Document:

EXHIBIT 4

                 CWABS ASSET-BACKED CERTIFICATES TRUST 2004-BC3,

                                     Issuer

                                  CWABS, INC.,

                                    Depositor

                          COUNTRYWIDE HOME LOANS, INC.,

                                     Seller

                      COUNTRYWIDE HOME LOANS SERVICING LP,

                                 Master Servicer

                                       and

                              THE BANK OF NEW YORK,

                                     Trustee

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

                         POOLING AND SERVICING AGREEMENT

                            Dated as of July 1, 2004

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

                   ASSET-BACKED CERTIFICATES, SERIES 2004-BC3

<PAGE>

                                Table of Contents

ARTICLE I
DEFINITIONS..................................................................3
      Section 1.01  Defined Terms............................................3

ARTICLE II
CONVEYANCE OF MORTGAGE LOANS; REPRESENTATIONS AND
WARRANTIES..................................................................53
      Section 2.01  Conveyance of Mortgage Loans............................53
      Section 2.02  Acceptance of the Mortgage Loans........................57
      Section 2.03  Representations, Warranties and Covenants of the
                    Master Servicer and the Seller..........................59
      Section 2.04  Representations and Warranties of the Depositor.........71
      Section 2.05  Delivery of Opinion of Counsel in Connection with
                    Substitutions and Repurchases...........................73
      Section 2.06  Authentication and Delivery of Certificates.............73
      Section 2.07  Covenants of the Master Servicer........................73

ARTICLE III
ADMINISTRATION AND SERVICING OF MORTGAGE LOANS..............................75
      Section 3.01  Master Servicer to Service Mortgage Loans...............75
      Section 3.02  Subservicing; Enforcement of the Obligations of
                    Master Servicer.........................................76
      Section 3.03  Rights of the Depositor, the Seller and the Trustee
                    in Respect of the Master Servicer.......................77
      Section 3.04  Trustee to Act as Master Servicer.......................77
      Section 3.05  Collection of Mortgage Loan Payments; Certificate
                    Account; Distribution Account; Seller Shortfall
                    Interest Requirement....................................77
      Section 3.06  Collection of Taxes, Assessments and Similar Items;
                    Escrow Accounts.........................................80
      Section 3.07  Access to Certain Documentation and Information
                    Regarding the Mortgage Loans............................81
      Section 3.08  Permitted Withdrawals from the Certificate Account,
                    Distribution Account and the Carryover Reserve Fund.....81
      Section 3.09  [Reserved.].............................................83
      Section 3.10  Maintenance of Hazard Insurance.........................83
      Section 3.11  Enforcement of Due-On-Sale Clauses; Assumption
                    Agreements..............................................84
      Section 3.12  Realization Upon Defaulted Mortgage Loans;
                    Determination of Excess Proceeds and Realized
                    Losses; Repurchase of Certain Mortgage Loans............85
      Section 3.13  Trustee to Cooperate; Release of Mortgage Files.........88
      Section 3.14  Documents, Records and Funds in Possession of
                    Master Servicer to be Held for the Trustee..............89
      Section 3.15  Servicing Compensation..................................90
      Section 3.16  Access to Certain Documentation.........................90
      Section 3.17  Annual Statement as to Compliance.......................90

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<PAGE>

      Section 3.18  Annual Independent Public Accountants' Servicing
                    Statement; Financial Statements.........................91
      Section 3.19  The Corridor Contracts..................................91
      Section 3.20  Prepayment Charges......................................92

ARTICLE IV
DISTRIBUTIONS AND ADVANCES BY THE MASTER SERVICER...........................94
      Section 4.01  Advances................................................94
      Section 4.02  Reduction of Servicing Compensation in Connection
                    with Prepayment Interest Shortfalls.....................95
      Section 4.03  [Reserved]..............................................95
      Section 4.04  Distributions...........................................95
      Section 4.05  Monthly Statements to Certificateholders...............101
      Section 4.06  [Reserved].............................................104
      Section 4.07  [Reserved].............................................104
      Section 4.08  Carryover Reserve Fund.................................104
      Section 4.09  Distributions on the REMIC I Regular Interests.........105
      Section 4.10  [Reserved].............................................107
      Section 4.11  Allocation of Realized Losses on the REMIC I
                    Regular Interests......................................107
      Section 4.12  The Class P Certificates...............................108

ARTICLE V
THE CERTIFICATES...........................................................109
      Section 5.01  The Certificates.......................................109
      Section 5.02  Certificate Register; Registration of Transfer and
                    Exchange of Certificates...............................110
      Section 5.03  Mutilated, Destroyed, Lost or Stolen Certificates......114
      Section 5.04  Persons Deemed Owners..................................114
      Section 5.05  Access to List of Certificateholders' Names and
                    Addresses..............................................114
      Section 5.06  Book-Entry Certificates................................114
      Section 5.07  Notices to Depository..................................115
      Section 5.08  Definitive Certificates................................116
      Section 5.09  Maintenance of Office or Agency........................116

ARTICLE VI
THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER..........................117
      Section 6.01  Respective Liabilities of the Depositor, the Master
                    Servicer and the Seller................................117
      Section 6.02  Merger or Consolidation of the Depositor, the
                    Master Servicer or the Seller..........................117
      Section 6.03  Limitation on Liability of the Depositor, the
                    Seller, the Master Servicer and Others.................117
      Section 6.04  Limitation on Resignation of Master Servicer...........118
      Section 6.05  Errors and Omissions Insurance; Fidelity Bonds.........118

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<PAGE>

ARTICLE VII
DEFAULT; TERMINATION OF MASTER SERVICER....................................119
      Section 7.01  Events of Default......................................119
      Section 7.02  Trustee to Act; Appointment of Successor...............120
      Section 7.03  Notification to Certificateholders.....................122

ARTICLE VIII
CONCERNING THE TRUSTEE.....................................................123
      Section 8.01  Duties of Trustee......................................123
      Section 8.02  Certain Matters Affecting the Trustee..................124
      Section 8.03  Trustee Not Liable for Mortgage Loans..................125
      Section 8.04  Trustee May Own Certificates...........................125
      Section 8.05  Master Servicer to Pay Trustee's Fees and Expenses.....125
      Section 8.06  Eligibility Requirements for Trustee...................126
      Section 8.07  Resignation and Removal of Trustee.....................126
      Section 8.08  Successor Trustee......................................127
      Section 8.09  Merger or Consolidation of Trustee.....................128
      Section 8.10  Appointment of Co-Trustee or Separate Trustee..........128
      Section 8.11  Tax Matters............................................129

ARTICLE IX
TERMINATION................................................................132
      Section 9.01  Termination upon Liquidation or Repurchase of all
                    Mortgage Loans.........................................132
      Section 9.02  Final Distribution on the Certificates.................132
      Section 9.03  Additional Termination Requirements....................133

ARTICLE X
MISCELLANEOUS PROVISIONS...................................................135
      Section 10.01 Amendment..............................................135
      Section 10.02 Recordation of Agreement; Counterparts.................136
      Section 10.03 Governing Law..........................................136
      Section 10.04 Intention of Parties...................................137
      Section 10.05 Notices................................................137
      Section 10.06 Severability of Provisions.............................138
      Section 10.07 Assignment.............................................138
      Section 10.08 Limitation on Rights of Certificateholders.............138
      Section 10.09 Inspection and Audit Rights............................139
      Section 10.10 Certificates Nonassessable and Fully Paid..............140

EXHIBITS

EXHIBIT A-1       Form of Class 1-A Certificate
EXHIBIT A-2       Form of Class 2-A Certificate
EXHIBIT A-3       Form of Class M-1 Certificate
EXHIBIT A-4       Form of Class M-2 Certificate
EXHIBIT A-5       Form of Class M-3 Certificate

                                      iii
<PAGE>

EXHIBIT A-6       Form of Class M-4 Certificate
EXHIBIT A-7       Form of Class M-5 Certificate
EXHIBIT A-8       Form of Class M-6 Certificate
EXHIBIT A-9       Form of Class M-7 Certificate
EXHIBIT A-10      Form of Class M-8 Certificate
EXHIBIT A-11      Form of Class B Certificate
EXHIBIT B         Form of Class C Certificate
EXHIBIT C         Form of Class P Certificate
EXHIBIT D         Form of Class A-R Certificate
EXHIBIT E         Form of Tax Matters Person Certificate
EXHIBIT F         Mortgage Loan Schedules
EXHIBIT F-1       List of Mortgage Loans
EXHIBIT F-2       Mortgage Loans for which All or a Portion of a Related
                  Mortgage File is not Delivered to the Trustee on or prior to
                  the Closing Date
EXHIBIT G         Forms of Certification of Trustee
EXHIBIT G-1       Form of Initial Certification of Trustee
EXHIBIT G-2       Form of Interim Certification of Trustee
EXHIBIT G-3       Form of Delay Delivery Certification
EXHIBIT G-4       [Reserved]
EXHIBIT H         Form of Final Certification of Trustee
EXHIBIT I         Transfer Affidavit
EXHIBIT J-1       Form of Transferor Certificate for Class A-R Certificates
EXHIBIT J-2       Form of Transferor Certificate for Private Certificates
EXHIBIT K         Form of Investment Letter (Non-Rule 144A)
EXHIBIT L         Form of Rule 144A Letter
EXHIBIT M         Request for Release (for Trustee)
EXHIBIT N         Request  for  Release  (for  Mortgage  Loans  Paid in  Full,
                  Repurchased or Replaced)
EXHIBIT O         Copy of Depositary Agreement
EXHIBIT P         Form of Mortgage Note and Mortgage
EXHIBIT Q         [reserved]
EXHIBIT R         Form of Corridor Contract
EXHIBIT S         Form of Corridor Contract Assignment Agreement
EXHIBIT T         Officer's Certificate with Respect to Prepayments
EXHIBIT U         Standard & Poor's Predatory Lending Categorization

                                       iv
<PAGE>

      POOLING AND SERVICING AGREEMENT, dated as of July 1, 2004, by and among
CWABS, INC., a Delaware corporation, as depositor (the "Depositor"), COUNTRYWIDE
HOME LOANS, INC., a New York corporation, as seller (the "Seller"), COUNTRYWIDE
HOME LOANS SERVICING LP, a Texas limited partnership, as master servicer (the
"Master Servicer"), and THE BANK OF NEW YORK, a New York banking corporation, as
trustee (the "Trustee").

                             PRELIMINARY STATEMENT:

      The Depositor intends to sell mortgage asset-backed pass-through
certificates (collectively, the "Certificates"), to be issued hereunder in
twelve classes, which in the aggregate will evidence the entire beneficial
ownership interest in the Mortgage Loans (as defined herein).

                                     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 (exclusive of the Corridor Contracts and the Carryover Reserve
Fund) 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-I Interest 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, remittance rate (the "Uncertificated
REMIC I Pass-Through Rate") and initial Uncertificated Principal Balance for
each of the "regular interests" in REMIC I (the "REMIC I Regular Interests").
The "latest possible maturity date" (determined solely for purposes of
satisfying Treasury regulation Section 1.860G-1(a)(4)(iii)) for each REMIC I
Regular Interest shall be the 360th Distribution Date. None of the REMIC I
Regular Interests will be certificated.

