

Master Servicer:
EMC Mortgage Corporation                      CUSIP:______________

Assumed Final Distribution Date:
January 25, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class CE Certificates with respect to a Trust
         Fund consisting primarily of a pool of conventional, closed-end
         one- to four-family first and second lien, fixed and adjustable
         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 or the Trustee 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 or the
Trustee 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, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (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.

                                      A-3-3

<PAGE>

EMC will act as master servicer of the Mortgage Loans (in that capacity, 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 Master Servicer and LaSalle Bank National Association,
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.

                  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 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.

                  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
Exhibit 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 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

                                      A-3-4

<PAGE>

Act or any other securities law or to take any action not otherwise required
under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Depositor, the
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 CE Certificate will be made unless
the transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory to the Trustee that the purchase
of this 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 Trustee, the Master Servicer or the Depositor to any obligation or
liability in addition to those undertaken in the agreement.

                  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-3-5

<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 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 first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance 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-3-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003                 LASALLE BANK NATIONAL ASSOCIATION
                                         not in its individual capacity but
                                         solely as Trustee

                                         By: ___________________________________
                                                    Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

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

                                         LASALLE BANK NATIONAL ASSOCIATION
                                         Authorized signatory of LaSalle Bank
                                         National Association, 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 P Certificate

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE 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.

                  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.

                                      A-4-1

<PAGE>

                  NO TRANSFER OF THIS CERTIFICATE MAY BE MADE TO ANY PERSON,
UNLESS THE TRANSFEREE PROVIDES EITHER A CERTIFICATION PURSUANT TO SECTION 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE 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 TRUSTEE, MASTER SERVICER OR THE DEPOSITOR TO ANY OBLIGATION OR
LIABILITY IN ADDITION TO THOSE UNDERTAKEN IN THE AGREEMENT.

                                      A-4-2

<PAGE>

<TABLE>
<CAPTION>
<S>                                         <C>
Certificate No.1                            Percentage Interest: 100%

Class P

Date of Pooling and Servicing Agreement     Aggregate Initial Certificate Principal Balance
and Cut-off Date:                           of this Certificate as of the Cut-off Date:
December 1, 2003                            $100.00

First Distribution Date:                    Initial Certificate Principal Balance of this
January 26, 2004                            Certificate as of the Cut-off Date:
                                            $100.00

Master Servicer:
EMC Mortgage Corporation                    CUSIP: _________________

Assumed Final Distribution Date:
January 24, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-HE1

         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, closed-end
         one- to four-family first and second lien, fixed and adjustable
         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 or the Trustee 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 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, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (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.

                                      A-4-3

<PAGE>

EMC will act as master servicer of the Mortgage Loans (in that capacity, 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 Master Servicer and LaSalle Bank National Association,
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 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.

                                      A-4-4

<PAGE>

                  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
Exhibit 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 or the Master Servicer in
their respective capacities as such), together with copies of the written
certification(s) of the Holder of the Certificate desiring to effect the
transfer and/or such Holder's prospective transferee upon which such Opinion of
Counsel is based. Neither the Depositor nor the Trustee is obligated to register
or qualify the Class of Certificates specified on the face hereof under the 1933
Act or any other securities law or to take any action not otherwise required
under the Agreement to permit the transfer of such Certificates without
registration or qualification. Any Holder desiring to effect a transfer of this
Certificate shall be required to indemnify the Trustee, the Depositor, 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 transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory to the Trustee that the purchase
of this 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 Trustee, the Master Servicer or the Depositor to any obligation or
liability in addition to those undertaken in the agreement.

                  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

                                      A-4-5

<PAGE>

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 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 first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance 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-4-6

<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: December 30, 2003                 LASALLE BANK NATIONAL ASSOCIATION,
                                         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.

                                         LASALLE BANK NATIONAL ASSOCIATION
                                         Authorized signatory of LaSalle Bank
                                         National Association, 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 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 6.02
OF THE AGREEMENT OR AN OPINION OF COUNSEL SATISFACTORY TO THE TRUSTEE 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 TRUSTEE, MASTER SERVICER OR THE DEPOSITOR 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-5-1

<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-5-2

<PAGE>

Certificate No.1

Class R[-I][-II]                               Percentage Interest: 100%

Date of Pooling and Servicing Agreement
and Cut-off Date:
December 1, 2003

First Distribution Date:
January 26, 2004

Master Servicer:
EMC Mortgage Corporation                       CUSIP: _________________

Assumed Final Distribution Date:
January 25, 2034

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-HE1

         evidencing a fractional undivided interest in the distributions
         allocable to the Class R[-I][-II] Certificates with respect to
         a Trust Fund consisting primarily of a pool of conventional,
         closed-end one- to four-family first and second lien, fixed and
         adjustable 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 or the Trustee 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 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, closed-end first
and second lien, fixed and adjustable rate mortgage loans secured by one- to
four- family residences (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. EMC will act as master servicer of
the Mortgage Loans (in that capacity, the "Master Servicer," which term includes
any successors thereto under the Agreement referred to below). The Trust Fund

                                      A-5-3

<PAGE>

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 Master Servicer and LaSalle
Bank National Association 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 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.

                  No transfer of this Class R Certificate will be made unless
the transferee provides either a certification pursuant to section 6.02 of the
Agreement or an Opinion of Counsel satisfactory

                                      A-5-4

<PAGE>

to the Trustee that the purchase of this 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 Trustee, the Master Servicer
or the Depositor to any obligation or liability in addition to those undertaken
in the agreement.

                  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 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

                                      A-5-5

<PAGE>

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 first Distribution Date on which the
aggregate Stated Principal Balance of the Mortgage Loans is less than or equal
to 10% of the aggregate Stated Principal Balance 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: December 30, 2003                 LASALLE BANK NATIONAL ASSOCIATION,
                                         not in its individual capacity but
                                         solely as Trustee

                                         By: ___________________________________
                                                    Authorized Signatory

                          CERTIFICATE OF AUTHENTICATION
                          -----------------------------

                  This is one of the Class R[-I][-II] Certificates referred to
in the within-mentioned Agreement.

                                         LASALLE BANK NATIONAL ASSOCIATION
                                         Authorized signatory of LaSalle Bank
                                         National Association, 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)  [Reserved];

          (c)  the 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)  reserved;

          (s)  the Gross Margin, if applicable;

                                       B-1

<PAGE>

          (t)  the Maximum Lifetime Mortgage Rate, if applicable;

          (u)  the Minimum Lifetime Mortgage Rate, if applicable;

          (v)  the Periodic Rate Cap, if applicable; and

          (w)  the number of days delinquent, if any.

                                       B-2

<PAGE>

                                    EXHIBIT C

                                   [RESERVED]

                                      C-1-1

<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-HE1, 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 _____________.

         5. That no purpose of the acquisition of the Residual Certificates is
to avoid or impede the assessment or collection of tax.

                                       D-1

<PAGE>

         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

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603

Attention: Bear Stearns Asset Backed Securities Trust 2003-HE1

                  Re:   Bear Stearns Asset Backed Securities, Inc.
                        Asset-Backed Certificates, Series 2003-HE1, 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-HE1, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of December 1, 2003 among Bear Stearns Asset-
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation, as seller and master servicer, and LaSalle Bank National
Association, 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

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603

Attention:   Bear Stearns Asset Backed Securities Trust 2003-HE1

             Re:  Bear Stearns Asset-Backed Securities, Inc.
                  Asset-Backed Certificates, Series 2003-HE1, Class__
                  ---------------------------------------------------

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
______________ (the "Seller") $_________ Initial Certificate Principal Balance
of Asset-Backed Certificates, Series 2003-HE1, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of December 1, 2003 among Bear Stearns Asset
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation, as seller and master servicer, and LaSalle Bank National
Association, 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 ______, 2003, 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

LaSalle Bank National Association
135 South LaSalle Street, Suite 1625
Chicago, Illinois 60603

         Re:      Bear Stearns Asset Backed Securities Trust 2003-HE1,
                  Asset-Backed Certificates, Series 2003-HE1 (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 securities or "Blue Sky" laws or an
                           exemption from the registration

                                       G-1

<PAGE>

                           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 LaSalle Bank 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.

                  (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.

                                       G-2

<PAGE>

                           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 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

                                       G-3

<PAGE>

                           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 December 1, 2003,
between Bear Stearns Asset Backed Securities, Inc., as depositor, EMC Mortgage
Corporation, as seller and master, and LaSalle Bank National Association, 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]

                                       G-5

<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]

                                       G-6

<PAGE>

                                                                       EXHIBIT H

                           FORM OF REQUEST FOR RELEASE

To:      LaSalle Bank National Association
         135 South LaSalle Street, Suite 1625
         Chicago, Illinois 60603

RE:      Pooling and Servicing Agreement dated as of December 1, 2003, between
         Bear Stearns Asset Backed Securities Inc., as Depositor, EMC Mortgage
         Corporation, as seller and master Servicer, and LaSalle Bank National
         Association, 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

                           FORM OF CUSTODIAL AGREEMENT
                           ---------------------------

                  THIS CUSTODIAL AGREEMENT (as amended and supplemented from
time to time, the "Agreement'), dated as of December 30, 2003, by and among
LASALLE BANK NATIONAL ASSOCIATION, not individually but solely as trustee under
the Pooling and Servicing Agreement defined below (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 (in that
capacity, the "Seller") and master servicer (together with any successor in
interest or successor under the Pooling and Servicing Agreement referred to
below, the "Master Servicer") and WELLS FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, as 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
December 1, 2003, relating to the issuance of Bear Stearns Asset Backed
Securities Trust 2003-HE1, Asset-Backed Certificates, Series 2003-HE1 (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 on behalf of the Certificateholders and the Certificate Insurer 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 custodial 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 and the Certificate Insurer.

                  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, the Trustee and the Certificate Insurer 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 and the Certificate Insurer, 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, the Master
Servicer, the Certificate Insurer 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, for the benefit of Certificateholders and the
Certificate Insurer, the Mortgage Files as provided in Section 2.02 of the
Pooling and Servicing Agreement and deliver to the Seller, the Master Servicer,
the Certificate Insurer and the Trustee a Final Certification in the form
annexed hereto as Exhibit Three evidencing the completeness of the Mortgage
Files.

                                       K-2

<PAGE>

                  (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 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 Master
Servicer, the Certificate Insurer 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 Protected 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 Master Servicer, 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 Master Servicer, the related Mortgage File. The Depositor
shall deliver to the Custodian and the Custodian agrees to review in accordance
with the provisions of the Custodial 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 Mortgage Insurance Policy or LPMI Policy, the Master Servicer 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 Master
Servicer 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 Master Servicer. The Master
Servicer shall cause each Mortgage File or any document therein so released to
be returned to the Custodian when the need therefore by the Master Servicer no
longer exists, unless (i) the Mortgage Loan has been liquidated and the
Liquidation Proceeds relating to the Mortgage Loan have been deposited in the
Protected 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 Master Servicer has

                                       K-3

<PAGE>

delivered to the Custodian a certificate of a Servicing Officer certifying as to
the name and address of the Person to which such Mortgage File or such document
was delivered and the purpose or purposes of such delivery.

                  At any time that the Master Servicer is required to deliver to
the Custodian a Request for Release, the Master Servicer shall deliver two
copies of the Request for Release if delivered in hard copy or the Master
Servicer 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 Master Servicer.

                  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, shall 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 custodial 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, the Certificateholders and the Certificate Insurer and undertakes to
perform such duties and only such duties as are specifically set forth in this
Agreement and in the Pooling and Servicing 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 Seller, the
Depositor 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 written notice of resignation, the
Trustee shall either take custody of the Mortgage Files itself and give prompt
written notice thereof to the Depositor, the Master Servicer, the Certificate
Insurer 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 written notice of resignation, the resigning Custodian may
petition any court of competent jurisdiction for the appointment of a successor
Custodian.

                  The Trustee, at the direction of 25% of the
Certificateholders, shall 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 Master Servicer 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, the
Certificate Insurer and the Master Servicer of the appointment of any successor
Custodian. Notwithstanding anything to the contrary set forth herein, no
successor Custodian shall be appointed by the Trustee without the prior approval
of the Depositor and the Master Servicer and with the prior written consent of
the Certificate Insurer (which consent shall not be unreasonably withheld).

                  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.

                                       K-5

<PAGE>

                  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 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.

                  Section 3.8. LIMITATION ON LIABILITY. Neither the Custodian
nor any of its directors, officers, agents or employees, shall be liable for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith in good faith and believed (which belief may be based upon the opinion
or advice of counsel selected by it in the exercise of reasonable care) by it or
them to be within the purview of this Agreement, except for its or their own
negligence, lack of good faith or willful misconduct. The Custodian and any
director, officer, employee or agent of the Custodian 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. In no event shall the Custodian
or its directors, officers, agents and employees be held liable for any special,
indirect or consequential damages resulting from any action taken or omitted to
be taken by it or them hereunder or in connection herewith even if advised of
the possibility of such damages.

                  Notwithstanding anything herein to the contrary, the Custodian
agrees to indemnify the Trust Fund, the Trustee and each of their respective
officers, directors and agents for any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever that may be imposed
on, incurred by or asserted against the Trustee or Trust Fund, due to any act or
omission by the Custodian with respect to the Mortgage Files; provided, however,
that the Custodian shall not be liable to any of the foregoing Persons for any
amount and any portion of any such amount resulting from the willful
misfeasance, bad faith or negligence of such Person. The provisions of this
Section 3.8 shall survive the termination of this Custodial Agreement.

                  The Custodian and its directors, officers, employees and
agents shall be entitled to indemnification and defense from the Trust Fund for
any loss, liability or expense incurred without negligence, willful misconduct,
bad faith on their part, arising out of, or in connection with, the acceptance
or administration of the custodial arrangement created hereunder, including the
costs and expenses of defending themselves against any claim or liability in
connection with the exercise or performance of any of their powers or duties
hereunder.

                                   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.

                                       K-6

<PAGE>

                  Section 4.2. CERTIFICATE INSURER RIGHTS. The Certificate
Insurer shall be an express third party beneficiary of this Custodial Agreement
for the purpose of enforcing the provisions hereof to the extent of the
Certificate Insurer's or any Class II-A Certificateholder's rights explicitly
specified herein as if a party hereto.

                  Section 4.3. 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, with the prior written consent of the
Certificate Insurer (which consent shall not be unreasonably withheld). 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 4.4. 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 4.5. 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, 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 4.6. 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-7

<PAGE>

                  IN WITNESS WHEREOF, this Agreement is executed as of the date
first above written.