<TABLE>
<CAPTION>
              Uncertificated REMIC I    Uncertificated Principal   Latest Possible
Designation     Pass-Through Rate               Balance             Maturity Date
------------  ----------------------    ------------------------   ---------------
<S>                    <C>                  <C>                      <C>
   LT-AA               (1)                  $220,500,000.00          August 2034
   LT-1A               (1)                  $  1,580,150.00          August 2034
   LT-2A               (1)                  $     32,100.00          August 2034
   LT-M1               (1)                  $     73,125.00          August 2034
   LT-M2               (1)                  $     61,875.00          August 2034
   LT-M3               (1)                  $     42,750.00          August 2034
   LT-M4               (1)                  $     37,125.00          August 2034
   LT-M5               (1)                  $     32,625.00          August 2034
   LT-M6               (1)                  $     28,125.00          August 2034
   LT-M7               (1)                  $     28,125.00          August 2034
   LT-M8               (1)                  $     22,500.00          August 2034
   LT-B                (1)                  $     22,500.00          August 2034
   LT-ZZ               (1)                  $  2,250,000.00          August 2034

                                       1
<PAGE>

   LT-P                (1)                  $        100.00          August 2034
   LT-R                (1)                  $        100.00          August 2034
  LT-1SUB              (1)                  $      5,442.64          August 2034
  LT-1GRP              (1)                  $     37,045.64          August 2034
  LT-2SUB              (1)                  $      1,532.28          August 2034
  LT-2GRP              (1)                  $      7,954.28          August 2034
   LT-XX               (1)                  $224,948,025.16          August 2034
</TABLE>

(1)   Calculated as provided in the definition of Uncertificated REMIC I Pass-
      Through Rate.

                                    REMIC II

      As provided herein, the Trustee will elect to treat the segregated pool of
assets consisting of the REMIC I Regular Interests as a REMIC for federal income
tax purposes, and such segregated pool of assets will be designated as REMIC II.
The Class R-II Interest will represent the sole class of "residual interests" in
REMIC II for purposes of the REMIC Provisions under federal income tax law. The
following table irrevocably sets forth the designation, Pass-Through Rate,
aggregate Initial Certificate Principal Balance and Final Scheduled Distribution
Date for each Class of Certificates comprising the interests representing
"regular interests" in REMIC II. The "latest possible maturity date" (determined
solely for purposes of satisfying Treasury Regulation Section
1.860G-1(a)(4)(iii)) for each Class of REMIC II Regular Certificates shall be
the 360th Distribution Date.

<TABLE>
<CAPTION>
                                     Aggregate Initial Certificate     Final Scheduled
 Designation    Pass-Through Rate          Principal Balance          Distribution Date
-------------  -------------------  -------------------------------  -------------------
<S>                    <C>                        <C>                   <C>
  Class 1-A            (1)                        $  316,030,000.00      August 2034
  Class 2-A            (1)                        $   64,220,000.00      August 2034
  Class M-1            (1)                        $   14,625,000.00       June 2034
  Class M-2            (1)                        $   12,375,000.00       June 2034
  Class M-3            (1)                        $    8,550,000.00       May 2034
  Class M-4            (1)                        $    7,425,000.00       May 2034
  Class M-5            (1)                        $    6,525,000.00      April 2034
  Class M-6            (1)                        $    5,625,000.00      March 2034
  Class M-7            (1)                        $    5,625,000.00     February 2034
  Class M-8            (1)                        $    4,500,000.00     November 2033
   Class B             (1)                        $    4,500,000.00      August 2033
   Class C             (2)                        $            0.00      August 2034
   Class P             (3)                        $          100.00      August 2034
</TABLE>

---------------
(1)   Interest will accrue at a rate equal to the Pass-Through Rate, as defined
      herein.

                                       2
<PAGE>

(2)   The Class C Certificates will accrue interest at its variable Pass-Through
      Rate on the Notional Amount of the Class C Certificates outstanding from
      time to time which shall equal the Uncertificated Principal Balance of the
      REMIC I Regular Interests (other than REMIC I Regular Interest LT-P and
      REMIC I Regular Interest LT-R). The Class C Certificates will not accrue
      interest on its Certificate Principal Balance.
(3)   The Class P Certificates will not be entitled to distributions of
      interest.

                                    ARTICLE I

                                   DEFINITIONS

      Section 1.01 Defined Terms.

      In addition to those defined 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:

      Accrual Period: With respect to any Distribution Date and the Certificates
(other than the Class A-R, Class P and Class C Certificates), the period from
and including the immediately preceding Distribution Date (or, in the case of
the first Distribution Date, from and including the Closing Date) and to and
including the day immediately preceding the current Distribution Date. With
respect to any Distribution Date and the Class C Certificates, the calendar
month preceding the month in which such Distribution Date occurs. All
calculations of interest on the Certificates (other than the Class A-R, Class P
and Class C Certificates) will be made on the basis of the actual number of days
elapsed in the related Accrual Period and on a 360-day year. All calculations of
interest on the Class C Certificates will be made on the basis of a 360-day year
consisting of twelve 30-day months. The Class A-R Certificates and Class P
Certificates will not accrue any interest and therefore have no Accrual Period.

      Adjustable Rate Mortgage Loans: The Mortgage Loans identified in the
Mortgage Loan Schedule as having a Mortgage Rate which is adjustable for the
life of the related Mortgage, including any Mortgage Loans delivered in
replacement thereof.

      Adjusted Net  Mortgage  Rate:  As to each  Mortgage  Loan,  the Mortgage
Rate less the Expense Fee Rate.

      Adjustment Date: As to each Adjustable Rate Mortgage Loan, each date on
which the related Mortgage Rate is subject to adjustment, as provided in the
related Mortgage Note.

      Advance: The aggregate of the advances required to be made by the Master
Servicer with respect to any Distribution Date pursuant to Section 4.01, the
amount of any such advances being equal to the sum of (A) the aggregate of
payments of principal and interest (net of the Servicing Fees) on the Mortgage
Loans that were due on the related Due Date and not received by the Master
Servicer as of the close of business on the related Determination Date and (B)
with respect to each REO Property that has not been liquidated, an amount equal
to the excess, if any, of (x) one month's interest (adjusted to the Net Mortgage
Rate) on the Stated Principal Balance of the related Mortgage Loan over (y) the
net monthly rental income (if any) from such REO Property deposited in the
Certificate Account for such Distribution Date pursuant to Section 3.12, less
the aggregate amount of any such delinquent payments that the Master Servicer
has

                                       3
<PAGE>

determined would constitute a Nonrecoverable Advance were an advance to be made
with respect thereto.

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

      Amount Held for Future Distribution: As to any Distribution Date, the
aggregate amount held in the Certificate Account at the close of business on the
related Determination Date on account of (i) all Scheduled Payments or portions
thereof received in respect of the Mortgage Loans due after the related Due Date
and (ii) Principal Prepayments and Liquidation Proceeds received in respect of
such Mortgage Loans after the last day of the related Prepayment Period or Due
Period, respectively.

      Applied Realized Loss Amount: With respect to any Distribution Date, the
sum of the Realized Losses with respect to the Mortgage Loans which are to be
applied in reduction of the Certificate Principal Balance the most subordinate
Class of Subordinate Certificates outstanding pursuant to this Agreement, which
shall equal the amount, if any, by which, Certificate Principal Balance of all
Certificates (after all distributions of principal on such Distribution Date)
exceeds the Stated Principal Balance of the Mortgage Loans for such Distribution
Date.

      Appraised Value: The appraised value of the Mortgaged Property based upon
the appraisal made for the Seller by a fee appraiser at the time of the
origination of the related Mortgage Loan, or the sales price of the Mortgaged
Property at the time of such origination, whichever is less, or 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.

      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 5.06). 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 State of California, City of New York, New
York or the city in which the Corporate Trust Office of the Trustee is located
are authorized or obligated by law or executive order to be closed.

      Calendar Quarter: A Calendar Quarter shall consist of one of the following
time periods in any given year: January 1 through March 31, April 1 through June
30, July 1 though September 30, and October 1 through December 31.

      Carryover Reserve Fund: The separate Eligible Account created and
initially maintained by the Trustee pursuant to Section 4.08 in the name of the
Trustee for the benefit of the

                                       4
<PAGE>

Certificateholders and designated "The Bank of New York in trust for registered
holders of CWABS, Inc., Asset-Backed Certificates, Series 2004-BC3". Funds in
the Carryover Reserve Fund shall be held in trust for the Certificateholders for
the uses and purposes set forth in this Agreement and shall not be a part of any
REMIC created under this 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-11, Exhibit B, Exhibit C and Exhibit D.

      Certificate Account: The separate Eligible Account created and initially
maintained by the Master Servicer pursuant to Section 3.05(b) with a depository
institution in the name of the Master Servicer for the benefit of the Trustee on
behalf of the Certificateholders and designated "Countrywide Home Loans
Servicing LP in trust for registered holders of CWABS, Inc., Asset-Backed
Certificates, Series 2004-BC3". Funds in the Certificate Account shall be held
in trust for the Certificateholders for the uses and purposes set forth in this
Agreement.

      Certificate Account Deposit: An amount equal to the aggregate of all
amounts in respect of (i) principal of the Mortgage Loans due on or after the
Cut-off Date and received by the Master Servicer before the Closing Date and not
applied in computing the Cut-off Date Principal Balance thereof, and (ii)
interest on the Mortgage Loans due on and after the Cut-off Date and received by
the Master Servicer before the Closing Date.

      Certificate Group: Any of the Group 1 Certificates or Group 2
Certificates.

      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 the Class
C Certificates) 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
4.04, and (ii) in the case of any Subordinate Certificate, any Applied Realized
Loss Amounts allocated to such Certificate on previous Distribution Dates
pursuant to Section 4.04; provided that, the Certificate Principal Balance of
the Class of Subordinate Certificates with the highest payment priority to which
Realized Losses have been allocated will be increased by the amount of any
Subsequent Recoveries on the Mortgage Loans not previously allocated, but not by
more than the amount of Realized Losses previously allocated to reduce the
Certificate Principal Balance of that Class. As to any Class C Certificate and
as of any Distribution Date, an amount equal to the excess, if any, of (i) the
aggregate Stated Principal Balance of the Mortgage Loans over (ii) the aggregate
Certificate Principal Balance of the Offered Certificates. References herein to
the Certificate Principal Balance of a Class of Certificates shall mean the
Certificate Principal Balances of all Certificates in such Class.

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

      Certificateholder or Holder: The person in whose name a Certificate is
registered in the Certificate Register (initially, Cede & Co., as nominee for
the Depository, in the case of any

                                       5
<PAGE>

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

      Class: All Certificates bearing the same Class designation as set forth in
Section 5.01 hereof.