Address:                                      LASALLE BANK NATIONAL
                                              ASSOCIATION, not individually but
135 South LaSalle Street                      solely as Trustee
Chicago, IL 60603

Attention:                                    By: ______________________________
            BSABS 2003-HE1                    Name:
Telecopy:                                     Title:
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
1015 Tenth Avenue Southeast
Minneapolis, Minnesota 55414                  By: ______________________________
                                              Name:    Leigh Taylor
                                              Title:   Assistant Vice President

<PAGE>

STATE OF              )
                      ) ss:
COUNTY OF             )

                  On the ____ day of December 2003 before me, a notary public in
and for said State, personally appeared _______________, known to me to be a(n)
___________________ of LaSalle Bank National Association, one of the parties
that executed the within agreement, and also known to me to be the person who
executed the within agreement on behalf of said party and acknowledged to me
that such party 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]

                                       K-9

<PAGE>

STATE OF NEW YORK              )
                                    ) ss:
COUNTY OF NEW YORK             )

                  On the ____ day of December 2003 before me, a notary public in
and for said State, personally appeared_____________________, known to me to be
a(n)________________of Bear Stearns Asset Backed Securities, Inc., and also
known to me to be the person who executed the within instrument on behalf of
said party, and acknowledged to me that such party 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 December 2003 before me, a notary public in
and for said State, personally appeared _____________________, known to me to be
a(n) __________________of EMC Mortgage Corporation, one of the parties that
executed the within instrument, and also known to me to be the person who
executed the within instrument on behalf of said party, and acknowledged to me
that such party 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]

                                      K-11

<PAGE>

STATE OF MINNESOTA      )
                        ) ss:
COUNTY OF HENNEPIN      )

                  On the ____ day of December 2003 before me, a notary public in
and for said State, personally appeared Leigh Taylor, known to me to be a
Assistant Vice President of Wells Fargo Bank Minnesota, National Association,
one of the national parties that executed the within instrument, and also known
to me to be the person who executed it on behalf of said party, and acknowledged
to me that such party 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

                                                  December ___, 2003

LaSalle Bank National Association        ACE Guaranty Corp.
135 South LaSalle Street                 1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                        New York, NY 10019

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-HE1

                  Re:   Custodial Agreement, dated as of December ___, 2003, by
                        and among LaSalle Bank National Association, 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-HE1, Asset-Backed Certificates, Series 2003-HE1
                        --------------------------------------------------------

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-13

<PAGE>

                                   EXHIBIT TWO

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                  [DATE]

LaSalle Bank National Association        ACE Guaranty Corp.
135 South LaSalle Street                 1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                        New York, NY 10019

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-HE1

                  Re:   Custodial Agreement, dated as of December ___, 2003, by
                        and among LaSalle Bank National Association, 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-HE1, Asset-Backed Certificates,
                        Series 2003-HE1
                        --------------------------------------------------------

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-14

<PAGE>

                                  EXHIBIT THREE

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                                     [DATE]

LaSalle Bank National Association        ACE Guaranty Corp.
135 South LaSalle Street                 1325 Avenue of the Americas, 18th Floor
Chicago, IL 60603                        New York, NY 10019

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-HE1

                  Re:  Custodial Agreement, dated as of December ___, 2003, by
                       and among LaSalle Bank National Association, 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-HE1 Asset-Backed Certificates,
                       Series 2003-HE1
                       --------------------------------------------------------

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 "LaSalle Bank
                  National Association, as Trustee for certificateholders of
                  Bear Stearns Asset Backed Securities, Inc. Asset Backed
                  Certificates, Series 2003- HE1," 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

                                      K-15

<PAGE>

                  evidence of such recording indicated thereon (or if permitted
                  by Section 2.2 of the Custodial Agreement, 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
"LaSalle Bank National Association , as Trustee for certificateholders of Bear
Stearns Asset Backed Securities, Inc. Asset Backed Certificates, Series
2003-HE1", 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:___________________________

                                      K-16

<PAGE>

                                   EXHIBIT L

                            FORM OF CLASS II-A POLICY

                                              December 30, 2003

ACE GUARANTY CORP.
1325 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019

FINANCIAL GUARANTY INSURANCE POLICY
-----------------------------------

OBLIGATIONS INSURED:                         FINANCIAL GUARANTY INSURANCE
                                             POLICY NUMBER:  D-2003-128
All Insured Payments now owing or which
may in the future be owing by the Trust      EFFECTIVE DATE:   December 30, 2003
and to be paid by the Trust to the
Beneficiary under the Obligations, as
further described and defined below.

         For value received and subject to the terms and conditions of this
financial guaranty insurance policy number D-2003-128 (the "POLICY"), ACE
Guaranty Corp., a Maryland corporation, as Insurer with respect to the
Obligations (the "INSURER") for the trust created pursuant to the Pooling
Agreement, as defined below (the "TRUST"), is held and firmly bound unto the
Beneficiary identified below for, and unconditionally and irrevocably agrees to
pay, each and every Insured Payment which shall become Due for Payment, but
shall be unpaid by reason of Nonpayment by the Trust (as such terms are defined
below). This Policy is non-cancelable for any reason, including, without
limitation, the non-payment of premium.

TERMS AND CONDITIONS
--------------------

SECTION 1.  DEFINITIONS

         Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Pooling Agreement as of the date of execution of
this Policy, without giving effect to any subsequent amendment to or
modification of the Pooling Agreement unless such amendment or modification has
been approved in writing by the Insurer pursuant to the amendment provisions of
the Pooling Agreement. In addition to the terms defined elsewhere herein, the
following terms shall have the respective meanings set forth below.

<PAGE>

         (a) "AVOIDED PAYMENT" shall mean any amount previously distributed by
or on behalf of the Trust in respect of an Obligation that is recoverable and
sought to be recovered as a voidable preference by a trustee in bankruptcy
pursuant to Insolvency Proceeding in accordance with a final nonappealable order
of a court having competent jurisdiction.

         (b) "BENEFICIARY" means the Trustee, on behalf of, and for the benefit
of the holders of the Obligations.

         (c) "BUSINESS DAY" means any day other than (i) a Saturday or Sunday or
(ii) any other day on which banking institutions are authorized or required by
law, executive order or governmental decree to be closed in New York City,
Minnesota, Maryland or Illinois.

         (d) "DEFAULTED AMOUNT" means the portion of an Insured Payment that is
Due for Payment and unpaid by reason of Nonpayment by the Trust.

         (e) "DUE FOR PAYMENT," means with respect to an Insured Payment and any
Distribution Date: (i) any shortfall in amounts available in the Distribution
Account in respect of the Interest Distribution Amount payable on each
Obligation on such Distribution Date; (ii) any Insured Certificate Loss Amount
with respect to each Obligation on such Distribution Date; and (iii) on the
Final Scheduled Distribution Date (or, with the consent of the Insurer, upon the
earlier termination of the Trust pursuant to the terms of the Pooling Agreement)
the Certificate Principal Balance of each Obligation after giving effect to any
distributions on such Distribution Date (other than distributions of Insured
Payments).

         (f) "FINAL SCHEDULED DISTRIBUTION DATE" means the Distribution Date
occurring in January 2034.

         (g) "FISCAL AGENT" has the meaning assigned thereto in Section 4.

         (h) "INSOLVENCY PROCEEDING" means the commencement after the date
hereof of any bankruptcy, insolvency, readjustment of debt, reorganization,
marshalling of assets and liabilities or similar proceedings by or against any
Person, or the commencement after the date hereof of any proceedings by or
against any Person for the winding up or the liquidation of its affairs, or the
consent after the date hereof to the appointment of a trustee, conservator,
administrator, receiver or liquidator in any bankruptcy, insolvency,
readjustment of debt, reorganization, marshalling of assets and liabilities or
similar proceedings relating to any Person.

         (i) "INSURED CERTIFICATE LOSS AMOUNT" means, with respect to any
Distribution Date and the Obligation, the Applied Realized Loss Amount with
respect to the Obligation allocated on such Distribution Date.

         (j) "INSURED PAYMENT" means the following amounts now owing or which
may in the future be owing by the Trust to the Holders of any Obligation: (i)
the Current Interest payable on each Obligation on such Distribution Date; (ii)
any Insured Certificate Loss Amount with respect to each Obligation on each
Distribution Date; and (iii) the Certificate Principal Balance of each
Obligation on the Final Scheduled Distribution Date, or, with the consent of the
Insurer, upon the

                                       L-2

<PAGE>

earlier termination of the Trust pursuant to the terms of the Pooling Agreement,
in each case after giving effect to any distributions on such Distribution Date
(other than distributions of Insured Payments); PROVIDED, HOWEVER, that so long
as the Insurer has not failed to pay when due and payable an amount previously
referred to in this definition, "Insured Payment" shall not include any
additional amounts owing by the Trust solely as a result of the failure by the
Trustee to pay such amount when due and payable, including, without limitation,
any such additional amounts as may be attributable to penalties or default
interest rates, amounts in respect of indemnification, or any other additional
amounts payable by the Trustee by reason of such a default. Notwithstanding the
foregoing, "INSURED PAYMENT" does not include any Basis Risk Shortfall, any
Prepayment Interest Shortfall, any Relief Act Interest Shortfall or any
shortfall attributable to the liability of the Trust for taxes or withholding
taxes including interest and penalties in respect of such liability.

         (k) "NONPAYMENT BY THE TRUST" with respect to an Insured Payment at a
time when such Insured Payment is Due for Payment, means that the funds, if any,
remitted to the Beneficiary pursuant to the Pooling Agreement are insufficient
for payment in full of such Insured Payment. In addition to and without limiting
the foregoing, "NONPAYMENT BY THE TRUST" includes any portion of any Insured
Payment which has become an Avoided Payment.

         (l) "NOTICE OF CLAIM" means a notice of claim in the form of Exhibit A
hereto.

         (m) "OBLIGATION" means the Asset-Backed Certificates, Series 2003-HE1,
Class II-A Certificates issued under the Pooling Agreement.

         (n) "ORDER" means a final, nonappealable order of a court or other body
exercising jurisdiction in an Insolvency Proceeding by or against the Trust, to
the effect that the Beneficiary is required to return or repay all or any
portion of an Avoided Payment.

         (o) "PERSON" means any legal person, including any individual,
corporation, partnership, joint venture, association, joint stock company,
limited liability company, trust or unincorporated organization or similar
entity.

         (p) "POLICY" means this Financial Guaranty Insurance Policy No.
D-2003-128.

         (q) "POOLING AGREEMENT" means the Pooling and Servicing Agreement,
dated as of December 1, 2003, among Bear Stearns Asset Backed Securities, Inc.,
as Depositor, EMC Mortgage Corporation, as Seller and Master Servicer and the
Trustee, without regard to any amendment or supplement thereto unless such
amendment or supplement has been approved in writing by the Insurer pursuant to
the amendment provisions of the Pooling Agreement.

         (r) "RECEIPT" and "RECEIVED" shall mean actual delivery to the Insurer
prior to 2:00 p.m., New York City time, on a Business Day; PROVIDED, HOWEVER,
that delivery either on a day that is not a Business Day, or after 2:00 p.m.,
New York City time, on a Business Day, shall be deemed to be "RECEIVED" on the
next succeeding Business Day. For purposes of this definition, "actual delivery"
to the Insurer shall mean (i) the delivery of the original Notice of Claim,
notice or other applicable documentation to the Insurer at its address set forth
in Section 6, or (ii) facsimile transmission of the original Notice of Claim,
notice or other applicable documentation to the Insurer at its facsimile

                                       L-3

<PAGE>

number set forth in Section 6. If presentation is made by facsimile
transmission, the Beneficiary (i) promptly shall confirm transmission by
telephone to the Insurer at its telephone number set forth in Section 6, and
(ii) as soon as is reasonably practicable, shall deliver the original Notice of
Claim, notice or other applicable documentation to the Insurer at its address
set forth in Section 6. If any Notice of Claim, notice or other documentation
actually delivered (or attempted to be delivered) under the Policy by the
Beneficiary is not in proper form or is not properly completed, executed or
delivered, or otherwise is insufficient for the purpose of making a claim
hereunder, "RECEIPT" by the Insurer shall be deemed not to have occurred, and
the Insurer promptly shall so advise the Beneficiary. In such case, the
Beneficiary may submit an amended Notice of Claim, notice or other
documentation, as the case may be, to the Insurer.

         (s) "TERM OF THE POLICY" means the period from and including the
Effective Date to and including the date on which all Insured Payments have been
paid; PROVIDED, HOWEVER, that in the event that any amount with respect to any
Insured Payment paid to the Beneficiary pursuant to the Pooling Agreement during
the Term of the Policy becomes an Avoided Payment, the Insurer's obligations
with respect thereto shall remain in effect or shall be reinstated, as
applicable, until payment in full by the Insurer pursuant to the terms hereof.

         (t) "TRUSTEE" means LaSalle Bank National Association, or any successor
thereto under the Pooling Agreement.

SECTION 2.  CLAIMS

         The Beneficiary may make a claim under this Policy for the amount of
any Defaulted Amount by executing and delivering, or causing to be executed and
delivered, to the Insurer a Notice of Claim, with appropriate insertions. Such
Notice of Claim, when so completed and delivered, shall constitute proof of a
claim hereunder when Received by the Insurer.

         In the event that any amount shall be received by the Beneficiary in
respect of a Defaulted Amount forming the basis of a claim specified in a Notice
of Claim submitted hereunder, which amount had not been received when the Notice
of Claim was prepared but which is received by the Beneficiary prior to the
receipt of payment from the Insurer as contemplated by this Policy (any such
amount, a "RECOVERY"), the Beneficiary immediately shall so notify the Insurer
(which notice shall include the amount of any such Recovery). The fact that a
Recovery has been received by the Beneficiary shall be deemed to be incorporated
in the applicable Notice of Claim as of the date such Notice of Claim originally
was prepared, without necessity of any action on the part of any Person, and the
Insurer shall pay the amount of the claim specified in the Notice of Claim as
herein provided, net of the Recovery.

         The Insurer will pay each Defaulted Amount (other than a Defaulted
Amount which consists of an Avoided Payment) to the Beneficiary on the later of
(i) noon, New York City time, on the date such Defaulted Amount becomes Due for
Payment or (ii) noon, New York City time, on the second Business Day following
the day on which the Insurer Receives a Notice of Claim as specified in the
preceding paragraph. The Insurer will pay each Defaulted Amount which consists
of an Avoided Payment as provided in Section 3.

                                       L-4

<PAGE>

         No claim may be made hereunder except by the Beneficiary.

SECTION 3.  PAYMENTS

         Payments due hereunder in respect of Insured Payments shall be
disbursed to the Beneficiary by wire transfer of immediately available funds to
an account of the Beneficiary specified in the applicable Notice of Claim.

         The Insurer's obligations hereunder in respect of Insured Payments
shall be discharged to the extent that funds are transferred to the Beneficiary
as provided in the Notice of Claim, whether or not such funds are properly
applied by the Beneficiary.

         If any amount or property paid, credited, transferred or delivered to
the Beneficiary by the Trust becomes an Avoided Payment, the Insurer will pay
the amount of such Avoided Payment when due to be paid pursuant to an applicable
Order, but in any event no earlier than the fourth Business Day following
Receipt by the Insurer from the Beneficiary of (i) a certified copy of such
Order, (ii) a certificate by or on behalf of the Beneficiary that such Order has
been entered and is not subject to any stay, (iii) an assignment, in form and
substance satisfactory to the Insurer, duly executed and delivered by the
Beneficiary, irrevocably assigning to the Insurer all rights and claims of the
Beneficiary against the estate of the Trust or otherwise, which rights and
claims relate to or arise under or with respect to the subject Avoided Payment,
and (iv) a Notice of Claim appropriately completed and executed by the
Beneficiary. Such payment shall be disbursed to the receiver, conservator,
administrator, debtor-in-possession or trustee in bankruptcy named in the Order,
and not to the Beneficiary directly, unless the Beneficiary has previously paid
the Avoided Payment over to such court or receiver, conservator, administrator,
debtor-in-possession, or trustee in bankruptcy, in which case the Insurer will
pay the Beneficiary subject to the delivery of (a) the items referred to in
clauses (i), (ii), (iii) and (iv) above to the Insurer, and (b) evidence
satisfactory to the Insurer that payment has been made to such court or
receiver, conservator, administrator, debtor-in-possession or trustee in
bankruptcy named in the Order.

         Notwithstanding the foregoing paragraph, in no event shall the Insurer
be obligated to make any payment in respect of an Avoided Payment prior to the
date such Avoided Payment is Due for Payment. In the event that the payment of
any amount in respect of any Insured Payment is accelerated or must otherwise be
paid by the Trust in advance of the scheduled payment date therefore, nothing in
this Policy shall be deemed to require the Insurer to make any payment hereunder
in respect of any such Insured Payment prior to the date such Insured Payment
otherwise would have been Due for Payment without giving effect to such
acceleration, unless the Insurer in its sole discretion elects to make any prior
payment, in whole or in part, with respect to any such Insured Payment.

SECTION 4.  FISCAL AGENT

         At any time during the Term of the Policy, the Insurer may appoint a
fiscal agent (the "FISCAL AGENT") for purposes of this Policy by written notice
to the Beneficiary, specifying the name and notice address of such Fiscal Agent.
From and after the date of receipt of such notice by the Beneficiary, copies of
all notices and documents required to be delivered to the Insurer pursuant to

                                       L-5

<PAGE>

this Policy shall be simultaneously delivered to the Fiscal Agent and to the
Insurer. All payments required to be made by the Insurer under this Policy may
be made directly by the Insurer or by the Fiscal Agent on behalf of the Insurer.
The Fiscal Agent is the agent of the Insurer only, and the Fiscal Agent shall in
no event be liable to the Beneficiary for any acts of the Fiscal Agent or any
failure of the Insurer to deposit, or cause to be deposited, sufficient funds to
make payments due under this Policy.

SECTION 5.  ASSIGNMENT

         This Policy may not be assigned by the Beneficiary without the prior
written consent of the Insurer.

SECTION 6.  NOTICES

         All notices, presentations, transmissions, deliveries and
communications made by the Beneficiary to the Insurer with respect to this
Policy shall specifically refer to the number of this Policy, shall be in
writing (except as otherwise specifically provided herein) and shall be mailed
by registered mail or personally delivered or telecopied to the recipient as
follows:

         if to the Insurer:

                  ACE Guaranty Corp.
                  1325 Avenue of the Americas
                  New York, New York   10019
                  Attention:     Risk Management
                  Telephone: (212) 974-0100
                  Telecopier: (212) 581-3268,

                  With a copy to the General Counsel at the above address and
telecopier number.

         if to the Beneficiary:

                  LaSalle Bank National Association, as Trustee
                  135 South LaSalle Street
                  Suite 1625
                  Chicago, Illinois
                  Attention:  Global Securitization Trust Services Group - Bear
                              Stearns Asset Backed
                  Securities, Inc., Series 2003-HE1

         The Insurer or the Beneficiary may designate an additional or different
address, or telephone or telecopier number, by prior written notice. Each
notice, presentation, delivery and communication to the Insurer shall be
effective only upon Receipt by the Insurer.

SECTION 7.  SUBROGATION

                                       L-6

<PAGE>

         The Insurer shall be subrogated to the rights of the Beneficiary to
receive payments in respect of the Insured Payments to the extent of any payment
by the Insurer hereunder. Any payment made by or on behalf of the Trust to, and
any amounts received under the Pooling Agreement for the benefit of, the
Beneficiary in respect of any Insured Payment forming the basis of a claim
hereunder (which claim shall have been paid by the Insurer) shall be received
and held in trust for the benefit of the Insurer and shall be paid over to the
Insurer in accordance with the Pooling Agreement. The Beneficiary shall
cooperate in all reasonable respects, and at the expense of the Insurer, with
any request by the Insurer for action to preserve or enforce the Insurer's
rights and remedies in respect of the Trust under the Obligation, any related
security arrangements or otherwise, including without limitation any request to
(i) institute or participate in any suit, action or other proceeding, (ii)
enforce any judgment obtained and collect from the Trust or the Beneficiary any
amounts adjudged due or (iii) transfer to the Insurer, via absolute legal
assignment, the Beneficiary's rights in respect of any Insured Payment which may
form the basis of a claim hereunder.

SECTION 8.  PREMIUMS

         The Beneficiary shall pay or cause to be paid to the Insurer in
accordance with the Pooling Agreement the premium payable to the Insurer in
respect of this Policy as set forth in the premium letter, dated December 30,
2003, relating to this Policy.

SECTION 9.  TERMINATION

         This Policy and the obligations of the Insurer hereunder shall
terminate upon the expiration of the Term of the Policy.

SECTION 10.  MISCELLANEOUS

         (a) No waiver of any rights or powers of the Insurer or the
Beneficiary, or any consent by either of them, shall be valid unless in writing
and signed by an authorized officer or agent of the Insurer or Beneficiary, as
applicable. The waiver of any right by the Insurer or the Beneficiary, or the
failure promptly to exercise any such right, shall not be construed as a waiver
of any other right to exercise the same at any time thereafter.

         (b) This Policy will be governed by, and shall be construed in
accordance with, the laws of the State of New York (other than with respect to
its conflicts of laws principles).

         (c) The Insurer hereby irrevocably submits to the jurisdiction of the
United States District Court for the Southern District of New York and any court
in the State of New York located in the City and County of New York, and any
Appellate Court which hears appeals from any such court, in any action, suit or
proceeding brought against it in connection with its obligations under this
Policy, or for recognition or enforcement of any judgment with respect thereto,
and the Insurer hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard or determined in such New
York State court or, to the extent permitted by law, in such United States
federal court. The Insurer agrees that a final judgment in any such action, suit
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment, or in any other manner provided by applicable law. To the
extent permitted by applicable

                                       L-7

<PAGE>

law, the Insurer hereby waives and agrees not to assert by way of motion, as a
defense or otherwise in any such suit, action or proceeding, any claim (i) that
it is not personally subject to the jurisdiction of such courts, (ii) that the
suit, action or proceeding is brought in an inconvenient forum, (iii) that the
venue of the suit, action or proceeding is improper or (iv) that the subject
matter thereof may not be litigated in or by such courts.

         (d) The Insurer hereby waives and agrees not to assert, in each case
for the benefit of the Beneficiary only, any and all rights and defenses of any
kind which the Insurer might have with respect to the Obligation to pay the
amounts due hereunder in full.

         (e) This policy is not subject to coverage under the New York
Property/Casualty Insurance Security Fund.

                                       L-8

<PAGE>

         IN WITNESS WHEREOF, ACE GUARANTY CORP. has caused this Policy to be
affixed with its corporate seal and to be signed by its authorized officer, to
become effective and binding upon ACE GUARANTY CORP. by virtue of such
signature.

                                                    ACE GUARANTY CORP.

                                                    By: ________________________
                                                        Name:
                                                        Title:

[SEAL]

                                       L-9

<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                                 NOTICE OF CLAIM
                                 ---------------

ACE Guaranty Corp.
1325 Avenue of the Americas
New York, New York   10019

Attention:  General Counsel

         The undersigned, a duly authorized officer of [Name of Beneficiary]
(the "BENEFICIARY"), hereby certifies to ACE Guaranty Corp. (the "INSURER") with
reference to Financial Guaranty Insurance Policy No. D-2003-128 (the "POLICY"),
that:

         (i) The deficiency with respect to the Insured Payment Due for Payment
and unpaid by reason of Nonpayment by the Trust for [insert applicable payment
date] is $[insert applicable amount] (the "DEFAULTED AMOUNT").

         (ii) The Beneficiary is making a claim under the Policy for the
Defaulted Amount to be applied to the payment of the above-described Insured
Payment.

         (iii) The Beneficiary agrees that, following payment by the Insurer
made with respect to the Defaulted Amount which is the subject of this Notice of
Claim, it (a) will cause such amounts to be applied directly to the payment of
the applicable Insured Payment; (b) will insure that such funds are not applied
for any other purpose; and (c) will cause an accurate record of such payment to
be maintained with respect to the appropriate Insured Payment(s), the
corresponding claim on the Policy, and the proceeds of such claim.

         (iv) Payment should be made by wire transfer to the following account :

                  LaSalle Bank National Association
                  ABA No.:     [________]
                  Account No:  [________]
                  Reference:   Trust Administration - [_______]

         Upon payment of the applicable Defaulted Amount(s), the Insurer shall
be subrogated to the rights of the Beneficiary with respect to such payment, to
the extent set forth in Section 7 of the Policy.

         Capitalized terms used in this Notice of Claim and not otherwise
defined herein shall have the respective meanings ascribed thereto in the
Policy.

                                      L-10

<PAGE>

         This Notice of Claim may be revoked at any time by written notice of
such revocation by the Beneficiary to the Insurer, if and only to the extent
that moneys are actually received prior to any such revocation from a source
other than the Insurer with respect to the Defaulted Amount set forth herein.

         IN WITNESS WHEREOF, the undersigned has executed and delivered this
Notice of Claim as of the __ day of _________ of 20__.

                                              LASALLE BANK NATIONAL ASSOCIATION,
                                                 as Trustee

                                              By:  ____________________________
                                                   Name:
                                                   Title:

                                      L-11

<PAGE>

                                    EXHIBIT M

         FORM OF BACK-UP CERTIFICATION TO FORM 10-K CERTIFICATE

         I, [identify the certifying individual], on behalf of LaSalle Bank
National Association, as trustee (the "Trustee") certify 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 or servicing reports
filed in respect of periods included in the year covered by that annual report,
of the trust (the "Trust") created pursuant to the Pooling and Servicing
Agreement dated December 1, 2003 (the "P&S Agreement") among Bear Stearns Asset
Backed Securities, Inc., as depositor (the "Depositor"), EMC Mortgage
Corporation as seller (in that capacity, the "Seller") and master servicer (in
that capacity, the "Master Servicer") and LaSalle Bank National Association as
trustee (the "Trustee"); and

         2. Based on my knowledge, the distribution information in these reports
and any other information provided by the Trustee for inclusion 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 the statements were made, not misleading
as of the last day of the period covered by that annual report.

Date:____________

_________________________________
[Signature]
Name:
Title:

                                       M-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

                         U.S. BANK NATIONAL ASSOCIATION,

                                     Trustee
                              ____________________

                         POOLING AND SERVICING AGREEMENT

                          Dated as of December 1, 2003
                    ________________________________________

               BEAR STEARNS ASSET BACKED SECURITIES TRUST 2003-AC7

                   ASSET-BACKED CERTIFICATES, SERIES 2003-AC7

<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....................................................-41-

                                                    ARTICLE II

                                             CONVEYANCE OF TRUST FUND
                                          REPRESENTATIONS AND WARRANTIES
Section 2.01      CONVEYANCE OF TRUST FUND.....................................................................-43-
Section 2.02      ACCEPTANCE OF THE MORTGAGE LOANS.............................................................-45-
Section 2.03      REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY, THE MASTER SERVICER AND
                  THE SELLER...................................................................................-47-
Section 2.04      REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR..............................................-57-
Section 2.05      DELIVERY OF OPINION OF COUNSEL IN CONNECTION WITH SUBSTITUTIONS AND REPURCHASES..............-58-
Section 2.06      COUNTERSIGNATURE AND DELIVERY OF CERTIFICATES................................................-59-

                                                    ARTICLE III

                           ADMINISTRATION AND SERVICING OF EMC MORTGAGE LOANS BY COMPANY
Section 3.01      THE COMPANY..................................................................................-61-
Section 3.02      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS...................................................-62-
Section 3.03      SUBSERVICERS.................................................................................-63-
Section 3.04      DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF COMPANY TO BE HELD FOR TRUSTEE.................-64-
Section 3.05      MAINTENANCE OF HAZARD INSURANCE..............................................................-64-
Section 3.06      PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.............................................-65-
Section 3.07      MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.......................................-65-
Section 3.08      FIDELITY BOND, ERRORS AND OMISSIONS INSURANCE................................................-66-
Section 3.09      REALIZATION UPON DEFAULTED MORTGAGE LOANS; DETERMINATION OF EXCESS LIQUIDATION
                  PROCEEDS AND REALIZED LOSSES; REPURCHASES OF CERTAIN MORTGAGE LOANS..........................-66-
Section 3.10      SERVICING COMPENSATION.......................................................................-69-
Section 3.11      REO PROPERTY.................................................................................-69-
Section 3.12      LIQUIDATION REPORTS..........................................................................-70-
Section 3.13      ANNUAL CERTIFICATE AS TO COMPLIANCE..........................................................-70-

                                                         i

<PAGE>

Section 3.14      ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' SERVICING REPORT............................-71-
Section 3.15      BOOKS AND RECORDS............................................................................-71-

                                                    ARTICLE IV

                          ADMINISTRATION AND MASTER SERVICING OF MORTGAGE LOANS BY MASTER
                                                     SERVICER
Section 4.01      MASTER SERVICER..............................................................................-72-
Section 4.02      REMIC-RELATED COVENANTS......................................................................-73-
Section 4.03      MONITORING OF COMPANY AND SERVICER...........................................................-73-
Section 4.04      FIDELITY BOND................................................................................-74-
Section 4.05      POWER TO ACT; PROCEDURES.....................................................................-74-
Section 4.06      DUE-ON-SALE CLAUSES; ASSUMPTION AGREEMENTS...................................................-75-
Section 4.07      RELEASE OF MORTGAGE FILES....................................................................-75-
Section 4.08      DOCUMENTS, RECORDS AND FUNDS IN POSSESSION OF MASTER SERVICER, COMPANY AND
                  SERVICER TO BE HELD FOR TRUSTEE..............................................................-76-
Section 4.09      STANDARD HAZARD INSURANCE AND FLOOD INSURANCE POLICIES.......................................-77-
Section 4.10      PRESENTMENT OF CLAIMS AND COLLECTION OF PROCEEDS.............................................-78-
Section 4.11      MAINTENANCE OF THE PRIMARY MORTGAGE INSURANCE POLICIES.......................................-78-
Section 4.12      TRUSTEE TO RETAIN POSSESSION OF CERTAIN INSURANCE POLICIES AND DOCUMENTS.....................-78-
Section 4.13      REALIZATION UPON DEFAULTED MORTGAGE LOANS....................................................-79-
Section 4.14      COMPENSATION FOR THE MASTER SERVICER.........................................................-79-
Section 4.15      REO PROPERTY.................................................................................-79-
Section 4.16      ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE................................................-80-
Section 4.17      ANNUAL INDEPENDENT ACCOUNTANT'S SERVICING REPORT.............................................-80-
Section 4.18      REPORTS FILED WITH SECURITIES AND EXCHANGE COMMISSION........................................-81-
Section 4.19      EMC..........................................................................................-82-
Section 4.20      UCC..........................................................................................-82-
Section 4.21      OPTIONAL PURCHASE OF CERTAIN MORTGAGE LOANS..................................................-82-

                                                     ARTICLE V

                                                     ACCOUNTS
Section 5.01      COLLECTION OF MORTGAGE LOAN PAYMENTS; PROTECTED ACCOUNT......................................-84-
Section 5.02      PERMITTED WITHDRAWALS FROM THE PROTECTED ACCOUNT.............................................-85-
Section 5.02A     REPORTS TO MASTER SERVICER...................................................................-87-
Section 5.03      COLLECTION OF TAXES; ASSESSMENTS AND SIMILAR ITEMS; ESCROW ACCOUNTS..........................-88-
Section 5.04      SERVICER PROTECTED ACCOUNTS..................................................................-88-
Section 5.05      MASTER SERVICER COLLECTION ACCOUNT...........................................................-90-
Section 5.06      PERMITTED WITHDRAWALS AND TRANSFERS FROM THE MASTER SERVICER COLLECTION ACCOUNT..............-91-
Section 5.07      DISTRIBUTION ACCOUNT.........................................................................-91-

                                                        ii

<PAGE>

Section 5.08      PERMITTED WITHDRAWALS AND TRANSFERS FROM THE DISTRIBUTION ACCOUNT............................-92-

                                                    ARTICLE VI

                                            DISTRIBUTIONS AND ADVANCES

Section 6.01      ADVANCES.....................................................................................-95-
Section 6.02      COMPENSATING INTEREST PAYMENTS...............................................................-96-
Section 6.03      REMIC DISTRIBUTIONS..........................................................................-96-
Section 6.04      DISTRIBUTIONS................................................................................-96-
Section 6.04A     ALLOCATION OF REALIZED LOSSES................................................................-99-
Section 6.05      MONTHLY STATEMENTS TO CERTIFICATEHOLDERS....................................................-100-
Section 6.06      REMIC  DESIGNATIONS AND REMIC I DISTRIBUTIONS...............................................-103-
Section 6.07      REMIC II DISTRIBUTIONS AND CERTAIN REMIC III DISTRIBUTIONS..................................-105-
Section 6.08      NET WAC RESERVE FUND AND CLASS A-3/A-4 NET WAC PASS-THROUGH AMOUNTS.........................-105-
Section 6.09      CLASS P CERTIFICATE ACCOUNT.................................................................-107-

                                                    ARTICLE VII

                                                 THE CERTIFICATES
Section 7.01      THE CERTIFICATES............................................................................-108-
Section 7.02      CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.................-109-
Section 7.03      MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES...........................................-113-
Section 7.04      PERSONS DEEMED OWNERS.......................................................................-113-
Section 7.05      ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND ADDRESSES...................................-113-
Section 7.06      BOOK-ENTRY CERTIFICATES.....................................................................-113-
Section 7.07      NOTICES TO DEPOSITORY.......................................................................-114-
Section 7.08      DEFINITIVE CERTIFICATES.....................................................................-115-
Section 7.09      MAINTENANCE OF OFFICE OR AGENCY.............................................................-115-

                                                   ARTICLE VIII

                                        THE COMPANY AND THE MASTER SERVICER
Section 8.01      LIABILITIES OF THE DEPOSITOR, THE COMPANY AND THE MASTER SERVICER...........................-116-
Section 8.02      MERGER OR CONSOLIDATION OF THE DEPOSITOR, THE COMPANY OR THE MASTER SERVICER................-116-
Section 8.03      INDEMNIFICATION OF THE TRUSTEE, THE MASTER SERVICER AND THE SECURITIES ADMINISTRATOR........-116-

                                                        iii

<PAGE>

Section 8.04      LIMITATIONS ON LIABILITY OF THE DEPOSITOR, THE COMPANY, THE MASTER SERVICER AND
                  OTHERS......................................................................................-117-
Section 8.05      MASTER SERVICER AND COMPANY NOT TO RESIGN...................................................-118-
Section 8.06      SUCCESSOR MASTER SERVICER...................................................................-119-
Section 8.07      SALE AND ASSIGNMENT OF MASTER SERVICING.....................................................-119-

                                                    ARTICLE IX

                                     DEFAULT; TERMINATION OF MASTER SERVICER;
                                              TERMINATION OF COMPANY

Section 9.01      EVENTS OF DEFAULT...........................................................................-121-
Section 9.02      TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR....................................................-122-
Section 9.03      NOTIFICATION TO CERTIFICATEHOLDERS..........................................................-124-
Section 9.04      WAIVER OF DEFAULTS..........................................................................-124-
Section 9.05      COMPANY DEFAULT.............................................................................-124-
Section 9.06      WAIVER OF COMPANY DEFAULTS..................................................................-126-