      Class A Principal Distribution Target Amount: For any Distribution Date,
the excess of (i) the sum of the Certificate Principal Balances of the Class 1-A
Certificates and Class 2-A Certificates immediately prior to such Distribution
Date, over (ii) the lesser of (x) 65.30% of the aggregate Stated Principal
Balance of the Mortgage Loans for such Distribution Date after giving effect to
distributions to be made on that Distribution Date and (y) the aggregate Stated
Principal Balance of the Mortgage Loans for such Distribution Date after giving
effect to distributions to be made on that Distribution Date minus the OC Floor;
provided however, that if the aggregate Certificate Principal Balance of the
Subordinated Certificates has been reduced to zero, the Class A Principal
Distribution Target Amount shall equal the sum of the Class 1-A and Class 2-A
Principal Distribution Target Amounts.

      Class 1-A Corridor Contract: The transaction evidenced by the Confirmation
and Agreement for the benefit of the Class 1-A Certificateholders (as assigned
to the Trustee pursuant to the Class 1-A Corridor Contract Assignment
Agreement), a form of which is attached hereto as Exhibit R.

      Class 1-A Corridor Contract Assignment Agreement: The Assignment Agreement
regarding the Class 1-A Corridor Contract dated as of the Closing Date among the
Seller, the Trustee and the Corridor Contract Counterparty, a form of which is
attached hereto as Exhibit S.

      Class 1-A Corridor Contract Payment Amount: The amount, if any, received
by the Trustee for the benefit of the Trust Fund in respect of the Class 1-A
Corridor Contract.

      Class 1-A Corridor Contract Termination Date: The Distribution Date in
September 2010.

      Class 1-A Confirmation and Agreement: The Confirmation and Agreement dated
June 30, 2004, reference number 3608500 3608499, evidencing the Class 1-A
Corridor Contract.

                                       6
<PAGE>

      Class 1-A Certificate: Any Certificate designated as a "Class 1-A
Certificate" on the face thereof, in the form of Exhibit A-1 hereto,
representing the right to distributions as set forth herein.

      Class 1-A Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class 1-A Certificates.

      Class 1-A Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class 1-A Pass-Through Rate on
the Class 1-A Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class 1-A Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class 1-A Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class 1-A Certificates
with respect to interest on such prior Distribution Dates.

      Class 1-A Interest Carryover Amount: For any Distribution Date and the
Class 1-A Certificates, the sum of (A) the excess of (i) the amount of interest
the Class 1-A Certificates would otherwise have accrued for such Distribution
Date had had the Class 1-A Pass-Through Rate thereon been calculated as the sum
of One-Month LIBOR and the applicable Class 1-A Margin for such Distribution
Date, over (ii) the amount of interest accrued on the Class 1-A Certificates at
the Net Rate Cap for such Distribution Date and (B) the Class 1-A Interest
Carryover Amount for all previous Distribution Dates not previously paid
pursuant to Section 4.04, together with interest thereon at the Class 1-A
Pass-Through Rate (without giving effect to the Net Rate Cap).

      Class 1-A Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 0.260% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 0.520% per
annum.

      Class 1-A Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class 1-A Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class 1-A Principal Distribution Amount: For any Distribution Date, the
product of (a) the Class A Principal Distribution Target Amount and (b) a
fraction, the numerator of which is the Class 1-A Principal Distribution Target
Amount and the denominator of which is the sum of the Class 1-A Principal
Distribution Target Amount and Class 2-A Principal Distribution Target Amount.

      Class 1-A Principal Distribution Target Amount: For any Distribution Date,
the excess of (i) the Certificate Principal Balance of the Class 1-A
Certificates immediately prior to such Distribution Date, over (ii) the lesser
of (x) 65.30% of the aggregate Stated Principal Balance of the Mortgage Loans in
Loan Group 1 for such Distribution Date after giving effect to

                                       7
<PAGE>

distributions to be made on that Distribution Date and (y) the aggregate Stated
Principal Balance of the Mortgage Loans in Loan Group 1 for such Distribution
Date after giving effect to distributions to be made on that Distribution Date
minus 0.50% of the Stated Principal Balance of the Mortgage Loans in Loan Group
1 as of the Cut-off Date.

      Class 2-A Corridor Contract: The transaction evidenced by the Confirmation
and Agreement for the benefit of the Class 2-A Certificateholders (as assigned
to the Trustee pursuant to the Class 2-A Corridor Contract Assignment
Agreement), a form of which is attached hereto as Exhibit R.

      Class 2-A Corridor Contract Assignment Agreement: The Assignment Agreement
regarding the Class 2-A Corridor Contract dated as of the Closing Date among the
Seller, the Trustee and the Corridor Contract Counterparty, a form of which is
attached hereto as Exhibit S.

      Class 2-A Corridor Contract Payment Amount: The amount, if any, received
by the Trustee for the benefit of the Trust Fund in respect of the Class 2-A
Corridor Contract.

      Class 2-A Corridor  Contract  Termination Date: The Distribution Date in
September 2010.

      Class 2-A Confirmation and Agreement: The Confirmation and Agreement dated
June 30, 2004, reference number 3608498 3608497, evidencing the Class 2-A
Corridor Contract.

      Class 2-A Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class 2-A Certificates.

      Class 2-A Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class 2-A Pass-Through Rate on
the Class 2-A Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class 2-A Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class 2-A Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class 2-A Certificates
with respect to interest on such prior Distribution Dates.

      Class 2-A Interest Carryover Amount: For any Distribution Date and the
Class 2-A Certificates, the sum of (A) the excess of (i) the amount of interest
the Class 2-A Certificates would otherwise have accrued for such Distribution
Date had the Class 2-A Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class 2-A Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class 2-A Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class 2-A Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class 2-A Pass-Through Rate
(without giving effect to the Net Rate Cap).

      Class 2-A Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 0.380% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 0.760% per
annum.

                                       8
<PAGE>

      Class 2-A Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class 2-A Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class 2-A Principal Distribution Amount: For any Distribution Date, the
product of (a) the Class A Principal Distribution Target Amount and (b) a
fraction, the numerator of which is the Class 2-A Principal Distribution Target
Amount and the denominator of which is the sum of the Class 1-A Principal
Distribution Target Amount and Class 2-A Principal Distribution Target Amount.

      Class 2-A Principal Distribution Target Amount: For any Distribution Date,
the excess of (i) the Certificate Principal Balance of the Class 2-A
Certificates immediately prior to such Distribution Date, over (ii) the lesser
of (x) 65.30% of the aggregate Stated Principal Balance of the Mortgage Loans in
Loan Group 2 for such Distribution Date after giving effect to distributions to
be made on that Distribution Date and (y) the aggregate Stated Principal
Balances of the Mortgage Loans in Loan Group 2 for such Distribution Date after
giving effect to distributions to be made on that Distribution Date minus 0.50%
of the Stated Principal Balance of the Mortgage Loans in Loan Group 2 as of the
Cut-off Date.

      Class A-R Certificate: Any one of the Class A-R Certificates executed by
the Trustee substantially in the form annexed hereto as Exhibit D, composed of
the Class R-I Interest and Class R-II Interest, and evidencing an interest
designated as a "residual interest" in REMIC I and REMIC II for purposes of the
REMIC Provisions.

      Class A-R Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class A-R Certificates.

      Class A-R Principal Distribution Amount: With respect to any Distribution
Date, the excess, if any, of (A) $100 over (B) all amounts distributed with
respect to such Certificate in reduction of the Certificate Principal Balance
thereof on previous Distribution Dates pursuant to Section 4.04.

      Class B Certificate: Any Certificate designated as a "Class B Certificate"
on the face thereof, in the form of Exhibit A-8 hereto, representing the right
to distributions as set forth herein.

      Class B Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class B Certificates.

      Class B Current Interest: For any Distribution Date, the interest accrued
during the related Accrual Period at the Class B Pass-Through Rate on the Class
B Certificate Principal Balance immediately prior to such Distribution Date,
plus any amount previously distributed with respect to interest for such Class
that is recovered as a voidable preference by a trustee in bankruptcy.

      Class B Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class B Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class B Certificates with
respect to interest on such prior Distribution Dates.

                                       9
<PAGE>

      Class B Interest Carryover Amount: For any Distribution Date and the Class
B Certificates, the sum of (A) the excess of (i) the amount of interest the
Class B Certificates would otherwise have accrued for such Distribution Date had
the Class B Pass-Through Rate thereon been calculated as the sum of One-Month
LIBOR and the applicable Class B Margin for such Distribution Date, over (ii)
the amount of interest accrued on the Class B Certificates at the Net Rate Cap
for such Distribution Date and (B) the Class B Interest Carryover Amount for all
previous Distribution Dates not previously paid pursuant to Section 4.04,
together with interest thereon at the Class B Pass-Through Rate (without giving
effect to the Net Rate Cap).

      Class B Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 3.000% per annum and, for any
Distribution Date after the Optional Termination Date, 4.500% per annum.

      Class B Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class B Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class B Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the Certificate Principal Balances of the
Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distribution of the Class M-4
Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distribution of the
Class M-5 Principal Distribution Amount on such Distribution Date); (G) the
Class M-6 Certificate Principal Balance (after taking into account distribution
of the Class M-6 Principal Distribution Amount on such Distribution Date); (H)
the Class M-7 Certificate Principal Balance (after taking into account
distribution of the Class M-7 Principal Distribution Amount on such Distribution
Date); (I) the Class M-8 Certificate Principal Balance (after taking into
account distribution of the Class M-8 Principal Distribution Amount on such
Distribution Date) and (J) the Class B Certificate Principal Balance immediately
prior to such Distribution Date over (ii) the lesser of (x) 96.30% of the
aggregate Stated Principal Balances of the Mortgage Loans for such Distribution
Date after giving effect to distributions to be made on that Distribution Date
and (y) the aggregate Stated Principal Balance of the Mortgage Loans for such
Distribution Date after giving effect to distributions to be made on that
Distribution Date minus the OC Floor; provided, however, that after the
Certificate Principal Balance of each other Class of Offered Certificates is
reduced to zero, the Class B Principal Distribution Amount for such Distribution
Date will equal 100% of the Principal Distribution Amount for such Distribution
Date.

      Class C Certificate: Any Certificate designated as a "Class C Certificate"
on the face thereof, in the form of Exhibit B hereto, representing the right to
distributions as set forth herein.

                                       10
<PAGE>

      Class C Current Interest: For any Distribution Date, the interest accrued
on the Class C Notional Amount during the related Accrual Period at the Class C
Pass-Through Rate plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class C Notional Amount: The aggregate amount of the Uncertificated
Principal Balance of the REMIC II Regular Interests other than REMIC I Regular
Interest LT-P and REMIC I Regular Interest LT-R.