                                                     ARTICLE X

                              CONCERNING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR
Section 10.01     DUTIES OF TRUSTEE AND SECURITIES ADMINISTRATOR..............................................-127-
Section 10.02     CERTAIN MATTERS AFFECTING THE TRUSTEE AND THE SECURITIES ADMINISTRATOR......................-129-
Section 10.03     TRUSTEE AND SECURITIES ADMINISTRATOR NOT LIABLE FOR CERTIFICATES OR MORTGAGE LOANS..........-130-
Section 10.04     TRUSTEE AND SECURITIES ADMINISTRATOR MAY OWN CERTIFICATES...................................-131-
Section 10.05     TRUSTEE'S AND SECURITIES ADMINISTRATOR'S FEES AND EXPENSES..................................-131-
Section 10.06     ELIGIBILITY REQUIREMENTS FOR TRUSTEE AND SECURITIES ADMINISTRATOR...........................-132-
Section 10.07     INSURANCE...................................................................................-132-
Section 10.08     RESIGNATION AND REMOVAL OF TRUSTEE AND SECURITIES ADMINISTRATOR.............................-132-
Section 10.09     SUCCESSOR TRUSTEE OR SECURITIES ADMINISTRATOR...............................................-133-
Section 10.10     MERGER OR CONSOLIDATION OF TRUSTEE OR SECURITIES ADMINISTRATOR..............................-134-
Section 10.11     APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE...............................................-134-
Section 10.12     TAX MATTERS.................................................................................-136-

                                                    ARTICLE XI

                                                    TERMINATION
Section 11.01     TERMINATION UPON LIQUIDATION OR REPURCHASE OF ALL MORTGAGE LOANS............................-139-
Section 11.02     FINAL DISTRIBUTION ON THE CERTIFICATES......................................................-139-

                                                        iv

<PAGE>

Section 11.03     ADDITIONAL TERMINATION REQUIREMENTS.........................................................-141-

                                                    ARTICLE XII

                                             MISCELLANEOUS PROVISIONS
Section 12.01     AMENDMENT...................................................................................-142-
Section 12.02     RECORDATION OF AGREEMENT; COUNTERPARTS......................................................-143-
Section 12.03     GOVERNING LAW...............................................................................-143-
Section 12.04     INTENTION OF PARTIES........................................................................-144-
Section 12.05     NOTICES.....................................................................................-144-
Section 12.06     SEVERABILITY OF PROVISIONS..................................................................-145-
Section 12.07     ASSIGNMENT..................................................................................-145-
Section 12.08     LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS..................................................-145-
Section 12.09     INSPECTION AND AUDIT RIGHTS.................................................................-146-
Section 12.10     CERTIFICATES NONASSESSABLE AND FULLY PAID...................................................-147-
</TABLE>

                                                         v

<PAGE>

EXHIBITS

Exhibit A-1       Form of Class A-[1][2][3] Certificates
Exhibit A-2       Form of Class A-4 Certificates
Exhibit A-3       Form of Class M-[1][2] Certificates
Exhibit A-4       Form of Class B 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
Exhibit C-2       Form of Interim Certification
Exhibit C-3       Form of Final Certification
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 December 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
U.S. BANK NATIONAL ASSOCIATION, a national banking association, 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>
               AA                 $695,984,447.76                     Variable (2)             January 25, 2034
               A-1                $2,406,000.00                       Variable (2)             January 25, 2034
               A-2                $2,628,000.00                       Variable (2)             January 25, 2034
               A-3                $930,000.00                         Variable (2)             January 25, 2034
               M-1                $426,000.00                         Variable (2)             January 25, 2034
               M-2                $426,000.00                         Variable (2)             January 25, 2034
                B                 $285,882.12                         Variable (2)             January 25, 2034
               ZZ                 $7,101,882.12                       Variable (2)             January 25, 2034
                P                 $100.00                              Fixed (2)               January 25, 2034
</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.

                                       -1-

<PAGE>

                                    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 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                Assumed Final
           Designation           Principal Balance                Pass-Through Rate          Maturity Date(1)
           -----------           -----------------                -----------------          ----------------
<S>                              <C>                                 <C>                     <C>
               A-1               $240,600,000.00                     Variable(2)             January 25, 2034
               A-2               $262,800,000.00                     Variable(2)             January 25, 2034
               A-3               $  93,000,000.00                    Variable(2)             January 25, 2034
               M-1               $  42,600,000.00                    Variable(2)             January 25, 2034
               M-2               $  42,600,000.00                    Variable(2)             January 25, 2034
                B                $  28,588,212.00                    Variable(2)             January 25, 2034
                C                                                    Variable(3)             January 25, 2034
                P                                                    Variable(4)             January 25, 2034
</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 C will not accrue interest on its Uncertificated
      Principal Balance, but will accrue interest at the related Uncertificated
      REMIC II Pass-Through Rate on its Uncertificated Notional Balance which
      shall equal the aggregate of the Uncertificated Principal Balances of the
      REMIC I Regular Interests other than REMIC I Regular Interest P.
(4)   REMIC II Regular Interest P is not entitled to distributions in respect of
      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         $ 240,600,000.00               Class A-1 Pass-Through Rate            January 25, 2034
        Class A-2         $ 262,800,000.00               Class A-2 Pass-Through Rate            January 25, 2034
      Class A-3(2)        $  93,000,000.00               Class A-3 Pass-Through Rate            January 25, 2034
       Class A-4(3)                N/A(4)                Class A-4 Pass-Through Rate            January 25, 2034
        Class M-1         $  42,600,000.00               Class M-1 Pass Through Rate            January 25, 2034
        Class M-2         $  42,600,000.00               Class M-2 Pass-Through Rate            January 25, 2034
         Class B          $  28,588,212.00                Class B Pass Through Rate             January 25, 2034
         Class C          $                         0.00            N/A(5)                      January 25, 2034
         Class P          $                         100.00          N/A(6)                      January 25, 2034
</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 III.
(2)      The Class A-3 Certificates represent ownership of REMIC III Regular
         Interest A-3, a regular interest in REMIC III, as well as the
         obligation to make payments in respect of the Class A-3/A-4 Net WAC
         Pass-Through Amount to the Net WAC Reserve Account for distribution in
         respect of the Class A-4 Certificates, which obligation shall not be an
         interest in any REMIC but a contractual obligation of the holders of
         the Class A-3 Certificates.
(3)      The Class A-4 Certificates represent ownership of REMIC III Regular
         Interest A-4, a regular interest in REMIC III, as well as the right to
         receive payments from the Net WAC Reserve Account in respect of Class
         A-3/A-4 Net WAC Pass-Through Amount, which payments shall not be in
         respect of an interest in any REMIC.
(4)      The Class A-4 Certificates will accrue interest at the Class A-4
         Pass-Through Rate on the Certificate Notional Balance of the Class A-4
         Certificates calculated in accordance with the definition of
         "Certificate Notional Balance" herein. The Class A-4 Certificates will
         not be entitled to distributions in respect of principal.
(5)      The Class C Certificates will not accrue interest on their Certificate
         Principal Balance, but will be entitled to 100% of amounts distributed
         on REMIC II Regular Interest C.
(6)      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-AC7." The Certificates issued
hereunder may be referred to as "Asset- Backed Certificates Series 2003-AC7"
(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 Class A-1, Class A-2, Class M-1 and
Class C Certificates and any Distribution Date, the calendar month immediately
preceding such Distribution Date. With respect to the Class A-3, Class A-4,
Class M-2 and Class B 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 (or, with respect to the first Accrual Period
and the Class M-2 Certificates and Class B Certificates, the Closing Date) 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
M-2, Class B, 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 M-2 Certificates and Class B 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.

                                       -4-

<PAGE>

         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 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, Liquidation Proceeds and Insurance 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 have been applied in reduction of the Certificate
Principal Balance of that Class of Certificates pursuant to Section 6.04A of
this Agreement, which have not previously been reimbursed.

         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 Cendant Assignment
Agreement, the GreenPoint Assignment Agreement, the HSBC Assignment Agreement
and the Union Federal Assignment Agreement.

         AVAILABLE FUNDS: The sum of Interest Funds and Principal Funds with
respect to the Mortgage Loans.

         BACK-UP SERVICER: With respect to the Union Federal Loans, EMC Mortgage
Corporation or any successor thereto.

         BACK-UP SERVICING FEE: As to each Union Federal Loan and any
Distribution Date, an amount equal to 1/12th of the Back-up Servicing Fee Rate
multiplied by the Stated Principal Balance of such Union Federal Loan as of the
last day of the related Due Period.

         BACK-UP SERVICING FEE RATE: 0.02% per annum.

         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.

         BISHOP'S GATE: Shall mean Bishop's Gate Residential Mortgage Trust.

                                       -5-

<PAGE>

         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 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.

         CENDANT: Shall mean Cendant Mortgage Corporation.

         CENDANT ASSIGNMENT AGREEMENT: Shall mean the Assignment, Assumption and
Recognition Agreement, dated December 30, 2003, by and among the Seller,
Cendant, Bishop's Gate and the Trust acknowledging the assignment of the Cendant
Servicing Agreement and the Cendant Loans to the Trust.

         CENDANT LOANS: Those Mortgage Loans subject to this Agreement which
were purchased by the Seller from Cendant and Bishop's Gate pursuant to the
Cendant Servicing Agreement.

         CENDANT SERVICING AGREEMENT: Shall mean the Purchase, Warranties and
Servicing Agreement, dated as of October 23, 2001, by and among Cendant,
Bishop's Gate and the Seller, as modified by the Cendant Assignment Agreement.

         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: As to any Class A-4 Certificate and any
Distribution Date, the Certificate Principal Balance of the Class A-3
Certificates; for federal income tax purposes, however, the equivalent of the
foregoing, expressed as the Uncertificated Principal Balance of REMIC II Regular
Interest A-3. As to the Class C Certificates and any Distribution Date, an
amount equal to the Stated Principal Balance of the Mortgage Loans; for federal
income tax purposes, however, the Class C Certificates will not have a
Certificate Notional Balance, but the Class C Distribution Amount for any
Distribution Date will be an amount equal to 100% of amounts deemed distributed
with respect to REMIC II Regular Interest C for such Distribution Date.

         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-4, 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

                                       -6-

<PAGE>

reduction of the Certificate Principal Balance thereof on previous Distribution
Dates pursuant to Section 6.04, and (ii) 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 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, 5.000% per annum,
subject to a cap equal to the product of (x) the related Net WAC Rate Cap for
such Distribution Date and (y) 90.9090909091% and (ii) for each Distribution
Date thereafter, 5.500% per annum, subject to a cap equal to the product of (x)
the related Net WAC Rate Cap for such Distribution Date and (y) 91.6666666667%;
for federal income tax purposes, however, the equivalent of the foregoing,
stated as the weighted average of the Uncertificated REMIC II Pass-Through Rate
for REMIC II Regular Interest A-1, weighted on the basis of the Uncertificated
Principal Balance thereof immediately prior to such Distribution Date.

         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, 5.250% per annum,
subject to a cap equal to the product of (x) the related Net WAC Rate Cap for
such Distribution Date and (y) 95.4545454545% and (ii) for each Distribution
Date thereafter, 5.750% per annum, subject to a cap equal to the product of (x)
the related Net WAC Rate Cap for such Distribution Date and (y) 95.8333333333%;
for federal income tax purposes, however, the equivalent of the foregoing,
stated as the weighted average of the Uncertificated REMIC II Pass-Through Rate
for REMIC II Regular Interest A-2, weighted on the basis of the Uncertificated
Principal Balance thereof immediately prior to 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

                                       -7-

<PAGE>

distributions provided for the Class A-3 Certificates as set forth herein and
evidencing a Regular Interest in REMIC III.

         CLASS A-3/A-4 NET WAC PASS-THROUGH AMOUNT: With respect to any
Distribution Date, the excess, if any, of (A) the amount of interest the Class
A-3 Certificates would have been entitled to receive if the related Net WAC Rate
Cap did not apply, over (B) the amount of interest the Class A-3 Certificates
would have been entitled to receive if reductions under the related Net WAC Rate
Cap were allocated as provided in the definition thereof; provided, however,
that if One-Month LIBOR plus the applicable margin for the Class A-3
Certificates for such Distribution Date is equal to or greater than the rate of
interest for the Class A-3 Certificates determined as if reductions under the
Net WAC Rate Cap allocable to the Class A-3 Certificates and Class A-4
Certificates were allocated to the Class A-3 Certificates, the amount determined
under clause (A) would be determined as if reductions under the Net WAC Rate Cap
allocable to the Class A-3 Certificates and Class A-4 Certificates were
allocated to the Class A-3 Certificates.

         CLASS A-3 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, One-Month LIBOR plus
0.68% per annum and (ii) for each Distribution Date thereafter, One-Month LIBOR
plus 1.18% per annum, in each case with a maximum rate of 7.50% per annum on or
prior to the Optional Termination Date and 8.00% per annum after the Optional
Termination Date and a minimum rate of 0.68%, in each case subject to a cap
equal to the related 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-2 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: On any Distribution Date, shall mean 6.82%
per annum minus One-Month LIBOR, with a maximum rate of 6.82% and a minimum rate
of 0.00% and subject to a cap equal to the related Net WAC Rate Cap for such
Distribution Date.

         CLASS B CERTIFICATE: Any Certificate designated as a "Class B
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 Certificates as set forth herein and evidencing a Regular Interest
in REMIC III.

         CLASS B PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, One-Month LIBOR plus
2.50% per annum and (ii) for each Distribution Date thereafter, One-Month LIBOR
plus 4.25% per annum, in each case subject to a cap equal to the related Net WAC
Rate Cap for such Distribution Date; for federal income tax purposes, however,
the equivalent of the foregoing, stated as the weighted average of the
Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest B,
weighted on the basis of the Uncertificated Principal Balance thereof
immediately prior to such Distribution Date.

         CLASS C CERTIFICATE: Any Certificate designated as a "Class C
Certificate" on the face thereof, in the form of Exhibit A-5 hereto,
representing the right to its Percentage Interest of

                                       -8-

<PAGE>

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. For federal income tax purposes the Class
C Distribution Amount for the Class C Certificates for any Distribution Date
shall be an amount equal to 100% of the amounts distributed in respect of REMIC
II Regular Interest C on such Distribution Date.

         CLASS C PASS-THROUGH RATE: The Class C Certificates will not have a
Pass-Through Rate, but the Class C Distribution Amount for the Class C
Certificates for any Distribution Date shall be an amount equal to 100% of the
amounts distributed in respect of REMIC II Regular Interest C on such
Distribution Date.

         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, 5.200% per annum and
(ii) for each Distribution Date thereafter, 5.700% per annum, in each case
subject to a cap equal to the related Net WAC Rate Cap for such Distribution
Date; for federal income tax purposes, however, the equivalent of the foregoing,
stated as the weighted average of the Uncertificated REMIC II Pass-Through Rate
for REMIC II Regular Interest M-1, weighted on the basis of the Uncertificated
Principal Balance thereof immediately prior to 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.

         CLASS M-2 PASS-THROUGH RATE: Shall mean (i) on any Distribution Date
which occurs on or prior to the Optional Termination Date, One-Month LIBOR plus
1.60% per annum and (ii) for each Distribution Date thereafter, One-Month LIBOR
plus 2.60% per annum, in each case subject to a cap equal to the related Net WAC
Rate Cap for such Distribution Date; for federal income tax purposes, however,
the equivalent of the foregoing, stated as the weighted average of the
Uncertificated REMIC II Pass-Through Rate for REMIC II Regular Interest M-2,
weighted on the basis of the Uncertificated Principal Balance thereof
immediately prior to 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

                                       -9-

<PAGE>

distributions provided for the Class P Certificates as set forth herein and
evidencing a Regular Interest in REMIC III.

         CLASS P CERTIFICATE ACCOUNT: The account established and maintained by
the Trustee pursuant to Section 6.09 hereof.

         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: December 30, 2003.

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

         COMPANY: EMC.

         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 US Bank Corporate Trust Services, One Federal Street,
3rd Floor, Boston, Massachusetts 02110, Attention: Corporate Trust
Services/BSABS 2003-AC7, or at such other address as the Trustee may designate
from time to time.

         CORRESPONDING CERTIFICATE: With respect to each Uncertificated REMIC I
Regular Interest and Uncertificated REMIC II Regular Interest, the Certificate
with the corresponding designation.

         CORRESPONDING INTEREST: With respect to each Uncertificated REMIC I
Regular Interest, the Uncertificated REMIC II Regular Interest with the
corresponding designation.