      Class C Pass-Through Rate: 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 (N) below, and the denominator of
which is the Uncertificated Principal Balance of the REMIC I Regular Interests
(other than REMIC I Regular Interest LT-P and REMIC I Regular Interest LT-R).
For purposes of calculating the Pass Through Rate for the Class C Certificates,
the numerator is equal to the sum of the following components:

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

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

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

            (D) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M1 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M1;

            (E) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M2 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M2;

            (F) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M3 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M3;

            (G) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M4 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M4;

            (H) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M5 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M5;

                                       11
<PAGE>

            (I) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M6 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M6;

            (J) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M7 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M7;

            (K) the Uncertificated REMIC I Pass-Through Rate for REMIC I Regular
Interest LT-M8 minus the Marker Rate, applied to an amount equal to the
Uncertificated Principal Balance of REMIC I Regular Interest LT-M8;

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

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

            (N) 100% of the interest distributed on REMIC I Regular Interest
LT-P.

      Class M-1 Certificate: Any Certificate designated as a "Class M-1
Certificate" on the face thereof, in the form of Exhibit A-3 hereto,
representing the right to distributions as set forth herein.

      Class M-1 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-1 Certificates.

      Class M-1 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-1 Pass-Through Rate on
the Class M-1 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-1 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-1 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-1 Certificates
with respect to interest.

      Class M-1 Interest Carryover Amount: For any Distribution Date and the
Class M-1 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-1 Certificates would otherwise have accrued for such Distribution
Date had the Class M-1 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-1 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-1 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-1 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-1 Pass-Through Rate
(without giving effect to the Net Rate Cap).

                                       12
<PAGE>

      Class M-1 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 0.550% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 0.825% per
annum.

      Class M-1 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-1 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-1 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of (A) the Certificate Principal Balances of the
Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date) and (B) the Class M-1 Certificate Principal Balance
immediately prior to such Distribution Date over (ii) the lesser of (x) 71.80%
of the Stated Principal Balances of the Mortgage Loans for such Distribution
Date after giving effect to distributions to be made on that Distribution Date
and (y) the aggregate Stated Principal Balance of the Mortgage Loans for such
Distribution Date after giving effect to distributions to be made on that
Distribution Date minus the OC Floor; provided, however, that after the
Certificate Principal Balance of each other Class of Offered Certificates is
reduced to zero, the Class M-1 Principal Distribution Amount for such
Distribution Date will equal 100% of the Principal Distribution Amount for such
Distribution Date.

      Class M-2 Certificate: Any Certificate designated as a "Class M-2
Certificate" on the face thereof, in the form of Exhibit A-4 hereto,
representing the right to distributions as set forth herein.

      Class M-2 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-2 Certificates.

      Class M-2 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-2 Pass-Through Rate on
the Class M-2 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-2 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-2 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-2 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-2 Interest Carryover Amount: For any Distribution Date and the
Class M-2 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-2 Certificates would otherwise have accrued for such Distribution
Date had the Class M-2 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-2 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-2 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-2 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-2 Pass-Through Rate
(without giving effect to the Net Rate Cap).

                                       13
<PAGE>

      Class M-2 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 0.600% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 0.900% per
annum.

      Class M-2 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-2 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-2 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date) and (C) the Class M-2 Certificate Principal Balance
immediately prior to such Distribution Date over (ii) the lesser of (x) 77.30%
of the aggregate Stated Principal Balances of the Mortgage Loans for such
Distribution Date after giving effect to distributions to be made on that
Distribution Date and (y) the aggregate Stated Principal Balance of the Mortgage
Loans for such Distribution Date after giving effect to distributions to be made
on that Distribution Date minus the OC Floor; provided, however, that after the
Certificate Principal Balance of each other Class of Offered Certificate is
reduced to zero, the Class M-2 Principal Distribution Amount for such
Distribution Date will equal 100% of the Principal Distribution Amount for such
Distribution Date.

      Class M-3 Certificate: Any Certificate designated as a "Class M-3
Certificate" on the face thereof, in the form of Exhibit A-5 hereto,
representing the right to distributions as set forth herein.

      Class M-3 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-3 Certificates.

      Class M-3 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-3 Pass-Through Rate on
the Class M-3 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-3 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-3 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-3 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-3 Interest Carryover Amount: For any Distribution Date and the
Class M-3 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-3 Certificates would otherwise have accrued for such Distribution
Date had the Class M-3 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-3 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-3 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-3 Interest Carryover
Amount

                                       14
<PAGE>

for all previous Distribution Dates not previously paid pursuant to Section
4.04, together with interest thereon at the Class M-3 Pass-Through Rate (without
giving effect to the Net Rate Cap).

      Class M-3 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 0.670% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 1.005% per
annum.

      Class M-3 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-3 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-3 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date) and (D) the Class M-3 Certificate Principal
Balance immediately prior to such Distribution Date over (ii) the lesser of (x)
81.10% of the aggregate Stated Principal Balances of the Mortgage Loans for such
Distribution Date after giving effect to distributions to be made on that
Distribution Date and (y) the aggregate Stated Principal Balance of the Mortgage
Loans for such Distribution Date after giving effect to distributions to be made
on that Distribution Date minus the OC Floor; provided, however, that after the
Certificate Principal Balance of each of the other Class of Offered Certificate
is reduced to zero, the Class M-3 Principal Distribution Amount for such
Distribution Date will equal 100% of the Principal Distribution Amount for such
Distribution Date.

      Class M-4 Certificate: Any Certificate designated as a "Class M-4
Certificate" on the face thereof, in the form of Exhibit A-6 hereto,
representing the right to distributions as set forth herein.

      Class M-4 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-4 Certificates.

      Class M-4 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-4 Pass-Through Rate on
the Class M-4 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-4 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-4 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-4 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-4 Interest Carryover Amount: For any Distribution Date and the
Class M-4 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-4 Certificates

                                       15
<PAGE>

would otherwise have accrued for such Distribution Date had the Class M-4
Pass-through Rate thereon been calculated as the sum of One-Month LIBOR and the
applicable Class M-4 Margin for such Distribution Date, over (ii) the amount of
interest accrued on the Class M-4 Certificates at the Net Rate Cap for such
Distribution Date and (B) the Class M-4 Interest Carryover Amount for all
previous Distribution Dates not previously paid pursuant to Section 4.04,
together with interest thereon at the Class M-4 Pass-Through Rate (without
giving effect to the Net Rate Cap).

      Class M-4 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 1.150% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 1.725% per
annum.

      Class M-4 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-4 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-4 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date) and (E) the Class M-4 Certificate
Principal Balance immediately prior to such Distribution Date over (ii) the
lesser of (x) 84.40% of the aggregate Stated Principal Balance of the Mortgage
Loans for such Distribution Date after giving effect to distributions to be made
on that Distribution Date and (y) the aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution Date after giving effect to distributions
to be made on that Distribution Date minus the OC Floor; provided, however, that
after the Certificate Principal Balance of each of the other Classes of Offered
Certificates if reduced to zero, the Class M-4 Principal Distribution Amount for
such Distribution Date will equal 100% of the Principal Distribution Amount for
such Distribution Date.

      Class M-5 Certificate: Any Certificate designated as a "Class M-5
Certificate" on the face thereof, in the form of Exhibit A-7 hereto,
representing the right to distributions as set forth herein.

      Class M-5 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-5 Certificates.

      Class M-5 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-5 Pass-Through Rate on
the Class M-5 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

                                       16
<PAGE>

      Class M-5 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-5 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-5 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-5 Interest Carryover Amount: For any Distribution Date and the
Class M-5 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-5 Certificates would otherwise have accrued for such Distribution
Date had the Class M-5 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-5 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-5 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-5 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-5 Pass-Through Rate
(without giving effect to the Net Rate Cap).
      Class M-5 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 1.250% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 1.875% per
annum.

      Class M-5 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-5 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-5 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distribution of the Class M-4
Principal Distribution Amount on such Distribution Date) and (F) the Class M-5
Certificate Principal Balance immediately prior to such Distribution Date over
(ii) the lesser of (x) 87.30% of the aggregate Stated Principal Balance of the
Mortgage Loans for such Distribution Date after giving effect to distributions
to be made on that Distribution Date and (y) the aggregate Stated Principal
Balance of the Mortgage Loans for such Distribution Date after giving effect to
distributions to be made on that Distribution Date minus the OC Floor; provided,
however, that after the Certificate Principal Balance of each other Class of
Offered Certificates is reduced to zero, the Class M-5 Principal Distribution
Amount for such Distribution Date will equal 100% of the Principal Distribution
Amount for such Distribution Date.

      Class M-6 Certificate: Any Certificate designated as a "Class M-6
Certificate" on the face thereof, in the form of Exhibit A-7 hereto,
representing the right to distributions as set forth herein.

      Class M-6 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-6 Certificates.

                                       17
<PAGE>

      Class M-6 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-6 Pass-Through Rate on
the Class M-6 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-6 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-6 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-6 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-6 Interest Carryover Amount: For any Distribution Date and the
Class M-6 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-6 Certificates would otherwise have accrued for such Distribution
Date had the Class M-6 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-6 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-6 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-6 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-6 Pass-Through Rate
(without giving effect to the Net Rate Cap).

      Class M-6 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 1.450% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 2.175% per
annum.

      Class M-6 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-6 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-6 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distribution of the Class M-4
Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distribution of the
Class M-5 Principal Distribution Amount on such Distribution Date) and (G) the
Class M-6 Certificate Principal Balance immediately prior to such Distribution
Date over (ii) the lesser of (x) 89.80% of the aggregate Stated Principal
Balance of the Mortgage Loans for such Distribution Date after giving effect to
distributions to be made on that Distribution Date and (y) the aggregate Stated
Principal Balance of the Mortgage Loans for such Distribution Date after giving
effect to distributions to be made on that Distribution Date minus the OC Floor;
provided, however, that after the Certificate Principal Balance of each other
Class of Offered Certificates is reduced to zero, the Class M-6

                                       18
<PAGE>

Principal Distribution Amount for such Distribution Date will equal 100% of the
Principal Distribution Amount for such Distribution Date.

      Class M-7 Certificate: Any Certificate designated as a "Class M-7
Certificate" on the face thereof, in the form of Exhibit A-7 hereto,
representing the right to distributions as set forth herein.

      Class M-7 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-7 Certificates.

      Class M-7 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-7 Pass-Through Rate on
the Class M-7 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-7 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-7 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-7 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-7 Interest Carryover Amount: For any Distribution Date and the
Class M-7 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-7 Certificates would otherwise have accrued for such Distribution
Date had the Class M-7 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-7 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-7 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-7 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-7 Pass-Through Rate
(without giving effect to the Net Rate Cap).

      Class M-7 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 1.900% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 2.850% per
annum.

      Class M-7 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-7 Margin and (ii) the Net Rate Cap for such
Distribution Date.

      Class M-7 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distribution of the Class M-4

                                       19
<PAGE>

Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distribution of the
Class M-5 Principal Distribution Amount on such Distribution Date), (G) the
Class M-6 Certificate Principal Balance (after taking into account distribution
of the Class M-6 Principal Distribution Amount on such Distribution Date) and
(H) the Class M-7 Certificate Principal Balance immediately prior to such
Distribution Date over (ii) the lesser of (x) 92.30% of the aggregate Stated
Principal Balances of the Mortgage Loans for such Distribution Date after giving
effect to distributions to be made on that Distribution Date and (y) the
aggregate Stated Principal Balance of the Mortgage Loans for such Distribution
Date after giving effect to distributions to be made on that Distribution Date
minus the OC Floor; provided, however, that after the Certificate Principal
Balance of each other Class of Offered Certificates is reduced to zero, the
Class M-7 Principal Distribution Amount for such Distribution Date will equal
100% of the Principal Distribution Amount for such Distribution Date.

      Class M-8 Certificate: Any Certificate designated as a "Class M-8
Certificate" on the face thereof, in the form of Exhibit A-7 hereto,
representing the right to distributions as set forth herein.

      Class M-8 Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class M-8 Certificates.

      Class M-8 Current Interest: For any Distribution Date, the interest
accrued during the related Accrual Period at the Class M-8 Pass-Through Rate on
the Class M-8 Certificate Principal Balance immediately prior to such
Distribution Date, plus any amount previously distributed with respect to
interest for such Class that is recovered as a voidable preference by a trustee
in bankruptcy.

      Class M-8 Interest Carry Forward Amount: For any Distribution Date, the
excess of (a) the Class M-8 Current Interest with respect to prior Distribution
Dates over (b) the amount actually distributed to the Class M-8 Certificates
with respect to interest on such prior Distribution Dates.

      Class M-8 Interest Carryover Amount: For any Distribution Date and the
Class M-8 Certificates, the sum of (A) the excess of (i) the amount of interest
the Class M-8 Certificates would otherwise have accrued for such Distribution
Date had the Class M-8 Pass-Through Rate thereon been calculated as the sum of
One-Month LIBOR and the applicable Class M-8 Margin for such Distribution Date,
over (ii) the amount of interest accrued on the Class M-8 Certificates at the
Net Rate Cap for such Distribution Date and (B) the Class M-8 Interest Carryover
Amount for all previous Distribution Dates not previously paid pursuant to
Section 4.04, together with interest thereon at the Class M-8 Pass-Through Rate
(without giving effect to the Net Rate Cap).

      Class M-8 Margin: For the Accrual Period for any Distribution Date on or
prior to the Optional Termination Date, 2.000% per annum and, for the Accrual
Period for any Distribution Date after the Optional Termination Date, 3.000% per
annum.

      Class M-8 Pass-Through Rate: For any Distribution Date, the lesser of (i)
One-Month LIBOR plus the Class M-8 Margin and (ii) the Net Rate Cap for such
Distribution Date.

                                       20
<PAGE>

      Class M-8 Principal Distribution Amount: With respect to any Distribution
Date, the excess of (i) the sum of: (A) the Certificate Principal Balances of
the Class 1-A Certificates and Class 2-A Certificates (after taking into account
distribution of the Class 1-A and Class 2-A Principal Distribution Amounts on
such Distribution Date), (B) the Class M-1 Certificate Principal Balance (after
taking into account distribution of the Class M-1 Principal Distribution Amount
on such Distribution Date), (C) the Class M-2 Certificate Principal Balance
(after taking into account distribution of the Class M-2 Principal Distribution
Amount on such Distribution Date), (D) the Class M-3 Certificate Principal
Balance (after taking into account distribution of the Class M-3 Principal
Distribution Amount on such Distribution Date), (E) the Class M-4 Certificate
Principal Balance (after taking into account distribution of the Class M-4
Principal Distribution Amount on such Distribution Date), (F) the Class M-5
Certificate Principal Balance (after taking into account distribution of the
Class M-5 Principal Distribution Amount on such Distribution Date), (G) the
Class M-6 Certificate Principal Balance (after taking into account distribution
of the Class M-6 Principal Distribution Amount on such Distribution Date), (H)
the Class M-7 Certificate Principal Balance (after taking into account
distribution of the Class M-7 Principal Distribution Amount on such Distribution
Date) and (I) the Class M-8 Certificate Principal Balance immediately prior to
such Distribution Date over (ii) the lesser of (x) 94.30% of the aggregate
Stated Principal Balance of the Mortgage Loans for such Distribution Date after
giving effect to distributions to be made on that Distribution Date and (y) the
aggregate Stated Principal Balance of the Mortgage Loans for such Distribution
Date after giving effect to distributions to be made on that Distribution Date
minus the OC Floor; provided, however, that after the Certificate Principal
Balance of each other Class of Offered Certificates is reduced to zero, the
Class M-8 Principal Distribution Amount for such Distribution Date will equal
100% of the Principal Distribution Amount for such Distribution Date.

      Class P Certificate: Any Certificate designated as a "Class P Certificate"
on the face thereof, in the form of Exhibit C hereto, representing the right to
distributions as set forth herein.

      Class P Certificate Principal Balance: As of any date of determination,
the Certificate Principal Balance of the Class P Certificates.

      Class P Distribution Account: The separate Eligible Account created and
maintained by the Trustee pursuant to Section 3.05 in the name of the Trustee
for the benefit of the Class P Certificateholders and designated "The Bank of
New York, in trust for registered holders of CWABS, Inc., Asset-Backed
Certificates, Series 2004-BC3".

      Class P Principal Distribution Date: The first Distribution Date that
occurs after the end of the latest Prepayment Charge Period for all Mortgage
Loans that have a Prepayment Charge Period.

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

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

      Closing Date: July 30, 2004.

                                       21
<PAGE>

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

      Compensating Interest: With respect to any Distribution Date, an amount
equal to one-half of the Servicing Fee, to be applied to the interest portion of
any Prepayment Interest Shortfall on the Mortgage Loans pursuant to Section 4.02
hereof.

      Confirmation And Agreements: The Class 1-A Confirmation and Agreement,
Class 2-A Confirmation and Agreement and Subordinated Confirmation and
Agreement.

      Corporate Trust Office: The designated office of the Trustee in the State
of New York 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 101 Barclay Street, New York, New York
10286 (Attention: Corporate Trust MBS Administration), telephone: (212)
815-3236, facsimile: (212) 815-3986.

      Corresponding Certificate: With respect to each REMIC I Regular Interest
set forth below, the Regular Certificate set forth in the table below:

         REMIC I Regular Interest              REMIC II Certificate
         ------------------------             ----------------------
                   LT-1A                      Class 1-A Certificate
                   LT-2A                      Class 2-A Certificate
                   LT-M1                      Class M-1 Certificate
                   LT-M2                      Class M-2 Certificate
                   LT-M3                      Class M-3 Certificate
                   LT-M4                      Class M-4 Certificate
                   LT-M5                      Class M-5 Certificate
                   LT-M6                      Class M-6 Certificate
                   LT-M7                      Class M-7 Certificate
                   LT-M8                      Class M-8 Certificate
                   LT-B                         Class B Certificate
                   LT-P                         Class P Certificate
                   LT-R                       Class A-R Certificate

      Corridor Contracts: The Class 1-A Corridor Contract, Class 2-A Corridor
Contract and Subordinated Corridor Contract.

      Corridor Contract Assignment Agreement: The Class 1-A Corridor Contract
Assignment Agreement, Class 2-A Corridor Contract Assignment Agreement and
Subordinated Corridor Contract Assignment Agreement, as applicable.

      Corridor Contract Counterparty: Banc of America, N.A., and any permitted
successors and assigns pursuant to the Corridor Contracts.

                                       22
<PAGE>

      Corridor Contract Payment Amount: The Class 1-A Corridor Contract Payment
Amount, Class 2-A Corridor Contract Payment Amount and Subordinated Corridor
Contract Payment Amount, as applicable.

      Corridor Contract Termination Date: The Class 1-A Corridor Contract
Termination Date, Class 2-A Corridor Contract Termination Date and Subordinated
Corridor Contract Termination Date, as applicable.

      Cumulative Loss Trigger Event: With respect to a Distribution Date on or
after the Stepdown Date exists if the aggregate amount of Realized Losses on the
Mortgage Loans from (and including) the Cut-off Date for each Mortgage Loan to
(and including) the last day of the related Due Period (reduced by the aggregate
amount of Subsequent Recoveries received through the last day of that Due
Period) a Cumulative Loss Trigger Event exceeds the applicable percentage, for
such Distribution Date, of the Cut-off Date Principal Balance of the Mortgage
Loans, as set forth below:

<TABLE>
<CAPTION>
             Distribution Date                                    Percentage
             -----------------                                    ----------
<S>                                         <C>
August 2007 - July 2008.................    3.00% with respect to August 2007, plus an additional
                                            1/12th of 1.75% for each month thereafter until July
                                            2008
August 2008 - July 2009.................    4.75% with respect to August 2008, plus an additional
                                            1/12th of 1.50% for each month thereafter until July
                                            2009
August 2009 - July 2010.................    6.25% with respect to August 2009, plus an additional
                                            1/12th of 0.50% for each month thereafter until July
                                            2010
July 2010 and thereafter................    6.75%
</TABLE>

      Current Interest: With respect to (i) the Class 1-A Certificates, the
Class 1-A Current Interest, (ii) the Class 2-A Certificates, the Class 2-A
Current Interest, (iii) the Class M-1 Certificates, the Class M-1 Current
Interest, (iv) the Class M-2 Certificates, the Class M-2 Current Interest, (v)
the Class M-3 Certificates, the Class M-3 Current Interest, (vi) the Class M-4
Certificates, the Class M-4 Current Interest, (vii) the Class M-5 Certificates,
the Class M-5 Current Interest, (viii) the Class M-6 Certificates, the Class M-6
Current Interest, (ix) the Class M-7 Certificates, the Class M-7 Current
Interest, (x) the Class M-8 Certificates, the Class M-8 Current Interest, (xi)
the Class B Certificates, the Class B Current Interest and (xii) the Class C
Certificates, the Class C Current Interest.

      Cut-off Date: In the case of any Mortgage Loan, the later of (x) July 1,
2004 and (y) the date of origination of such Mortgage Loan. When used with
respect to any Mortgage Loans "the Cut-off Date" shall mean the related Cut-off
Dates.

      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 payments of

                                       23
<PAGE>

principal due on or prior to the Cut-off Date, whether or not received, and all
Principal Prepayments received on or prior to the Cut-off Date, 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.

      Definitive Certificates: As defined in Section 5.06.

      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.

      Delay Delivery Mortgage Loans: The Mortgage Loans identified on the
schedule of Mortgage Loans hereto set forth on Exhibit F-2 hereof for which all
or a portion of a related Mortgage File is not delivered to the Trustee on or
prior to the Closing Date. The Depositor shall deliver (or cause delivery of)
the Mortgage Files to the Trustee: (A) with respect to at least 50% of the
Mortgage Loans in each Loan Group, not later than the Closing Date, (B) with
respect to at least an additional 40% of the Mortgage Loans, not later than 20
days after the Closing Date, and (C) with respect to the remaining 10% of the
Mortgage Loans, not later than 30 days after the Closing Date. To the extent
that the Seller shall be in possession of any Mortgage Files with respect to any
Delay Delivery Loan, until delivery to of such Mortgage File to the Trustee as
provided in Section 2.01, the Seller shall hold such files as agent and in trust
for the Trustee.