                                      -10-

<PAGE>

         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 December 1, 2003 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 December 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 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".

                                      -11-

<PAGE>

         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.

         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 "U.S. Bank National
Association, in trust for registered holders of Bear Stearns Asset Backed
Securities, Inc., Asset-Backed Certificates, Series 2003-AC7" 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 January 2004.

         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

                                      -12-

<PAGE>

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.

         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 20% Clean-Up Call Date and (2)
the Distribution Date in December 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.

                                      -13-

<PAGE>

         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.

         GREENPOINT: GreenPoint Mortgage Funding, Inc., and any successor
thereto.

         GREENPOINT ASSIGNMENT AGREEMENT: The Assignment, Assumption and
Recognition Agreement, dated as of December 30, 2003, by and among and the
Seller, GreenPoint and the Trustee evidencing the assignment of the GreenPoint
Servicing Agreement to the Trust.

         GREENPOINT LOANS: Those Mortgage Loans subject to this Agreement which
were purchased by the Seller from GreenPoint pursuant to the GreenPoint
Servicing Agreement.

         GREENPOINT SERVICING AGREEMENT: Shall mean the Purchase, Warranties and
Servicing Agreement, dated as of September 1, 2003, by and among the Seller and
GreenPoint, as modified by the GreenPoint Assignment Agreement.

         HSBC: HSBC Mortgage Corporation (USA), and any successor thereto.

         HSBC ASSIGNMENT AGREEMENT: The Assignment, Assumption and Recognition
Agreement, dated as of December 30, 2003, by and among the Seller, HSBC and the
Trustee evidencing the assignment of the HSBC Servicing Agreement to the Trust.

         HSBC LOANS: Those Mortgage Loans subject to this Agreement which were
purchased by the Seller from HSBC pursuant to the HSBC Servicing Agreement.

         HSBC SERVICING AGREEMENT: Shall mean the Purchase, Warranties and
Servicing Agreement, dated as of May 1, 2002, by and between the Seller and
HSBC, as modified by the HSBC Assignment Agreement.

         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 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.

                                      -15-

<PAGE>

         LAST SCHEDULED DISTRIBUTION DATE: January 25, 2034.

         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.

         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 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 REMIC II Regular Interest C and any
Distribution Date, a per annum rate equal to two (2) times the weighted average
of the Uncertificated REMIC I Pass- Through Rates for REMIC I Regular Interest
A-1, REMIC I Regular Interest A-2, REMIC I Regular Interest A-3, REMIC I Regular
Interest M-1, REMIC I Regular Interest M-2, REMIC I

                                      -16-

<PAGE>

Regular Interest B and REMIC I Regular Interest ZZ, with the rate on such REMIC
I Regular Interests (other than REMIC I Regular Interest ZZ) subject to a cap
equal to the Uncertificated REMIC II Pass-Through Rate for the Corresponding
Interest and with the rate on REMIC I Regular Interest ZZ subject to a cap of
zero for the purpose of this calculation; provided, however, that for this
purpose, the calculation of the Uncertificated REMIC I Pass-Through Rate and the
related cap with respect to REMIC I Regular Interest M-2 and REMIC I Regular
Interest B 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.

         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
"U.S. Bank National Association, as Trustee f/b/o holders of Bear Stearns Asset
Backed Securities, Inc., Asset Backed Certificates, Series 2003-AC7 - Master
Servicer Collection Account".

         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.

                                      -17-

<PAGE>

         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 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 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. The
Monthly Interest Distributable Amount with respect to the Class A- 1, Class A-2,
Class A-3, Class A-4 and Class M-1 Certificates is calculated on the basis of a
360-day year consisting of twelve 30-day months. The Monthly Interest
Distributable Amount with respect to the Class M-2 Certificates and Class B
Certificates is calculated on the basis of a 360-day year and the actual number
of days elapsed during the related Accrual Period. No Monthly Interest
Distributable Amount 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 December 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)

                                      -18-

<PAGE>

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:

                  (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) and the 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.

         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

                                      -19-

<PAGE>

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 and (ii) the rate at which the LPMI Fee is calculated, if any.

         NET WAC RATE CAP: With respect to the Class A-1, Class A-2 and Class
M-1 Certificates shall mean the weighted average of the Net Mortgage Rates of
the Mortgage Loans.

         With respect to the Class A-3 Certificates and Class A-4 Certificates
will be calculated based on an assumed certificate with a principal balance
equal to the Certificate Principal Balance of the Class A-3 Certificates and a
fixed pass-through rate of (i) on any Distribution Date which occurs on or prior
to the Optional Termination Date, 8.000% per annum, subject to a cap equal to
the product of (x) the weighted average of the Net Mortgage Rates of the
Mortgage Loans and (y) 136.3636363636% and (ii) for each Distribution Date
thereafter, 8.500% per annum, subject to a cap equal to the product of (x) the
weighted average of the Net Mortgage Rates of the Mortgage Loans and (y)
133.3333333333%. If the weighted average of the Net Mortgage Rates of the
Mortgage Loans is less than 5.250% per annum (or, after the Optional Termination
Date, 5.750% per annum), the amount of the shortfall which would occur with
respect to the assumed certificate as a result of the cap will be allocated
between the Class A-3 Certificates and Class A-4 Certificates in proportion to
their current entitlements to interest calculated without regard to this cap.
Accordingly, in such event the Net WAC Rate Cap for the Class A-3 Certificates
would be equal to the Class A-3 Pass-Through Rate (determined without regard to
the Net WAC Rate Cap) less the amount allocable to the Class A-3 Certificates
pursuant to the preceding sentence, and the Net WAC Rate Cap for the Class A-4
Certificates would be equal to the Class A-4 Pass-Through Rate (determined
without regard to the Net WAC Rate Cap) less the amount allocable to the Class
A-4 Certificates pursuant to the preceding sentence.

         With respect to the Class M-2 Certificates and Class B Certificates
shall mean the lesser of (i) 11.00% and (ii) the weighted average of the Net
Mortgage Rates of the Mortgage Loans.

         For federal income tax purposes, the Net WAC Rate Cap shall equal (i)
with respect to each of the Class A-1, Class A-2, Class M-1, Class M-2 and Class
B Certificates, the weighted average of the Uncertificated REMIC II Pass-Through
Rate on the REMIC II Regular Interest for which such Certificate is the
Corresponding Certificate and (ii) with respect to the Class A-3 Certificates
and Class A-4 Certificates, if the weighted average of the Net Mortgage Rates of
the Mortgage Loans is less than 5.250% per annum (or, after the Optional
Termination Date, 5.750% per annum), the equivalent of the rates determined in
the third preceding paragraph, calculated using the weighted average of the
Uncertificated REMIC II Pass-Through Rate on REMIC II Regular Interest A-1 in
place of the weighted average of the Net Mortgage Rates of the Mortgage Loans.

         NET WAC RATE CARRYOVER AMOUNT: With respect each Class of Offered
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 of interest such Class would

                                      -20-

<PAGE>

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
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, Insurance Proceeds or otherwise.

         OFFERED CERTIFICATES: The Class A-1, Class A-2, Class A-3, Class A-4,
Class M-1, Class M-2 and Class B 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,
the Master Servicer 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 1.12% 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

                                      -21-

<PAGE>

the Class A-3, Class A-4, Class M-2 and Class B Certificates for the related
Accrual Period shall, in the absence of manifest error, be final and binding.

         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.

         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 Distribution Date (after taking into account
payments to the Offered Certificates of the Basic Principal Distribution Amount
on such Distribution Date).

                                      -22-

<PAGE>

         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, $4,971,317.

         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
aggregate Certificate Principal Balance 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).

         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

                                      -23-

<PAGE>

         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 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

                                      -24-

<PAGE>

         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;

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.

                                      -25-

<PAGE>

         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.

         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 EXCESS: With respect to any Distribution Date, for
each EMC Mortgage Loan that was the subject of a Principal Prepayment in full or
in part during the portion of the related Prepayment Period occurring between
the first day of the calendar month in which such Distribution Date occurs and
the Determination Date of the calendar month in which such Distribution Date
occurs, an amount equal to interest (to the extent received) at the applicable
Net Mortgage Rate on the amount of such Principal Prepayment for the number of
days commencing on the first day of the calendar month in which such
Distribution Date occurs and ending on the last date through which interest is
collected from the related Mortgagor.

         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 and (i) each EMC
Mortgage Loan, the period commencing on the 16th day of the month prior to the
month in which the related Distribution Date occurs and ending on the 15th day
of the month in which such Distribution Date occurs and (ii) any other Mortgage
Loan, the period set forth in the related Servicing Agreement.

         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.

                                      -26-

<PAGE>

         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 or 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.

         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 December 29,
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 5.01 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, 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 lending laws.

                                      -27-

<PAGE>

         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
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
A-3, Class A-4, Class M-2 and Class B Certificates) and any Distribution Date,
the close of business on the last

                                      -28-

<PAGE>

Business Day of the month preceding the month in which such Distribution Date
occurs. With respect to any Distribution Date and the Class A-3, Class A-4,
Class M-2 and Class B Certificates, so long as such 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.

         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.

         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
aggregate Certificate Principal Balance of the Class A-3, Class M-2 and Class B
Certificates 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 amounts approximately equal
to the aggregate Certificate Principal Balance of the Class A-3, Class M-2 and
Class B Certificates 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 INTEREST LOSS ALLOCATION AMOUNT": With respect to any
Distribution Date, an amount equal to (a) the product of (i) the aggregate
Stated Principal Balance of the Mortgage Loans and REO Properties then
outstanding and (ii) the REMIC I Remittance Rate for REMIC I Regular Interest AA
minus the Marker Rate, divided by (b) 12.

         REMIC I INTERESTS: The REMIC I Regular Interests and the Class R-1
Certificates.

         REMIC I OVERCOLLATERALIZATION AMOUNT: With respect to any date of
determination, (i) 1% of the aggregate Uncertificated Principal Balances of the
REMIC I Regular Interests minus (ii) the aggregate of the Uncertificated
Balances of REMIC I Regular Interest A-1, REMIC I Regular

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<PAGE>

Interest A-2, REMIC I Regular Interest A-3, REMIC I Regular Interest M-1, REMIC
I Regular Interest M-2 and REMIC I Regular Interest B, in each case as of such
date of determination.

         REMIC I OVERCOLLATERALIZATION TARGET AMOUNT: 1% of the
Overcollateralization Target Amount.

         REMIC I 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 I Regular Interest
A- 1, REMIC I Regular Interest A-2, REMIC I Regular Interest A-3, REMIC I
Regular Interest M-1, REMIC I Regular Interest M-2 and REMIC I Regular Interest
B and the denominator of which is the aggregate of the Uncertificated Balances
of REMIC I Regular Interest A-1, REMIC I Regular Interest A-2, REMIC I Regular
Interest A-3, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC
I Regular Interest B and REMIC I Regular Interest ZZ.

         REMIC I REGULAR INTEREST ZZ MAXIMUM INTEREST DEFERRAL AMOUNT: With
respect to any Distribution Date, the excess of (i) accrued interest at the
Uncertificated REMIC I Pass-Through Rate applicable to REMIC I Regular Interest
ZZ for such Distribution Date on a balance equal to the Uncertificated Principal
Balance of REMIC I Regular Interest ZZ minus the REMIC I Overcollateralization
Amount, in each case for such Distribution Date, over (ii) Uncertificated
Accrued Interest on REMIC I Regular Interest A-1, REMIC I Regular Interest A-2,
REMIC I Regular Interest A-3, REMIC I Regular Interest M-1, REMIC I Regular
Interest M-2 and REMIC I Regular Interest B for such Distribution Date, with the
rate on each such REMIC I Regular Interest subject to a cap equal to the
Pass-Through Rate for the Corresponding Certificate.

         REMIC I REGULAR INTERESTS: REMIC I Regular Interest AA, REMIC I Regular
Interest A- 1, REMIC I Regular Interest A-2, REMIC I Regular Interest A-3, REMIC
I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular Interest
B, REMIC I Regular Interest ZZ and REMIC I Regular Interest P.

         REMIC I REGULAR INTEREST AA: 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 AA 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 A-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 A-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.

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<PAGE>

         REMIC I REGULAR INTEREST A-2: 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 A-2 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 A-3: 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 A-3 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 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 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.

         REMIC I REGULAR INTEREST M-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 M-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 M-2: 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 M-2 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 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 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 INTEREST ZZ: 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 ZZ 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

                                      -31-

<PAGE>

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

         REMIC II: The segregated pool of assets described in the Preliminary
Statement, consisting of the REMIC I Regular Interests.

         REMIC II INTERESTS: The REMIC II Regular Interests and the Class R-2
Certificates.

         REMIC II REGULAR INTERESTS: REMIC II Regular Interest A-1, REMIC II
Regular Interest A-2, REMIC II Regular Interest A-3, REMIC II Regular Interest
M-1, REMIC II Regular Interest M-2, REMIC II Regular Interest B, REMIC II
Regular Interest C and REMIC II Regular Interest P.

         REMIC II REGULAR INTEREST A-1: 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 A-1 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 A-2: 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 A-2 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 A-3: 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 A-3 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 B: 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 B 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 C: 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 C 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

                                      -32-

<PAGE>

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 C DISTRIBUTION AMOUNT: With respect to any
Distribution Date, the sum of (i) the Uncertificated Accrued Interest for REMIC
II Regular Interest C 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 REMIC II
Regular Interest C Distribution Amount shall include the Overcollateralized
Amount.

         REMIC II REGULAR INTEREST M-1: 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 M-1 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 M-2: 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 M-2 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 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 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.

         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 III REGULAR INTEREST A-3: One of the separate non-certificated
beneficial ownership interests in REMIC III issued hereunder and designated as a
Regular Interest in REMIC III. REMIC III Regular Interest A-3 shall accrue
interest at the related Uncertificated REMIC III Pass- Through Rate in effect
from time to time, and shall be deemed to receive 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, as such amounts are distributed in respect of the Class A-3
Certificates.

         REMIC III REGULAR INTEREST A-4: One of the separate non-certificated
beneficial ownership interests in REMIC III issued hereunder and designated as a
Regular Interest in REMIC III.

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<PAGE>

REMIC III Regular Interest A-4 shall accrue interest at the related
Uncertificated REMIC III Pass- Through Rate in effect from time to time, and
shall not be entitled to distributions of principal.

         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, REMIC III Regular Interest A-3, REMIC III Regular Interest A-4 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.

         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.

                                      -34-

<PAGE>

         REPURCHASE PRICE: With respect to each Mortgage Loan, a price equal to
(i) the outstanding principal balance of such 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 or the
related Servicer in respect of such repurchased 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 lending laws.

         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 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 and Class A-4
Certificates.

                                      -35-

<PAGE>

         SERVICER: Shall mean either Cendant, GreenPoint, HSBC 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 Cendant Servicing Agreement,
the GreenPoint Servicing Agreement, the HSBC 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.

         SERVICING FEE RATE: 0.25% per annum.

         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

                                      -36-

<PAGE>

related Servicing Agreement with respect to such Mortgage Loan, that were
received by the Company or the related 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 and Class B
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.

         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 Class P Certificate Account,
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: U.S. Bank National Association, a national banking
association, 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

                                      -37-

<PAGE>

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 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 aggregate Cut-off Date
Principal Balance of the Mortgage Loans.

         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 Sections 1.02 and 6.07).

         UNCERTIFICATED NOTIONAL AMOUNT: With respect to REMIC II Regular
Interest C, the aggregate Uncertificated Principal Balance of the REMIC I
Regular Interests (other than REMIC I Regular Interest P). With respect to REMIC
III Regular Interest A-4, the aggregate Uncertificated Principal Balance of
REMIC II Regular Interest A-3.

         UNCERTIFICATED PASS-THROUGH RATE: Any Uncertificated REMIC I
Pass-Through Rate, Uncertificated REMIC II Pass-Through Rate or Uncertificated
REMIC III Pass-Through Rate.

         UNCERTIFICATED PRINCIPAL BALANCE: With respect to each REMIC Regular
Interest, 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 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.

         UNCERTIFICATED REMIC I PASS-THROUGH RATE: With respect to any REMIC I
Regular Interest other than REMIC I Regular Interest P and any Distribution
Date, 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. With respect to REMIC I Regular Interest P and any Distribution Date,
0.00%.