      Deleted Mortgage Loan: A Mortgage Loan replaced or to be replaced by a
Replacement Mortgage Loan.

      Delinquency Trigger Event: With respect to any Distribution Date on or
after the Stepdown Date, a Delinquency Trigger Event exists if the Rolling
Delinquency Percentage equals or exceeds the product of 40.82% and the Senior
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.

                                       24
<PAGE>

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

      Depositor: CWABS, 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
O.

      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 3.05 in the name of the Trustee for the
benefit of the Certificateholders and designated "The Bank of New York, in trust
for registered holders of CWABS, Inc., Asset-Backed Certificates, Series
2004-BC3". Funds in the Distribution Account shall be held in trust for the
Certificateholders for the uses and purposes set forth in this Agreement.

      Distribution Account Deposit Date: As to any Distribution Date, 1:00 p.m.
Pacific 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 August 2004.

      Due Date: With respect to any Mortgage Loan and Due Period, the due date
for scheduled payments of interest and/or principal on that Mortgage Loan
occurring in such Due Period as provided in the related Mortgage Note.

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

                                       25
<PAGE>

      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, if 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.

      Eligible Repurchase Month:  As defined in Section 3.12(c) hereof.

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

      ERISA-Restricted Certificates: The Class A-R, Class C and Class P
Certificates.

      Event of Default: As defined in Section 7.01 hereof.

      Excess Cashflow: With respect to any Distribution Date the sum of (i) the
amount remaining after the distribution of interest to Certificateholders for
such Distribution Date pursuant to Section 4.04(a)(xi), (ii) the amount
remaining after the distribution of principal to Certificateholders for such
Distribution Date pursuant to Section 4.04(d)(i)(K) or 4.04(d)(ii)(K) and (iii)
the related Overcollateralization Reduction Amount, if any, for such
Distribution Date.

      Excess Proceeds: With respect to any Liquidated Loan, any Liquidation
Proceeds that are in excess of the sum of (i) the unpaid principal balance of
such Liquidated Loan as of the date of such liquidation plus (ii) interest at
the Mortgage Rate from the Due Date as to which interest was last paid or
advanced to Certificateholders (and not reimbursed to the Master Servicer) up to
the Due Date in the month in which such Liquidation Proceeds are required to be
distributed on the Stated Principal Balance of such Liquidated Loan outstanding
during each Due Period as to which such interest was not paid or advanced.

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

      Extra Principal Distribution Amount: With respect to any Distribution Date
and Loan Group, the lesser of (1) the Overcollateralization Deficiency Amount
for such Distribution Date multiplied by a fraction, the numerator of which is
the Principal Remittance Amount for such

                                       26
<PAGE>

Loan Group and the denominator of which is the Principal Remittance Amount for
both Loan Groups and (2) the Loan Group Excess Cashflow Allocation Amount for
such Distribution Date available for payment thereof pursuant to Section
4.04(e)(i).

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

      FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of
1989.

      Five-Year Hybrid Mortgage Loan: A Mortgage Loan having a Mortgage Rate
that is fixed for 60 months after origination thereof before such Mortgage Rate
becomes subject to adjustment.

      Fixed Rate Mortgage Loans: The Mortgage Loans identified in the Mortgage
Loan Schedule as having a Mortgage Rate which is fixed for the life of the
related Mortgage, including any Mortgage Loans delivered in replacement thereof.

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

      Gross Margin: The percentage set forth in the related Mortgage Note for
the Adjustable Rate Mortgage Loans to be added to the Index for use in
determining the Mortgage Rate on each Adjustment Date, and which is set forth in
the Mortgage Loan Schedule for the Adjustable Rate Mortgage Loans.

      Group 1 Certificates: The Class A-R Certificates and the Class 1-A
Certificates.

      Group 1 Mortgage Loans: The group of Mortgage Loans identified in the
related Mortgage Loan Schedule as "Group 1 Mortgage Loans", including in each
case any Mortgage Loans delivered in replacement thereof.

      Group 1 Net WAC: The weighted average Adjusted Net Mortgage Rate of the
Mortgage Loans in Loan Group 1.

      Group 2 Certificates: The Class 2-A Certificates.

      Group 2 Mortgage Loans: The group of Mortgage Loans identified in the
related Mortgage Loan Schedule as "Group 2 Mortgage Loans", including any
Mortgage Loans delivered in replacement thereof.

      Group 2 Net WAC: The weighted average Adjusted Net Mortgage Rate of the
Mortgage Loans in Loan Group 2.

                                       27
<PAGE>

      Index: As to any Adjustable Rate Mortgage Loan on any Adjustment Date
related thereto, the index for the adjustment of the Mortgage Rate set forth as
such in the related Mortgage Note, such index in general being the average of
the London interbank offered rates for six-month U.S. dollar deposits in the
London market, as set forth in The Wall Street Journal or some other source
generally accepted in the residential mortgage loan origination business and
specified in the related Mortgage Note, as most recently announced as of either
45 days prior to, or the first business day of the month immediately preceding
the month of, such Adjustment Date or, if the Index ceases to be published in
the original source or becomes unavailable for any reason, then the Index shall
be a new index selected by the Master Servicer, based on comparable information.

      Initial Adjustment Date: As to any Adjustable Rate Mortgage Loan, the
first Adjustment Date following the origination of such Mortgage Loan.

      Initial Certificate Principal Balance: With respect to any Certificate,
the Certificate Principal Balance of such Certificate or any predecessor
Certificate on the Closing Date.

      Initial Mortgage Rate: As to each Mortgage Loan, the Mortgage Rate in
effect prior to the Initial Adjustment Date.

      Insurance Proceeds: Proceeds paid in respect of the Mortgage Loans
pursuant to any Required 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 a Required Insurance Policy or any
other insurance policy with respect to the Mortgage Loans.

      Interest Carry Forward Amount: With respect to (i) the Class 1-A
Certificates, the Class 1-A Interest Carry Forward Amount, (ii) the Class 2-A
Certificates, the Class 2-A Interest Carry Forward Amount, (iii) the Class M-1
Certificates, the Class M-1 Interest Carry Forward Amount, (iv) the Class M-2
Certificates, the Class M-2 Interest Carry Forward Amount, (v) the Class M-3
Certificates, the Class M-3 Interest Carry Forward Amount, (vi) the Class M-4
Certificates, the Class M-4 Interest Carry Forward Amount, (vii) the Class M-5
Certificates, the Class M-5 Interest Carry Forward Amount, (viii) the Class M-6
Certificates, the Class M-6 Interest Carry Forward Amount, (ix) the Class M-7
Certificates, the Class M-7 Interest Carry Forward Amount, (x) the Class M-8
Certificates, the Class M-8 Interest Carry Forward Amount, and (xi) the Class B
Certificates, the Class B Interest Carry Forward Amount.

      Interest Determination Date: With respect to the Certificates (other than
the Class A-R, Class C and Class P Certificates) for the first Accrual Period,
July 28, 2004. With respect to the Certificates (other than the Class A-R, Class
C and Class P Certificates) and any Accrual Period thereafter, the second LIBOR
Business Day preceding the commencement of such Accrual Period.

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<PAGE>

      Interest Funds: On any Distribution Date, the Interest Remittance Amount
less the Trustee Fee for the Mortgage Loans for such Distribution Date.

      Interest Remittance Amount: With respect to the Mortgage Loans in each
Loan Group and any Master Servicer Advance Date, the sum, without duplication,
of (i) all scheduled interest collected during the related Due Period with
respect to the Mortgage Loans less the related Servicing Fee, (ii) interest
payments on any Principal Prepayments received during the related Prepayment
Period other than Prepayment Interest Excess, (iii) all related Advances
relating to interest with respect to the Mortgage Loans, (iv) all Compensating
Interest with respect to the Mortgage Loans, (v) Liquidation Proceeds and
Subsequent Recoveries with respect to the Mortgage Loans collected during the
related Due Period (to the extent such Liquidation Proceeds and Subsequent
Recoveries relate to interest), and (v) for the Master Servicer Advance Date in
August 2004, the Seller Shortfall Interest Requirement for such Master Servicer
Advance Date (if any), less all Nonrecoverable Advances relating to interest
reimbursed during the related Due Period.

      Latest Possible Maturity Date: The Distribution Date in August 2034.

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

      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 certified (in accordance with
Section 3.12) in the related Prepayment Period that it has received all amounts
it expects to receive in connection with such liquidation.

      Liquidation Proceeds: Amounts, including Insurance Proceeds, received in
connection with the partial or complete liquidation of Mortgage Loans, whether
through trustee's sale, foreclosure sale or otherwise or amounts received in
connection with any condemnation or partial release of a Mortgaged Property and
any other proceeds received in connection with an REO Property, less the sum of
related unreimbursed Advances, Servicing Fees and Servicing Advances.

      Loan Group: Any of Loan Group 1 or Loan Group 2.

      Loan Group Characteristics: The characteristics for each Loan Group
identified under the caption "The Mortgage Pool" in the Prospectus Supplement.

      Loan Group 1: The Group 1 Mortgage Loans.

      Loan Group 2: The Group 2 Mortgage Loans.

      Loan Group Excess Cashflow Allocation Amount: With respect to any
Distribution Date and Loan Group, the product of (i) the Excess Cashflow for
such Distribution Date multiplied by (ii) a fraction, the numerator of which is
the Principal Remittance Amount for such Loan Group

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<PAGE>

for such Distribution Date and the denominator of which is the sum of the
Principal Remittance Amount for both Loan Groups.

      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.

      Marker Rate: With respect to the Class C Certificates and any Distribution
Date, a per annum rate equal to two (2) multiplied by the weighted average of
the Pass Through Rates for each REMIC I Regular Interest (other than REMIC I
Regular Interest LT-AA, REMIC 1 Regular Interest LT-1SUB, REMIC 1 Regular
Interest LT-1GRP, REMIC Regular Interest LT-2SUB, REMIC 1 Regular Interest
LT-2GRP, REMIC 1 Regular Interest LT-XX, REMIC I Regular Interest LT-P and REMIC
I Regular Interest LT-R), with the rates on each such REMIC I Regular Interest
subject to a cap equal to the Pass Through Rate for the Corresponding Class for
such REMIC I Regular Interest, and the rate on REMIC I Regular Interest LT-ZZ
subject to a cap of zero for purposes of this calculation; provided, however,
for purposes of this calculation each such rate 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: Countrywide Home Loans Servicing LP, a Texas limited
partnership, and its successors and assigns, in its capacity as master servicer
hereunder.

      Master Servicer Advance Date: As to any Distribution Date, the Business
Day immediately preceding such Distribution Date.

      Maximum Mortgage Rate: With respect to each Adjustable Rate Mortgage Loan,
the maximum rate of interest set forth as such in the related Mortgage Note.

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

      MERS Mortgage Loan: Any Mortgage Loan registered with MERS on the
MERS(R)System.

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

      MIN: The Mortgage Identification Number for any MERS Mortgage Loan.

      Minimum Mortgage Rate: With respect to each Adjustable Rate Mortgage Loan,
the minimum rate of interest set forth as such in the related Mortgage Note.

      MOM Loan: Any Mortgage Loan, as to which MERS is acting as mortgagee,
solely as nominee for the originator of such Mortgage Loan and its successors
and assigns.

      Monthly Statement: The statement delivered to the Certificateholders
pursuant to Section 4.05.

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<PAGE>

      Moody's: Moody's Investors Service, Inc. or 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 Trustee to be added to the Mortgage File pursuant to this Agreement.

      Mortgage Loan: Such of the Group 1 Mortgage Loans and Group 2 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 subject to repurchase by the
Seller or Master Servicer as provided in this Agreement, shall continue to be a
Mortgage Loan hereunder until the Purchase Price with respect thereto has been
paid to the Trust Fund.

      Mortgage Loan Schedule: The list of Mortgage Loans (as from time to time
amended by 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, attached hereto as Exhibit F-1, setting
forth the following information with respect to each Mortgage Loan: the loan
number;

      (i) the Loan Group;

      (ii) the Appraised Value;

      (iii) the Initial Mortgage Rate;

      (iv) the maturity date;

      (v) the original principal balance;

      (vi) the Cut-off Date Principal Balance;

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

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

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

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

      (xi) a code indicating whether the residential dwelling is either (a) a
detached single family dwelling (b) a condominium unit or (c) a two to four unit
residential property;

                                       31
<PAGE>

      (xii) [reserved];

      (xiii) [reserved]; and

      (xiv) with respect to each Adjustable Rate Mortgage Loan;

            (a) the frequency of each Adjustment Date;

            (b) the next Adjustment Date;

            (c) the Maximum Mortgage Rate;

            (d) the Minimum Mortgage Rate;

            (e) the Mortgage Rate as of the Cut-off Date;

            (f) the related Periodic Rate Cap;

            (g) the Gross Margin; and

            (h) the purpose of the Mortgage Loan.

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

      Mortgage Pool: The aggregate of the Mortgage Loans identified in the
Mortgage Loan Schedule.

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

      Mortgaged Property: The underlying property securing a Mortgage Loan.

      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 Servicing Fee Rate.

      Net Rate Cap: For any Distribution Date, (i) With respect to the Class 1-A
Certificates, the Group 1 Net WAC, (ii) with respect to the Class 2-A
Certificates, the Group 2 Net WAC, and (iii) with respect to the Class M-1,
Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and
Class B Certificates, the weighted average of the Group 1 Net WAC and Group 2
Net WAC (weighted (x) in the case of the Group 1 Net WAC, on the positive
difference (if any) of the Stated Principal Balance of the Mortgage Loans in
Loan Group 1 over the outstanding Certificate Principal Balance of the Class 1-A
Certificates and (y) in the case of the Group 2 Net WAC, on the positive
difference (if any) of the Stated Principal Balance of the Mortgage Loans in
Loan Group 2 over the outstanding Certificate Principal Balance the Class 2-A
Certificates), in the case of each of (i), (ii) and (iii) above, adjusted to an
effective rate reflecting the calculation of interest on the basis of the actual
number of days elapsed during the

                                       32
<PAGE>

related interest accrual period and a 360-day year. For federal income tax
purposes, the equivalent of clause (i) above shall be expressed as the weighted
average of the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular
Interest LT-1GRP, weighted on the basis of the Uncertificated Principal Balance
of such REMIC I Regular Interest. For federal income tax purposes, the
equivalent of clause (ii) above shall be expressed as the weighted average of
the Uncertificated REMIC I Pass-Through Rate on REMIC I Regular Interest
LT-2GRP, weighted on the basis of the Uncertificated Principal Balance of such
REMIC I Regular Interest. For federal income tax purposes, the equivalent of
clause (iii) above shall be expressed as the weighted average of the
Uncertificated REMIC I Pass-Through Rates on (a) REMIC I Regular Interest
LT-1SUB, subject to a cap and a floor equal to the Group 1 Net WAC Rate and (b)
REMIC I Regular Interest LT-2SUB, subject to a cap and a floor equal to the
Group 2 Net WAC Rate; in each case weighted on the basis of the Uncertificated
Principal Balance of such REMIC I Regular Interests.

      Net Rate Carryover: With respect to any Distribution Date, an amount equal
to the sum of (i) the Class 1-A Interest Carryover Amount for such Distribution
Date (if any), (ii) the Class 2-A Interest Carryover Amount for such
Distribution Date (if any), (iii) the Class M-1 Interest Carryover Amount for
such Distribution Date (if any), (iv) the Class M-2 Interest Carryover Amount
for such Distribution Date (if any), (v) the Class M-3 Interest Carryover Amount
for such Distribution Date (if any), (vi) the Class M-4 Interest Carryover
Amount for such Distribution Date (if any), (vii) the Class M-5 Interest
Carryover Amount for such Distribution Date (if any), (viii) the Class M-6
Interest Carryover Amount for such Distribution Date (if any), (ix) the Class
M-7 Interest Carryover Amount for such Distribution Date (if any), (x) the Class
M-8 Interest Carryover Amount for such Distribution Date (if any), and (xi) the
Class B Interest Carryover Amount for such Distribution Date (if any); provided
that when the term Net Rate Carryover is used with respect to one Class of
Certificates (other than the Class A-R, Class C and Class P Certificates), it
shall mean such carryover amount listed in clauses (i), (ii), (iii) (iv), (v),
(vi), (vii), (viii), (ix), (x) or (xi) as applicable, with the same Class
designation. The Class A-R, Class C and Class P Certificates shall not accrue
any Net Rate Carryover.

      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 that, in the good faith judgment of
the Master Servicer, will not or, in the case of a current delinquency, would
not, be ultimately recoverable by the Master Servicer from the related
Mortgagor, related Liquidation Proceeds or otherwise.

      OC Floor: For any Distribution Date, 0.50% of the Stated Principal Balance
of the Mortgage Loans as of the Cut-off Date.

      Offered Certificates: The Class 1-A, Class 2-A, Class A-R, Class M-1,
Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and
Class B Certificates.

      Officer's Certificate: A certificate (i) in the case of the Depositor,
signed by the Chairman of the Board, the Vice Chairman of the Board, the
President, a Managing Director, a Vice President (however denominated), an
Assistant Vice President, the Treasurer, the Secretary, or one of the Assistant
Treasurers or Assistant Secretaries of the Depositor, (ii) in the case of the

                                       33
<PAGE>

Master Servicer, (x) signed by the President, an Executive Vice President, a
Vice President, an Assistant Vice President, the Treasurer, or one of the
Assistant Treasurers or Assistant Secretaries or Countrywide GP, Inc., its
general partner, or (y) if provided for in this Agreement, signed by a Servicing
Officer, as the case may be, and delivered to the Depositor and the Trustee, as
the case may be, as required by this Agreement.

      One-Month LIBOR: With respect to any Accrual Period for the Certificates
(other than the Class A-R, Class P and Class C Certificates), 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 calculated for the first Accrual Period shall equal 1.264% 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 for such Certificates.

      Opinion of Counsel: A written opinion of counsel, who may be counsel for
the Depositor or the Master Servicer, reasonably acceptable to each addressee of
such opinion; provided that with respect to Section 6.04 or 10.01, or the
interpretation or application of the REMIC Provisions, such counsel must (i) in
fact be independent of the Depositor and the Master Servicer, (ii) not have any
direct financial interest in the Depositor or the Master Servicer or in any
affiliate of either, and (iii) not be connected with the Depositor or the Master
Servicer as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.

      Optional Termination: The termination of the Trust Fund provided hereunder
pursuant to the purchase of the Mortgage Loans pursuant to the last sentence of
Section 9.01 hereof.

      Optional Termination Date: Any Distribution Date on which the Stated
Principal Balance of the Mortgage Loans and REO Properties in the Trust Fund is
equal to or less than 10% of the Stated Principal Balance of the Mortgage Loans
as of the Cut-off Date.

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

      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 satisfactory to the Master Servicer or the sales price of
such property or, in the case of a refinancing, on an appraisal satisfactory to
the Master Servicer.

      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:

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<PAGE>

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

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

      Outstanding Mortgage Loan: As of any Distribution Date, a Mortgage Loan
with a Stated Principal Balance greater than zero that was not the subject of a
Principal Prepayment in full, and that did not become a Liquidated Loan, prior
to the end of the related Prepayment Period.

      Overcollateralized Amount: For any Distribution Date, the amount, if any,
by which (x) the aggregate Stated Principal Balance of the Mortgage Loans as of
the last day of the related Due Period exceeds (y) the aggregate Certificate
Principal Balance of the Offered Certificates as of such Distribution Date
(after giving effect to distributions in respect of the Principal Remittance
Amount on such Distribution Date).

      Overcollateralization Deficiency Amount: With respect to any Distribution
Date, the amount, if any, by which the Overcollateralization Target Amount
exceeds the Overcollateralized Amount for such Distribution Date (after giving
effect to distributions in respect of the Principal Remittance Amount for such
Distribution Date).

      Overcollateralization Reduction Amount: For any Distribution Date for
which the Excess Overcollateralization Amount is, or would be, after taking into
account all other distributions to be made on that Distribution Date, greater
than zero, an amount equal to the lesser of (i) the Excess Overcollateralization
Amount for that Distribution Date and (ii) the Principal Remittance Amount for
that Distribution Date.

      Overcollateralization Target Amount: (a) on or after the Closing Date and
on each Distribution Date prior to and including the Distribution Date in
October 2004, zero, (b) on or after the Distribution Date in November 2004 and
on each Distribution Date prior to Stepdown Date, an amount equal to 1.85% of
the aggregate Cut-off Date Principal Balance of the Mortgage Loans and (b) on
and after the Stepdown Date, an amount equal to 3.70% of the aggregate Stated
Principal Balance of the Mortgage Loans in the Mortgage Pool for the current
Distribution Date, subject to a minimum amount equal to the OC Floor; provided,
however, that, if on any Distribution Date, a Trigger Event is in effect, the
Overcollateralization Target Amount will be the Overcollateralization Target
Amount on the Distribution Date immediately preceding such 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.

      Pass-Through Rate: With respect to the Class 1-A Certificates, the Class
1-A Pass-Through Rate; with respect to the Class 2-A Certificates, the Class 2-A
Pass-Through Rate; with respect to the Class M-1 Certificates, the Class M-1
Pass-Through Rate; with respect to the Class M-2 Certificates, the Class M-2
Pass-Through Rate; with respect to the Class M-3

                                       35
<PAGE>

Certificates, the Class M-3 Pass-Through Rate; with respect to the Class M-4
Certificates, the Class M-4 Pass-Through Rate; with respect to the Class M-5
Certificates, the Class M-5 Pass-Through Rate; with respect to the Class M-6
Certificates, the Class M-6 Pass-Through Rate; with respect to the Class M-7
Certificates, the Class M-7 Pass-Through Rate; with respect to the Class M-8
Certificates, the Class M-8 Pass-Through Rate; with respect to the Class B
Certificates, the Class B Pass-Through Rate and with respect to the Class C
Certificates, the Class C Pass-Through Rate.