         UNCERTIFICATED REMIC II PASS-THROUGH RATE:

         With respect to REMIC II Regular Interest A-1 and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, the lesser of
(a) 5.000% per annum and (b) the product of (x) 90.9090909091% and (y) the
weighted average of the REMIC I Pass-Through Rates on the REMIC I Regular
Interests, weighted on the basis of the Uncertificated Principal

                                      -38-

<PAGE>

Balance of each such REMIC I Regular Interest and (ii) for each Distribution
Date thereafter, the lesser of (a) 5.500% per annum and (b) the product of (x)
91.6666666667% and (y) the weighted average of the REMIC I Pass-Through Rates on
the REMIC I Regular Interests, weighted on the basis of the Uncertificated
Principal Balance of each such REMIC I Regular Interest.

         With respect to REMIC II Regular Interest A-2 and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, the lesser of
(a) 5.250% per annum and (b) the product of (x) 95.4545454545% and (y) the
weighted average of the REMIC I Pass-Through Rates on the REMIC I Regular
Interests, weighted on the basis of the Uncertificated Principal Balance of each
such REMIC I Regular Interest and (ii) for each Distribution Date thereafter,
the lesser of (a) 5.750% per annum and (b) the product of (x) 95.8333333333% and
(y) the weighted average of the REMIC I Pass-Through Rates on the REMIC I
Regular Interests, weighted on the basis of the Uncertificated Principal Balance
of each such REMIC I Regular Interest.

         With respect to REMIC II Regular Interest A-3 and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, the lesser of
(a) 7.500% per annum and (b) the product of (x) 136.3636363636% and (y) the
weighted average of the REMIC I Pass-Through Rates on the REMIC I Regular
Interests, weighted on the basis of the Uncertificated Principal Balance of each
such REMIC I Regular Interest and (ii) for each Distribution Date thereafter,
the lesser of (a) 8.000% per annum and (b) the product of (x) 133.3333333333%
and (y) the weighted average of the REMIC I Pass-Through Rates on the REMIC I
Regular Interests, weighted on the basis of the Uncertificated Principal Balance
of each such REMIC I Regular Interest.

         With respect to REMIC II Regular Interest M-1 and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, 5.200% per annum
and (ii) for each Distribution Date thereafter, 5.700% per annum, in each case
subject to a cap equal to the weighted average of the REMIC I Pass-Through Rates
on the REMIC I Regular Interests, weighted on the basis of the Uncertificated
Principal Balance of each such REMIC I Regular Interest.

         With respect to REMIC II Regular Interest M-2 and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, One-Month LIBOR
plus 1.60% per annum and (ii) for each Distribution Date thereafter, One-Month
LIBOR plus 2.60% per annum, in each case subject to the related Net WAC Rate
Cap.

         With respect to REMIC II Regular Interest B and (i) any Distribution
Date which occurs on or prior to the Optional Termination Date, One-Month LIBOR
plus 2.50% per annum and (ii) for each Distribution Date thereafter, One-Month
LIBOR plus 4.25% per annum, in each case subject to the related Net WAC Rate
Cap.

         With respect to REMIC II Regular Interest C, 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 (H) below, and the
denominator of which is (y) the aggregate of the Uncertificated Principal
Balances of the REMIC I Regular Interests (other than REMIC I Regular Interest
P). For purposes of calculating the Uncertificated REMIC II Pass-Through Rate
for REMIC II Regular Interest C, the numerator is equal to the sum of the
following components:

                                      -39-

<PAGE>

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

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

                  (C) the Uncertificated REMIC I Pass-Through Rate for REMIC I
Regular Interest A-2 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest A-2;

                  (D) the Uncertificated REMIC I Pass-Through Rate for REMIC I
Regular Interest A-3 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest A-3;

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

                  (F) the Uncertificated REMIC I Pass-Through Rate for REMIC I
Regular Interest M-2 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest M-2;

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

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

         UNCERTIFICATED REMIC III PASS-THROUGH RATE:

         With respect to REMIC III Regular Interest A-3, (i) on any Distribution
Date which occurs on or prior to the Optional Termination Date, One-Month LIBOR
plus 0.68% per annum and (ii) for each Distribution Date thereafter, One-Month
LIBOR plus 1.18% per annum, in each case subject to a cap equal to the weighted
average of the Uncertificated REMIC II Pass-Through Rate with respect to REMIC
II Regular Interest A-3, weighted on the basis of the Uncertificated Principal
Balance thereof immediately prior to such Distribution Date.

         With respect to REMIC III Regular Interest A-4, on any Distribution
Date, the excess, if any, of (A) the Uncertificated REMIC II Pass-Through Rate
with respect to REMIC II Regular Interest A-3 over (B) the lesser of (x) (i) on
any Distribution Date which occurs on or prior to the Optional Termination Date,
One-Month LIBOR plus 0.68% per annum and (ii) for each Distribution Date
thereafter, One-Month LIBOR plus 1.18% per annum, and (y) an amount equal

                                      -40-

<PAGE>

to the weighted average of the Uncertificated REMIC II Pass-Through Rate with
respect to REMIC II Regular Interest A-3, weighted on the basis of the
Uncertificated Principal Balance thereof immediately prior to such Distribution
Date.

         UNCERTIFICATED REMIC REGULAR INTEREST: The REMIC I Regular Interests,
the REMIC II Regular Interests, REMIC III Regular Interest A-3 and REMIC III
Regular Interest A-4.

         UNION FEDERAL: Union Federal Bank of Indianapolis.

         UNION FEDERAL ASSIGNMENT AGREEMENT: Shall mean the Assignment,
Assumption and Recognition Agreement, dated December 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 Amended and Restated
Forward Commitment Flow Mortgage Loan Purchase and Servicing Agreement, dated as
of March 4, 2003, between the Seller and Union Federal, as modified by the Union
Federal Assignment Agreement.

         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 C, Class P and the Residual Certificates), (ii) 1% to the
Class P Certificates, (iii) 3% to the Class C Certificates and (iv) 0.50% to
each Class of Residual Certificates, with the allocation among the Certificates
other than the 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
M-1, Class M-2, Class B and Class C Certificates for any Distribution Date, (1)
the aggregate amount of any Unpaid Interest Shortfalls in respect of the
Mortgage Loans for any Distribution Date shall be allocated FIRST, in reduction
of amounts otherwise distributable to the Class C Certificates and Class R
Certificates, AND THEREAFTER among the Offered Certificates in proportion to the
amount of the Monthly Interest Distributable Amount that would have been
allocated to such Certificates in the absence of such Unpaid Interest Shortfalls
and (2) the interest portion of Realized Losses for the Mortgage Loans will be
allocated first, to the Class C Certificates based on, and to the extent of, one
month's

                                      -41-

<PAGE>

interest at the then applicable Pass-Through Rate on the Certificate Notional
Balance thereof, second to the Class B Certificates, third to the Class M-2
Certificates, and fourth to the Class M-1 Certificates, and following the
Cross-Over Date to the Senior Certificates, on a pro rata basis.

         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 Unpaid Interest Shortfalls incurred in respect of the
Mortgage Loans for any Distribution Date shall be allocated first, to
Uncertificated Accrued Interest payable to REMIC I Regular Interest AA and REMIC
I Regular Interest ZZ 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 A-1, REMIC I Regular Interest A-2, REMIC I Regular Interest
A-3, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC I Regular
Interest B and REMIC I Regular Interest ZZ, pro rata, based on, and 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 Unpaid Interest Shortfalls incurred in respect of
the Mortgage Loans for any Distribution Date shall be allocated first to REMIC
II Regular Interest C, and then, pro rata, to REMIC II Regular Interest A- 1,
REMIC II Regular Interest A-2, REMIC II Regular Interest A-3, REMIC II Regular
Interest M- 1, REMIC II Regular Interest M-2 and REMIC I Regular Interest B, in
each case to the extent of one month's interest at the then applicable
respective REMIC II Remittance Rate on the respective Uncertificated Balance of
each such REMIC II Regular Interest.

                                      -42-

<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 "U.S. Bank National Association, as Trustee for
certificateholders of Bear Stearns Asset Backed Securities, Inc. Asset Backed
Certificates, Series 2003-AC7," 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
"U.S. Bank National Association, as Trustee for certificateholders of Bear
Stearns Asset Backed Securities, Inc. Asset Backed Certificates, Series
2003-AC7," 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

                                      -43-

<PAGE>

been returned in time to permit their delivery as specified above, the Depositor
may deliver 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, any
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.

                                      -44-

<PAGE>

         Section 2.02 ACCEPTANCE OF THE MORTGAGE LOANS.

                  (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.

                                      -45-

<PAGE>

                  (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. 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.

                                      -46-

<PAGE>

                  (d) The Seller shall deliver to the Trustee or the Custodian
on its behalf, 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.

         Section 2.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY,
                      THE MASTER SERVICER 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,

                                      -47-

<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 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.

                  (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) Wells Fargo Bank Minnesota National Association, in its
         capacity as Master Servicer and Securities Administrator hereby
         represents and warrants to the Seller, the Depositor and the Trustee as
         follows, as of the Closing Date:

                  (i) It is a national banking association duly formed, validly
         existing and in good standing under the laws of the United States of
         America and is duly authorized and qualified to transact any and all
         business contemplated by this Agreement to be conducted by the Master
         Servicer and the Securities Administrator 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 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
         consummation of any other of the transactions contemplated by this
         Agreement, and the fulfillment of or

                                      -48-

<PAGE>

         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) 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 perform any of its other 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 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.

                  (c) 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

                                      -49-

<PAGE>

         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
         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.

                                      -50-

<PAGE>

                  (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 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

                                      -51-

<PAGE>

Act of 1974, as amended, consumer credit protection, equal credit opportunity or
disclosure or reporting laws and all predatory lending 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 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

                                      -52-

<PAGE>

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 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]

                                      -53-

<PAGE>

                  (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. 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

                                      -54-

<PAGE>

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.

                  (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 (a) 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 TILA, which implements HOEPA or (b) classified and/or
defined as a "high cost home loan" under any state, federal or local law,
including, but not limited to, the States of Georgia or North Carolina.

                  (c) Upon discovery by any of the parties hereto of a breach of
a representation or warranty set forth in Section 2.03(c)(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(c)(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

                                      -55-

<PAGE>

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(c)(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 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(c)(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.

                                      -56-

<PAGE>

                  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 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

                                      -57-

<PAGE>

         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, 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.

                                      -58-

<PAGE>

                  (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) 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.

         (a) 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.

         (b) The Seller, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Seller in and
to the REMIC I Regular Interests, and the other assets of REMIC II for the
benefit of the holders of the REMIC II Interests. The Trustee acknowledges
receipt of the REMIC I Regular Interests (which are uncertificated) and the
other assets of REMIC II and declares that it holds and will hold the same in
trust for the exclusive use and benefit of the holders of the REMIC II
Interests.

                                      -59-

<PAGE>

         (c) The Seller, concurrently with the execution and delivery hereof,
does hereby transfer, assign, set over and otherwise convey in trust to the
Trustee without recourse all the right, title and interest of the Seller in and
to the REMIC II Regular Interests, and the other assets of REMIC III for the
benefit of the holders of the REMIC III Certificates. The Trustee acknowledges
receipt of the REMIC II Regular Interests (which are uncertificated) and the
other assets of REMIC III and declares that it holds and will hold the same in
trust for the exclusive use and benefit of the holders of the REMIC III
Certificates.

                                      -60-

<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.

                                      -61-

<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

                                      -62-

<PAGE>

substitution or assumption agreement, which in the case of the original shall be
added to the related Mortgage File and shall, for all purposes, be considered a
part of such Mortgage File to the same extent as all other documents and
instruments constituting a part thereof. Any fee collected by the 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.

                                      -63-

<PAGE>

         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 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

                                      -64-

<PAGE>

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 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

                                      -65-

<PAGE>

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.

         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 Insurance
Proceeds or Liquidation

                                      -66-

<PAGE>

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 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

                                      -67-

<PAGE>

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 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.

                                      -68-

<PAGE>

                  (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.

         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 Prepayment
Interest Excess on any EMC Mortgage Loan, 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.

         EMC will be entitled to retain any Prepayment Interest Excess pursuant
to Section 5.06(e).

         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

                                      -69-

<PAGE>

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.

                  (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).

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<PAGE>

         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
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.

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<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 each Servicer 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.

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<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

                                      -73-

<PAGE>

Mortgage Loans. The Master Servicer shall pay the costs of such enforcement at
its own expense, subject to its right of 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

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<PAGE>

related Servicer to) knowingly or intentionally take any action, or fail to take
(or fail to cause to be taken) any action 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 (or if the Company or the related Servicer does
not, the Master Servicer may), 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

                                      -75-

<PAGE>

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 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

                                      -76-

<PAGE>

withdraw from the Master Servicer Collection Account 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. 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

                                      -77-

<PAGE>

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.

         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.

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         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
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 all income and gain realized
from any investment of funds on Permitted Investments in the Master Servicer
Collection Account and Distribution Account as compensation for the performance
of its obligations hereunder. 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.

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<PAGE>

         (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.

         (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

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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 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

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<PAGE>

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 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

                                      -82-

<PAGE>

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.

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<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 "U.S.
         Bank National Association, in trust for registered holders of Bear
         Stearns Asset Backed Securities, Inc., Asset-Backed Certificates Series
         2003-AC7". 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;

                  (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;

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<PAGE>

                  (iii) all Liquidation Proceeds and Insurance 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.

                  (a) The Company may from time to time make withdrawals from
the Protected Account for the following purposes:

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<PAGE>

                  (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 and Insurance 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,
         Insurance 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, Insurance
         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.

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<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

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<PAGE>

         which foreclosure has commenced; and (c) as to which REO Property has
         been acquired; and

                  (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

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<PAGE>

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 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.

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<PAGE>

         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 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

                                      -90-

<PAGE>

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 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, costs and liabilities 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; provided however, that the Master Servicer
shall be obligated to pay from its own funds any amounts which it is required to
pay under Section 8.03(a).

         (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

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<PAGE>

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 as may be selected by the Master
Servicer on such direction 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 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;

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<PAGE>

                  (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;

                  (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

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<PAGE>

                  (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.

                  (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.

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<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 Servicing Fee
for such Mortgage Loan except to the extent the Master Servicer determines any
such Advance to be nonrecoverable from Liquidation Proceeds,

                                      -95-

<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 amounts earned on
Permitted Investments in the Master Servicer Collection Account 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 make 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:

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<PAGE>

                  FIRST, to pay accrued and unpaid interest on the Offered
Certificates as follows:

                  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, based on the entitlement of each such Class;

                  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 Certificates, the Monthly
         Interest Distributable Amount for such Class for such Distribution
         Date.

                  SECOND, the Principal Distribution Amount for any Distribution
Date shall be distributed to the Offered Certificates (other than the Class A-4
Certificates), on a pro rata basis, based on the Certificate Principal Balance
of each such Class, until the Certificate Principal Balances thereof have been
reduced to zero.

                  THIRD, on each Distribution Date after the Distribution Date
in January 2004, 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:

                  1. To the holders of the Offered Certificates (other than the
         Class A-4 Certificates), 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 Senior Certificates, on a pro rata
         basis, based on the entitlement of each such class, then to the holders
         of the Class M-1 Certificates, then to the holders of the Class M-2
         Certificates, and then to the holders of the Class B Certificates, 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 Senior Certificates (other than the
         Class A-4 Certificates), on a pro rata basis, in an amount equal to the
         Applied Realized Loss Amount for each such Class;

                  4. To the holders of the Class M-1 Certificates, in an amount
         equal to the Applied Realized Loss Amount for such Class;

                  5. To the holders of the Class M-2 Certificates, in an amount
         equal to the Applied Realized Loss Amount for such Class;

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<PAGE>

                  6. To the holders of the Class B Certificates, in an amount
         equal to the Applied Realized Loss Amount for such Class;

                  7. From amounts otherwise distributable to the Class C
         Certificates, to the Net WAC Reserve Fund, in respect of the Class A
         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;

                  8. From amounts otherwise distributable to the Class C
         Certificates, to the Net WAC Reserve Fund, in respect of 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;

                  9. From amounts otherwise distributable to the Class C
         Certificates, to the Net WAC Reserve Fund, in respect of 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;

                  10. From amounts otherwise distributable to the Class C
         Certificates, to the Net WAC Reserve Fund, in respect of the Class B
         Certificates, the Net WAC Rate Carryover Amount for such Class for such
         Distribution Date or any prior Distribution Dates to the extent unpaid;

                  11. To the Back-up Servicer, the Back-up Servicing Fee for
         such Distribution Date;

                  12. To the holders of the Class C Certificates, the Class C
         Distribution Amount less amounts distributed pursuant to items 7, 8, 9
         and 10 above; and

                  13. To the holders of the Class R-3 Certificates, any amount
         of Net Monthly Excess Cashflow remaining after distributions pursuant
         to items 1 through 12 of this clause THIRD.

         On the Distribution Date in January 2004, all Net Monthly Excess
Cashflow shall be distributed to the Class C Certificates.

                  (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.

                  (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

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<PAGE>

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
pursuant to Section 6.04(A)(d) 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 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; fourth, to the Class M-2 Certificates,
until the Certificate Principal Balance thereof has been reduced to zero; fifth,
to the Class M-1 Certificates, until the Certificate Principal Balance thereof
has been reduced to zero; and sixth, to the Senior Certificates (other than the
Class A-4 Certificates), on a pro rata basis, in reduction of the Certificate
Principal Balance of each such Class. 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 Losses, in each case to be allocated to such Class of
Certificates, on such Distribution Date.

                                      -99-

<PAGE>

                  Any allocation of the principal portion of Realized Losses to
an Offered 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 Balance of the Class P Certificates.

                  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) All Realized Losses on the Mortgage Loans shall be allocated on
each Distribution Date to the following REMIC I Regular Interests in the
specified percentages, as follows: first, to Uncertificated Accrued Interest
payable to the REMIC I Regular Interest AA and REMIC I Regular Interest ZZ up to
an aggregate amount equal to the REMIC I Interest Loss Allocation Amount, 98%
and 2%, respectively; second, to the Uncertificated Principal Balances of the
REMIC I Regular Interest AA and REMIC I Regular Interest ZZ up to an aggregate
amount equal to the REMIC I Principal Loss Allocation Amount, 98% and 2%,
respectively; third, to the Uncertificated Principal Balances of REMIC I Regular
Interest AA, REMIC I Regular Interest B and REMIC I Regular Interest ZZ, 98%, 1%
and 1%, respectively, until the Uncertificated Principal Balance of REMIC I
Regular Interest B has been reduced to zero; fourth, to the Uncertificated
Principal Balances of REMIC I Regular Interest AA, REMIC I Regular Interest M- 2
and REMIC I Regular Interest ZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest M-2 has been
reduced to zero; fifth, to the Uncertificated Principal Balances of REMIC I
Regular Interest AA, REMIC I Regular Interest M- 1 and REMIC I Regular Interest
ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal Balance of
REMIC I Regular Interest M-1 has been reduced to zero; and sixth, to the
Uncertificated Principal Balances of REMIC I Regular Interest AA, 98%, to REMIC
I Regular Interest A-1, REMIC I Regular Interest A-2 and REMIC I Regular
Interest A-3, 1% pro rata and to REMIC I Regular Interest ZZ, 1%, until the
Uncertificated Principal Balances of REMIC I Regular Interest A-1, REMIC I
Regular Interest A-2 and REMIC I Regular Interest A-3 have been reduced to zero.

         (e) All Realized Losses on the Mortgage Loans shall be allocated on
each Distribution Date to the REMIC II Regular Interests in the same manner as
Realized Losses are allocated to the Corresponding Certificates, pursuant to
Section 6.04A(c).

         Section 6.05 MONTHLY STATEMENTS TO CERTIFICATEHOLDERS.

                  (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

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<PAGE>

         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 for the following Distribution Date;

                  (v) 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;

                  (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 end of the related Prepayment Period;

                  (xi) the total number and principal balance of any real estate
         owned or REO Properties as of the end of the related Prepayment Period;

                  (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 the calendar month
         preceding such Distribution Date;

                                      -101-

<PAGE>

                  (xiii) the Realized Losses during the related Prepayment
         Period and the cumulative Realized Losses through the end of the
         preceding month;

                  (xiv) the 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
"https://trustinvestorreporting.usbank.com". Assistance in using the Trustee's
internet website can be obtained by calling the Trustee's customer service desk
at (800) 934-6802.

                  (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. 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:

                                      -102-

<PAGE>

                  (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 DISTRIBUTIONS.

                  (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 Master Servicer Collection 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 deemed distributed by REMIC I to

                                      -103-

<PAGE>

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
AA, REMIC Regular Interest A-1, REMIC I Regular Interest A-2, REMIC I Regular
Interest A-3, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2, REMIC
I Regular Interest B, REMIC I Regular Interest ZZ and REMIC I Regular Interest
P, pro rata, in an amount equal to (A) the Uncertificated Accrued Interest for
each such REMIC I 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 I Regular
Interest ZZ shall be reduced and deferred when the REMIC I Overcollateralized
Amount is less than the REMIC I Overcollateralization Target Amount, by the
lesser of (x) the amount of such difference and (y) the REMIC I Regular Interest
ZZ Maximum Interest Deferral Amount and such amount will be payable to the
Holders of REMIC Regular Interest A-1, REMIC I Regular Interest A-2, REMIC I
Regular Interest A-3, REMIC I Regular Interest M-1, REMIC I Regular Interest M-2
and REMIC I Regular Interest B in the same proportion as the
Overcollateralization Increase Amount is allocated to the Corresponding
Interests, respectively, and the Uncertificated Principal Balance of REMIC I
Regular Interest ZZ shall be increased by such amount;

                           (ii) second, to the Holders of REMIC I 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 I Regular
Interest AA, 98.00% of such remainder (other than amounts payable under the
proviso below), until the Uncertificated Principal Balance of such REMIC I
Regular Interest is reduced to zero;

                                    (B) to the Holders of REMIC Regular Interest
A-1, REMIC I Regular Interest A-2, REMIC I Regular Interest A-3, REMIC I Regular
Interest M-1, REMIC I Regular Interest M-2 and REMIC I Regular Interest B, 1.00%
of such remainder (other than amounts payable under the proviso below), in the
same proportion as principal payments are allocated to the Corresponding
Interests, until the Uncertificated Principal Balances of such REMIC I Regular
Interests are reduced to zero;

                                    (C) to the Holders of REMIC I Regular
Interest ZZ, 1.00% of such remainder (other than amounts payable under the
proviso below), until the Uncertificated Principal Balance of such REMIC I
Regular Interest is reduced to zero; then

                                    (D) any remaining amount to the Holders of
the Class R-1 Certificates;

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

                                      -104-

<PAGE>

                  (c) On each Distribution Date, all amounts representing
Prepayment Charges deemed distributed in respect of REMIC II Regular Interest P
shall be deemed distributed in respect of REMIC I Regular Interest P, provided
that such amounts shall not reduce the Uncertificated Principal Balance of REMIC
I Regular Interest P. On the Distribution Date in January 2009, $100 shall be
deemed distributed in respect of REMIC I Regular Interest P in reduction of the
Uncertificated Principal Balance thereof.

         Section 6.07 REMIC II DISTRIBUTIONS AND CERTAIN REMIC III
DISTRIBUTIONS.

                  (a) On each Distribution Date, the Available Funds, in the
following order of priority and in accordance with the Remittance Report, shall
be deemed 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:

                  (i) to the Holders of the REMIC II Regular Interests, in the
same manner and priority as paid to the Corresponding Certificates,

                           (A) the Uncertificated Accrued Interest (or, in the
case of REMIC II Regular Interest C, the REMIC II Regular Interest C
Distribution Amount) for such Distribution Date, plus

                           (B) any amounts in respect thereof remaining unpaid
from previous Distribution Dates and

                  (ii) 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 in the same
manner and priority as paid to the Corresponding Certificates, and any remaining
amount to the Holders of the Class R-2 Certificates.

                  (b) On each Distribution Date, all amounts representing
Prepayment Charges distributed in respect of the Class P Certificates shall be
deemed distributed in respect of REMIC II Regular Interest P, provided that such
amounts shall not reduce the Uncertificated Principal Balance of REMIC II
Regular Interest P. On the Distribution Date in January 2009, $100 shall be
deemed distributed in respect of REMIC II Regular Interest P in reduction of the
Uncertificated Principal Balance thereof.

                  (c) On each Distribution Date, (i) the related Uncertificated
Accrued Interest for such Distribution Date, plus any amounts in respect thereof
remaining unpaid from previous Distribution Dates, shall be deemed distributed
in respect of REMIC III Regular Interest A-3 and REMIC III Regular Interest A-4
and (ii) amounts distributable in reduction of the Certificate Principal Balance
of the Class A-3 Certificates shall be deemed distributed to the Holders of
REMIC III Regular Interest A-3 in reduction of the Uncertificated Principal
Balance thereof.

                                      -105-

<PAGE>

         Section 6.08 NET WAC RESERVE FUND AND CLASS A-3/A-4 NET WAC
                      PASS-THROUGH AMOUNTS.

         (a) The Trustee shall establish a Net WAC Reserve Fund on behalf of the
holders of the Offered Certificates. The Net WAC Reserve Fund must be an
Eligible Account. The Net WAC Reserve Fund shall be entitled "Net WAC Reserve
Fund, U.S. Bank National Association as Trustee for the benefit of holders of
Bear Stearns Asset Backed Securities, Inc., Asset-Backed Certificates, Series
2003-AC7, Class A-1, Class A-2, Class A-3, Class A-4, Class M-1, Class M-2 and
Class B". 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, in accordance with the Remittance Report for
such Distribution Date, deposit the amounts pursuant to paragraphs 7, 8, 9 and
10 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 in the amounts and priorities
set forth in clause THIRD of Section 6.04(a).

         (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.

         (c) For federal tax return and information reporting, the right of the
holders of the Offered 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.

         (d) With respect to each Distribution Date as to which there is a
positive Class A-3/A- 4 Net WAC Pass-Through Amount, such amount shall be
payable from the Holders of the Class A-3 Certificates to the Holders of the
Class A-4 Certificates. Accordingly, on each such Distribution Date the Trustee
shall deposit into the Net WAC Reserve Fund the Class A-3/A-4 Net WAC
Pass-Through Amount, rather than distributing such amount to the Class A-3
Certificateholders. Notwithstanding the foregoing, such Class A-3/A-4 Net WAC
Pass-Through Amount shall for federal, state and local tax purposes be deemed
distributed in respect of REMIC III Regular Interest A-4 and the Class A-4
Certificates.

                                      -106-

<PAGE>

         On each such Distribution Date, the Trustee shall hold the Class
A-3/A-4 Net WAC Pass- Through Amount for the benefit of the Holders of the Class
A-4 Certificates, and shall distribute such amount to the Holders of the Class
A-4 Certificates. Payments to the Holders of the Class A-4 Certificates of any
Class A-3/A-4 Net WAC Pass-Through Amount will not be payments with respect to a
"regular interest" in a REMIC within the meaning of Code Section 860G(a)(1).

         By accepting a Class A-3 Certificate, each Class A-3 Certificateholder
thereby agrees to direct the Trustee, and the Trustee hereby is directed, to
deposit into the Net WAC Reserve Fund any Class A-3/A-4 Net WAC Pass-Through
Amount rather than distributing such amounts to the Class A-3 Certificateholders
and further agrees that such direction is given for good and valuable
consideration, the receipt and sufficiency of which is acknowledged by such
acceptance. By accepting a Class A-3 Certificate, each Class A-3
Certificateholder acknowledges that any such Class A-3/A-4 Net WAC Pass-Through
Amount shall for federal, state and local tax purposes be deemed distributed in
respect of REMIC III Regular Interest A-3 and the Class A-3 Certificates. By
accepting a Class A-4 Certificate, each Class A-4 Certificateholder acknowledges
that for federal, state and local tax purposes any payments of such Class
A-3/A-4 Net WAC Pass-Through Amount shall not be payments with respect to a
"regular interest" in a REMIC within the meaning of Code Section 860G(a)(1).

         Section 6.09 CLASS P CERTIFICATE ACCOUNT. The Trustee shall establish
and maintain with itself a separate, segregated trust account titled "Bear
Stearns ABS Trust 2003-AC7 Class P Certificate Account". On the Closing Date,
the Depositor will deposit, or cause to be deposited in the Class P Certificate
Account $100.00. The amount on deposit in the Class P Certificate Account shall
be held uninvested. On the January 2009 Distribution Date, the Trustee shall
withdraw the amount on deposit in the Class P Certificate Account and remit such
amount to the holders of the Class P Certificates in reduction of the
Certificate Principal Balance thereof.

                                      -107-

<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             $240,600,000.00          Class A-1 Pass-Through Rate
     A-2            $25,000              $1,000             $262,800,000.00          Class A-2 Pass-Through Rate
     A-3            $25,000              $1,000              $93,000,000.00          Class A-3 Pass-Through Rate
     A-4            $25,000              $1,000                   N/A                Class A-4 Pass-Through Rate
     M-1            $25,000              $1,000              $42,600,000.00          Class M-1 Pass-Through Rate
     M-2            $25,000              $1,000              $42,600,000.00          Class M-2 Pass-Through Rate
      B             $25,000              $1,000              $28,588,212.00           Class B 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.

                                      -108-

<PAGE>

         Section 7.02 CERTIFICATE REGISTER; REGISTRATION OF TRANSFER AND
                      EXCHANGE OF CERTIFICATES.

                  (a) The Trustee shall maintain, or cause to be maintained in
accordance with the provisions of Section 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

                                      -109-

<PAGE>

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 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 and
holding of such ERISA Restricted Certificate will not constitute or result in
the assets of the Trust being deemed to be "plan assets" under ERISA or the
Code, 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

                                      -110-

<PAGE>

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 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 or Class B 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 Ratings or Moody's, 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.

                                      -111-

<PAGE>

                  (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 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.

                                      -112-

<PAGE>

         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
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

                                      -113-

<PAGE>

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;

                  (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,

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<PAGE>

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
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 U.S. Bank National
Association, 60 Livingston Avenue, Bond Drop Window, St. Paul, Minnesota 55107
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.

                                      -115-

<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.

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<PAGE>

This indemnity shall 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 Seller, 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

                                      -117-

<PAGE>

Servicer, the 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

                                      -118-

<PAGE>

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 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 (or an Affiliate thereof the primary
business of which is the servicing of conventional residential mortgage loans)
shall be qualified to service mortgage loans for Fannie Mae or Freddie Mac; (b)
shall have a net worth of not less than

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<PAGE>

$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 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.

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                                   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

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<PAGE>

                  (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.

                  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

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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 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

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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 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:

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                  (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 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,

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<PAGE>

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 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.

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                                    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

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<PAGE>

         certificates or opinions furnished to 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

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<PAGE>

performance of, any of the 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

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<PAGE>

         or 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

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<PAGE>

representation as to the 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, or the
Custodian on its behalf, of the obligation to review the Mortgage Files pursuant
to Section 2.02 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 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,

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<PAGE>

disbursements or advances from the Depositor and the Depositor hereby agrees to
pay such expenses, disbursements or advances upon demand. Such compensation and
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 Ratings 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

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<PAGE>

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 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

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<PAGE>

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 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

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<PAGE>

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.

                  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.

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<PAGE>

         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 for so long as it is also Master Servicer (and the Securities
Administrator is hereby appointed to act as agent) on behalf of the Trust Fund.
The 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

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<PAGE>

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 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

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<PAGE>

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 to all
other Certificateholders in the following order of priority: first, to the Class
B Certificates, 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.

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<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 December 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 Section 11.01, at least 20 days prior to the date

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<PAGE>

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.

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<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.

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<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

                                      -142-

<PAGE>

Counsel addressed to the Trustee , which opinion shall be an expense of the
party requesting such 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

                                      -143-

<PAGE>

OF LAWS PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAWS).

         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

                                      -144-

<PAGE>

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, 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-AC7 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

                                      -145-

<PAGE>

of the parties hereto, nor shall anything herein set forth or contained in the
terms of the Certificates be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third party by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.

                  No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee 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).

                                      -146-

<PAGE>

         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.

                                      * * *

                                      -147-

<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: /s/ Joseph T. Jurkowski, Jr.
                                          ----------------------------------
                                       Name:   Joseph T. Jurkowski, Jr.
                                       Title:  Vice President

                                       EMC MORTGAGE CORPORATION,
                                                as Seller and Company

                                       By: /s/ Sue Stepanek
                                          ----------------------------------
                                       Name:   Sue Stepanek
                                       Title:  Executive Vice President

                                       WELLS FARGO BANK MINNESOTA,
                                       NATIONAL ASSOCIATION,
                                                as Securities Administrator and
                                                Master Servicer

                                       By: /s/ Stacey Taylor
                                          ----------------------------------
                                       Name:   Stacey Taylor
                                       Title:  Assistant Vice President

                                       U.S. BANK NATIONAL ASSOCIATION,
                                                as Trustee

                                       By: /s/ Vaneta I. Bernard
                                          ----------------------------------
                                       Name:   Vaneta I. Bernard
                                       Title:  Vice President

<PAGE>

STATE OF NEW YORK                   )
                                    ) ss.:
COUNTY OF NEW YORK                  )

                  On this ___ day of December, 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 MARYLAND           )
                            ) ss.:
COUNTY OF HOWARD            )

                  On this ____ day of December, 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 TEXAS                      )
                                    ) ss.:
COUNTY OF DALLAS                    )

                  On this ____ day of December, 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 MASSACHUSETTS              )
                                    ) ss.:
COUNTY OF BOSTON                    )

                  On this ____ day of December, 2003, before me, a notary public
in and for said State, appeared Vaneta I. Bernard personally known to me on the
basis of satisfactory evidence to be an authorized representative of U.S. Bank
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>

                                                               EXHIBIT A-1

                      Form of Class A-[1][2][3]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.

                                      A-1-1

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Certificate No.1                                          Pass-Through Rate: _______%

Class A-[1][2][3] Senior

Date of Pooling and Servicing Agreement                   Aggregate Initial Certificate Principal Balance
and Cut-off Date:                                         of this Certificate as of the Cut-off Date:
December 1, 2003                                          $___________________

First Distribution Date:                                  Initial Certificate Principal Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $___________________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ____________

Assumed Final Distribution Date:
January 25, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         evidencing a fractional undivided interest in the distributions
         allocable to the Class A-[1][2][3] 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 (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

                                      A-1-2

<PAGE>

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 U.S. Bank National
Association, 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.

                  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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than 20% of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date and (ii) the Distribution Date in December
2013. The exercise of such right will

                                      A-1-4

<PAGE>

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-1-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003           U.S. BANK NATIONAL ASSOCIATION
                                   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] Certificates referred to
in the within-mentioned Agreement.

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, not in its individual capacity
                                   but solely as Trustee

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

                                      A-1-6

<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.

                                      A-1-7

<PAGE>

                                                                     EXHIBIT A-2

                         Form of Class A-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").

                  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-4 Senior

Date of Pooling and Servicing Agreement                   Aggregate Initial Certificate Notional Balance
and Cut-off Date:                                         of this Certificate as of the Cut-off Date:
December 1, 2003                                          $___________________

First Distribution Date:                                  Initial Certificate Notional Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $___________________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ____________

Assumed Final Distribution Date:
January 25, 2034

</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         evidencing a fractional undivided interest in the distributions
         allocable to the Class A-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 (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

                                      A-2-2

<PAGE>

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 U.S. Bank National
Association, 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 from and including
the 25th day of the calendar month preceding the month in which a Distribution
Date (as hereinafter defined) occurs to and including the 24th day of the
calendar month in which that Distribution Date occurs on the Certificate
Notional 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.

                  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 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.

                                      A-2-3

<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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than 20% of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date and (ii) the Distribution Date in December
2013. The exercise of such right will

                                      A-2-4

<PAGE>

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-2-5

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

                                   Dated: December 30, 2003 U.S. BANK NATIONAL
                                   ASSOCIATION not in its individual capacity
                                   but solely as Trustee

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

                         CERTIFICATE OF AUTHENTICATION

                  This is one of the Class A-4 Certificates referred to in the
within-mentioned Agreement.

                                   U.S. BANK NATIONAL ASSOCIATION Authorized
                                   signatory of U.S. Bank National Association,
                                   not in its individual capacity but solely as
                                   Trustee

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

                                      A-2-6

<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.

                                      A-2-7

<PAGE>

                                                                     EXHIBIT A-3

                       Form of Class M[1][2] Certificates

                  THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF PAYMENT TO
THE SENIOR CERTIFICATES [AND CLASS M-1 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 APPLICABLE
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 RATINGS OR
MOODY'S, 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

                                      A-2-8

<PAGE>

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-2-9

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Certificate No.1                                          [Pass-Through Rate: ______%][Variable 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:
December 1, 2003                                          $_________________

First Distribution Date:                                  Initial Certificate Principal Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $_________________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: ______________

Assumed Final Distribution Date:
January 25, 2034

</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         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 (collectively, the "Mortgage Loans")
sold by Bear Stearns Asset Backed Securities, Inc. ("BSABS"). The Mortgage Loans
were sold by EMC

                                     A-2-10

<PAGE>

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 U.S Bank National Association 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.

                  [For Class M-1 Certificate: 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.] [For
Class M-2 Certificate: Interest on this Certificate will accrue from and
including the 25th day of the calendar month preceding the month in which a
Distribution Date (as hereinafter defined) occurs to and including the 24th day
of the calendar month in which that Distribution Date 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

                                     A-2-11

<PAGE>

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.

                  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 Ratings or Moody's, 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.

                                     A-2-12

<PAGE>

                  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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than 20% of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date and (ii) the Distribution Date in December
2013. 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-2-13

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003           U.S. BANK NATIONAL ASSOCIATION
                                   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.

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, not in its individual capacity
                                   but solely as Trustee

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

                                     A-2-14

<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 Certificate

                  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 RATINGS OR
MOODY'S, 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

                                      A-3-1

<PAGE>

OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.

                                      A-3-2

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Certificate No.1                                          Variable Pass-Through Rate

Class B 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:
December 1, 2003                                          $________________

First Distribution Date:                                  Initial Certificate Principal Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $________________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: _______________

Assumed Final Distribution Date:
January 25, 2034
</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         evidencing a fractional undivided interest in the distributions
         allocable to the Class B 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 (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

                                      A-3-3

<PAGE>

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 U.S. Bank National
Association 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 from and including
the 25th day of the calendar month preceding the month in which a Distribution
Date (as hereinafter defined) occurs to and including the 24th day of the
calendar month in which that Distribution Date 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-3-4

<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 Ratings or Moody's, 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.

                                      A-3-5

<PAGE>

                  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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than 20% of the aggregate Stated Principal Balance of the
Mortgage Loans at the Cut-off Date and (ii) the Distribution Date in December
2013. 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-3-6

<PAGE>

                  IN WITNESS WHEREOF, the Trustee has caused this Certificate to
be duly executed.

Dated: December 30, 2003           U.S. BANK NATIONAL ASSOCIATION, not in its
                                   individual capacity but solely as Trustee

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

                          CERTIFICATE OF AUTHENTICATION

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

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, 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 P Certificate

                  SOLELY FOR U.S. FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE
IS A "REGULAR INTEREST" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT," AS THOSE
TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
REVENUE CODE OF 1986 (THE "CODE").

                  THE 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.

                  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.

                                      A-4-1

<PAGE>

                  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 TRUSTEE
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.

                                      A-4-2

<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:
December 1, 2003                                          $100.00

First Distribution Date:                                  Initial Certificate Principal Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $100.00

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: _________________

Assumed Final Distribution Date:
January 25, 2034

</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         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 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 (collectively,
the "Mortgage Loans") sold by Bear Stearns Asset Backed Securities, Inc.
("BSABS"). The Mortgage Loans were

                                      A-4-3

<PAGE>

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 U.S. Bank National Association, 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-4-4

<PAGE>

                  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 shall have received either (i) the opinion of counsel set forth in
Section 7.02(b) of the Pooling 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

                                      A-4-5

<PAGE>

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 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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than or equal to 20% of the aggregate Stated Principal
Balance of the Mortgage Loans at the Cut-off Date and (ii) the Distribution Date
in December 2013. 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-4-6

<PAGE>

         IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly
executed.

Dated: December 30, 2003

                                   U.S. BANK NATIONAL ASSOCIATION, 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.

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, 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

                                      A-5-1

<PAGE>

AND WILL NOT SUBJECT THE TRUSTEE 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:
December 1, 2003                                          $______________

First Distribution Date:                                  Initial Certificate Notional Balance of this
January 26, 2004                                          Certificate as of the Cut-off Date:
                                                          $______________

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP:______________

Assumed Final Distribution Date:
January 25, 2034

</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         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 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 (collectively,
the "Mortgage Loans") sold by Bear Stearns Asset Backed Securities, Inc.
("BSABS"). The Mortgage Loans were

                                      A-5-3

<PAGE>

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 U.S. Bank National Association, 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.

                  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.

                  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

                                      A-5-4

<PAGE>

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 shall have received the opinion of counsel set forth in section 7.02
of the Pooling 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.

                                      A-5-5

<PAGE>

                  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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than or equal to 20% of the aggregate Stated Principal
Balance of the Mortgage Loans at the Cut-off Date and (ii) the Distribution Date
in December 2013. 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: December 30, 2003           U.S. BANK NATIONAL ASSOCIATION
                                   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.

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, not in its individual capacity
                                   but solely as Trustee
                                   By:
                                       -----------------------------------------
                                             Authorized Signatory

                                      A-5-7

<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.

                                      A-5-8

<PAGE>

                                                                EXHIBIT A-6

                          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 TRUSTEE
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-6-1

<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-6-2

<PAGE>

<TABLE>
<CAPTION>

<S>                                                       <C>
Certificate No.1

Class R                                                   Percentage Interest: 100%

Date of Pooling and Servicing Agreement and
Cut-off Date:
December 1, 2003

First Distribution Date:
January 26, 2004

Master Servicer:
Wells Fargo Bank Minnesota, National
Association                                               CUSIP: _________________

Assumed Final Distribution Date:
January 25, 2034

</TABLE>

                            ASSET-BACKED CERTIFICATE
                                 SERIES 2003-AC7

         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 (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 master
servicer of the Mortgage Loans (the "Master Servicer," which term

                                      A-6-3

<PAGE>

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 U.S. Bank National
Association 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.

                  No transfer of this Class R-1 Certificate will be made unless
the Trustee shall have received either (i) the opinion of counsel set forth in
section 7.02 of the Pooling Agreement or (ii)

                                      A-6-4

<PAGE>

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 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

                                      A-6-5

<PAGE>

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 earlier of (i) the first
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans is less than or equal to 20% of the aggregate Stated Principal
Balance of the Mortgage Loans at the Cut-off Date and (ii) the Distribution Date
in December 2013. 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: December 30, 2003           U.S. BANK NATIONAL ASSOCIATION,
                                   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.

                                   U.S. BANK NATIONAL ASSOCIATION
                                   Authorized signatory of U.S. Bank National
                                   Association, 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)      reserved;

                                       B-1

<PAGE>

                  (s) the Gross Margin, if applicable;

                  (t) the Maximum Lifetime Mortgage Rate, if applicable;

                  (u) the Minimum Lifetime Mortgage Rate, if applicable;

                  (v) the Periodic Rate Cap, if applicable; and

                  (w) the number of days delinquent, if any.

                                       B-2

<PAGE>

                                                                  EXHIBIT C-1

                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                     December 30, 2003

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

               Re:  Custodial Agreement, dated as of December 30, 2003, by and
                    among U.S. Bank National Association, 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-AC7, Asset-
                    Backed Certificates, Series 2003-AC7

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.

                                      C-1-1

<PAGE>

                  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-1-2

<PAGE>

                                                                     EXHIBIT C-2

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                   [DATE]

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

               Re:  Custodial Agreement, dated as of December 30, 2003, by and
                    among U.S. Bank National Association, 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-AC7, Asset-
                    Backed Certificates, Series 2003-AC7

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 FINAL CERTIFICATION

                                                  [DATE]

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

               Re:  Custodial Agreement, dated as of December 30, 2003, by and
                    among U.S. Bank National Association, 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-AC7,
                    Asset-Backed Certificates, Series 2003-AC7

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 "U.S. Bank National Association, as
         Trustee for certificateholders of Bear Stearns Asset Backed Securities,
         Inc. Asset Backed Certificates, Series 2003- AC7," 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 "U.S.
Bank National Association , as Trustee for certificateholders of Bear Stearns
Asset Backed Securities, Inc. Asset Backed Certificates, Series 2003-AC7," 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-AC7, 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

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

Attention: Bear Stearns Asset Backed Securities Trust 2003-AC7

                  Re:      Bear Stearns Asset Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2003-AC7, 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-AC6, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of December 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 U.S. Bank
National Association, 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

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02100

Attention:        Bear Stearns Asset Backed Securities Trust 2003-AC7

                  Re:      Bear Stearns Asset-Backed Securities, Inc.
                           Asset-Backed Certificates, Series 2003-AC7, Class__
                           ---------------------------------------------------

Ladies and Gentlemen:

         ______________ (the "Purchaser") intends to purchase from
______________ (the "Seller") $_________ Initial Certificate Principal Balance
of Asset-Backed Certificates, Series 2003-AC7, Class _____ (the "Certificates"),
issued pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of December 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 U.S. Bank
National Association, 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

                                       F-1

<PAGE>

                  thereof in any manner that would violate the Act or any
                  applicable state securities laws.

                           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 ______, 2003, 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

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

               Re:  Bear Stearns Asset Backed Securities Trust 2003-AC7,
                    Asset-Backed Certificates, Series 2003-AC7 (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 securities or "Blue Sky" laws or an
                           exemption from the registration

                                       G-1

<PAGE>

                           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 and
                           the Securities Administrator) 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 "Securities Administrator") 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.

                  (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

                                       G-2

<PAGE>

                           "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 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

                                       G-3

<PAGE>

                           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 December 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 U.S. Bank
National Association, 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]

                                       G-5

<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]

                                       G-6

<PAGE>

                                                                       EXHIBIT H

                          FORM OF REQUEST FOR RELEASE

To:  U.S. Bank National Association One Federal Street, 3rd Floor Boston, MA
     02110

RE:  Pooling and Servicing Agreement dated as of December 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 U.S. Bank
     National Association, 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

                           FORM OF CUSTODIAL AGREEMENT

                  THIS CUSTODIAL AGREEMENT (as amended and supplemented from
time to time, the "Agreement'), dated as of December 30, 2003, by and among U.S.
BANK NATIONAL ASSOCIATION, 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
December 1, 2003, relating to the issuance of Bear Stearns Asset Backed
Securities Trust 2003-AC7, Asset-Backed Certificates, Series 2003-AC7 (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.

<TABLE>
<CAPTION>

<S>                                                        <C>
Address:                                                   U.S. BANK NATIONAL ASSOCIATION, as
                                                           Trustee
One Federal Street, 3rd Floor
Boston, MA 02110
                                                           By:
                                                              -----------------------------------
Attention: Corporate Trust Services, BSABS                 Name:
2003-AC6                                                   Title:
Telecopy: (617)603-6638
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:
</TABLE>

                                       K-7

<PAGE>

STATE OF NEW YORK          )
                           ) ss:
COUNTY OF NEW YORK         )

                  On the ______ day of December 2003 before me, a notary public
in and for said State, personally appeared _______________, known to me to be a
_________________of U.S. Bank National Association, a national banking
association that executed the within instrument, and also known to me to be the
person who executed it on behalf of said 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]

                                       K-8

<PAGE>

STATE OF NEW YORK              )
                               ) ss:
COUNTY OF NEW YORK             )

                  On the ______ day of December 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]

                                       K-9

<PAGE>

STATE OF TEXAS                 )
                               ) ss:
COUNTY OF DALLAS               )

                  On the ______ day of December 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]

                                      K-10

<PAGE>

STATE OF MARYLAND      )
                       ) ss:
COUNTY OF HOWARD       )

                  On the ______ day of December 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]

                                                       K-11

<PAGE>

                       EXHIBIT ONE TO CUSTODIAL AGREEMENT

                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                                  December 30, 2003

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

          Re:  Custodial Agreement, dated as of December 30, 2003, by and among
               U.S. Bank National Association, 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-AC7, Asset- Backed Certificates,
               Series 2003-AC7
               --------------------------------------------------------------

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-12

<PAGE>

                       EXHIBIT TWO TO CUSTODIAL AGREEMENT

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                    ____________, 2003

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02100

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

          Re:  Custodial Agreement, dated as of December 30, 2003, by and among
               U.S. Bank National Association, 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-AC7, Asset-Backed Certificates,
               Series 2003-AC7
               --------------------------------------------------------------

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-3-1

<PAGE>

                      EXHIBIT THREE TO CUSTODIAL AGREEMENT

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                  ____________, 2003

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, MA 02110

EMC Mortgage Corporation
909 Hidden Ridge Drive, Suite 200
Irving, Texas 75038

Attention: Bear Stearns Asset Backed Securities, Inc., Series 2003-AC7

          Re:  Custodial Agreement, dated as of December 30, 2003, by and among
               U.S. Bank National Association, 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-AC7, Asset-Backed Certificates,
               Series 2003-AC7
               ---------------------------------------------------------------

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 "U.S. Bank National
                  Association, as Trustee for certificateholders of Bear Stearns
                  Asset Backed Securities, Inc. Asset Backed Certificates,
                  Series 2003- AC7," 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-3-2

<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 "U.S.
Bank National Association , as Trustee for certificateholders of Bear Stearns
Asset Backed Securities, Inc. Asset Backed Certificates, Series 2003-AC7," 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-3-3

<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 December 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 U.S.
Bank National Association, 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

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