      Percentage Interest: With respect to any Certificate (other than the Class
P, Class C or Class A-R Certificates), a fraction, expressed as a percentage,
the numerator of which is the Certificate Principal Balance represented by such
Certificate and the denominator of which is the aggregate Certificate Principal
Balance of the related Class. With respect to the Class C, Class P and Class A-R
Certificates, the portion of the Class evidenced thereby, expressed as a
percentage, as stated on the face of such Certificate.

      Periodic Rate Cap: As to substantially all Adjustable Rate Mortgage Loans
and the related Mortgage Notes, the provision therein that limits permissible
increases and decreases in the Mortgage Rate on any Adjustment Date to not more
than three percentage points.

      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 each
      Rating Agency has confirmed in writing will not result in the downgrading
      or withdrawal of the ratings then assigned to the Certificates by such
      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 each Rating Agency has confirmed in writing will
      not result in the downgrading or withdrawal of the ratings then assigned
      to the Certificates by such Rating Agency;

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

                                       36
<PAGE>

      ratings as each Rating Agency has confirmed in writing will not result in
      the downgrading or withdrawal of the rating then assigned to the
      Certificates by such Rating Agency;

            (vi) 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;

            (vii) 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 S&P
      for any such securities) or such lower rating as each Rating Agency has
      confirmed in writing will not result in the downgrading or withdrawal of
      the rating then assigned to the Certificates by such Rating Agency;

            (viii) interests in any money market fund 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 each Rating Agency
      has confirmed in writing will not result in the downgrading or withdrawal
      of the ratings then assigned to the Certificates by such Rating Agency;

            (ix) short term investment funds sponsored by any trust company or
      national banking association incorporated under the laws of the United
      States or any state 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 each Rating Agency has confirmed in
      writing will not result in the downgrading or withdrawal of the ratings
      then assigned to the Certificates by such Rating Agency; and

            (x) such other relatively risk free investments having a specified
      stated maturity and bearing interest or sold at a discount acceptable to
      each Rating Agency as will not result in the downgrading or withdrawal of
      the rating then assigned to the Certificates by any Rating Agency, as
      evidenced by a signed writing delivered by each Rating Agency;

            (xi) 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

                                       37
<PAGE>

      beneficially owned by any REMIC (including, without limitation, any
      amounts collected by the Master Servicer but not yet deposited in the
      Certificate Account) 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 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, 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
Class A-R Certificate, (iv) rural electric and telephone cooperatives described
in section 1381(a)(2)(C) of the Code, (v) an "electing large partnership" as
defined in Section 775 of the Code, (vi) a Person that is not a citizen or
resident of the United States, a corporation, partnership, 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, or 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 unless such Person has furnished the
transferor and the Trustee with a duly completed Internal Revenue Service Form
W-8ECI, and (vii) any other Person so designated by the Trustee based upon an
Opinion of Counsel that the Transfer of an Ownership Interest in a Class A-R
Certificate to such Person may cause any REMIC 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 the Federal Home Loan Mortgage Corporation, a
majority of its board of directors is not selected by such government unit.

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

      Pool Stated Principal Balance: As to any Distribution Date, the aggregate
of the Stated Principal Balances of the Mortgage Loans which were Outstanding
Mortgage Loans on the Due Date in the month preceding the month of such
Distribution Date (after giving effect to Principal Prepayments and Liquidation
Proceeds accrued in the Prepayment Period related to such Due Date).

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<PAGE>

      Prepayment Assumption: The applicable rate of prepayment, as described in
the Prospectus Supplement relating to the Offered Certificates.

      Prepayment Charge: As to a Mortgage Loan, any charge paid by a Mortgagor
in connection with certain partial prepayments and all prepayments in full made
within the related Prepayment Charge Period, the Prepayment Charges with respect
to each applicable Mortgage Loan being identified in the Prepayment Charge
Schedule.

      Prepayment Charge Period: As to any Mortgage Loan the period of time
during which a Prepayment Charge may be imposed.

      Prepayment Charge Schedule: As of any date, the list of Prepayment Charges
included in the Trust Fund on that date, (including the prepayment charge
summary attached thereto). The Prepayment Charge Schedule shall contain the
following information with respect to each Prepayment Charge:

            (i) the Mortgage Loan account number;

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

            (iii) the state of origination in which the related Mortgage
      Property is located;

            (iv) the first date on which a Monthly Payment is or was due under
      the related Mortgage Note;

            (v) the term of the Prepayment Charge;

            (vi) the original principal amount of the related Mortgage Loan; and

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

      The Prepayment Charge Schedule shall be amended from time to time by the
Master Servicer in accordance with this Agreement.

      Prepayment Interest Excess: With respect to any Distribution Date, for
each Mortgage Loan that was the subject of a Principal Prepayment during the
portion of the Prepayment Period from the related Due Date to the end of such
Prepayment Period, any payment of interest received in connection therewith (net
of any applicable Servicing Fee) representing interest accrued for any portion
of such month of receipt.

      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
portion of the Prepayment Period from the beginning of such Prepayment Period to
the related Due Date in such Prepayment Period (in each case, other than a
Principal Prepayment in full resulting from the purchase of a Mortgage Loan
pursuant to Section 2.02, 2.03, 2.04, 3.12 or 9.01 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

                                       39
<PAGE>

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.

      Prepayment Period: As to any Distribution Date and Due Date, the period
beginning with the opening of business on the sixteenth day of the calendar
month preceding the month in which such Distribution Date occurs (or, with
respect to the first Distribution Date, the period from July 1, 2004) and ending
on the close of business on the fifteenth day of the month in which such
Distribution Date occurs.

      Prime Rate: The prime commercial lending rate of The Bank of New York, as
publicly announced to be in effect from time to time. The Prime Rate shall be
adjusted automatically, without notice, on the effective date of any change in
such prime commercial lending rate. The Prime Rate is not necessarily the Bank
of New York's lowest rate of interest.

      Principal Distribution Amount: With respect to any Distribution Date and a
Loan Group, the sum of (i) the Principal Remittance Amount for such Loan Group
for such Distribution Date and (ii) the Extra Principal Distribution Amount for
such Loan Group for such Distribution Date minus (iii) the amount of any related
Overcollateralization Reduction Amount for that Distribution Date.

      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, 2.04, 3.12 and 9.01 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 in accordance with
the terms of the related Mortgage Note.

      Principal Remittance Amount: As to any Distribution Date (a) the sum,
without duplication, of: (i) the scheduled principal due during the related Due
Period and collected on or before the related Determination Date or advanced on
or before the related Master Servicer Advance Date, (ii) Principal Prepayments
collected in the related Prepayment Period, (iii) the Stated Principal Balance
of each Mortgage Loan that was repurchased by the Seller or purchased by the
Master Servicer, (iv) the amount, if any, by which the aggregate unpaid
principal balance of any Replacement Mortgage Loans is less than the aggregate
unpaid principal balance of any Deleted Mortgage Loans delivered by the Seller
in connection with a substitution of a Mortgage Loan and (v) all Liquidation
Proceeds and Subsequent Recoveries collected during the related Due Period (to
the extent such Liquidation Proceeds related to principal); less (b) all
non-recoverable Advances relating to principal and certain expenses reimbursed
during the related Due Period.

      Private Certificates: The Class C Certificates and Class P Certificates.

      Prospectus Supplement: The Prospectus Supplement dated July 23, 2004,
relating to the public offering of the Offered Certificates offered thereby.

      PUD: A Planned Unit Development.

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<PAGE>

      Purchase Price: With respect to any Mortgage Loan (x) required to be (1)
repurchased by the Seller or purchased by the Master Servicer, as applicable,
pursuant to Section 2.02, 2.03 or 3.12 hereof or (2) repurchased by the
Depositor pursuant to Section 2.04 hereof, or (y) that the Master Servicer has a
right to purchase pursuant to Section 3.12 hereof, an amount equal to the sum of
(i) 100% of the unpaid principal balance (or, if such purchase or repurchase, as
the case may be, is effected by the Master Servicer, the Stated Principal
Balance) of the Mortgage Loan as of the date of such purchase, (ii) accrued
interest thereon at the applicable Mortgage Rate (or, if such purchase or
repurchase, as the case may be, is effected by the Master Servicer, at the Net
Mortgage Rate) from (a) the date through which interest was last paid by the
Mortgagor (or, if such purchase or repurchase, as the case may be, is effected
by the Master Servicer, the date through which interest was last advanced and
not reimbursed by the Master Servicer) to (b) the Due Date in the month in which
the Purchase Price is to be distributed to Certificateholders, and (iii) costs
and damages incurred by the Trust Fund in connection with a repurchase pursuant
to Section 2.03 hereof that arises out of a violation of any predatory or
abusive lending law which also constitutes an actual breach of representation
(xxxiv) of Section 2.03(b) hereof.

      Rating Agency: Each of S&P and Moody's. 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 Liquidated Loan, an amount (not less
than zero or more than the Stated Principal Balance of the Mortgage Loan) as of
the date of such liquidation, equal to (i) the Stated Principal Balance of such
Liquidated Loan as of the date of such liquidation, minus (ii) the Liquidation
Proceeds, if any, received in connection with such liquidation during the month
in which such liquidation occurs, to the extent applied as recoveries of
principal of the Liquidated Loan. With respect to each Mortgage Loan that has
become the subject of a Deficient Valuation, (i) if the value of the related
Mortgaged Property was reduced below the principal balance of the related
Mortgage Note, the amount by which the value of the Mortgaged Property was
reduced below the principal balance of the related Mortgage Note, and (ii) if
the principal amount due under the related Mortgage Note has been reduced, the
difference between the principal balance of the Mortgage Loan outstanding
immediately prior to such Deficient Valuation and the principal balance of the
Mortgage Loan as reduced by the Deficient Valuation plus any reduction in the
interest component of the Scheduled Payments. With respect to each Mortgage Loan
that has become the subject of a Debt Service Reduction and any Distribution
Date, the amount, if any, by which the related Scheduled Payment was reduced.
The amount of a Realized Loss on a Liquidated Loan will be reduced by the amount
of Subsequent Recoveries received with respect to such Liquidated Loan.

      Record Date: With respect to any Distribution Date and the Certificates,
other than the Class A-R, Class C and Class P Certificates, the Business Day
immediately preceding such Distribution Date, or if such Certificates are no
longer Book-Entry Certificates, the last Business Day of the month preceding the
month of such Distribution Date. With respect to the Class A-R, Class C and
Class P Certificates, the last Business Day of the month preceding the month of
a Distribution Date.

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<PAGE>

      Reference Bank Rate: With respect to any Accrual Period for the Offered
Certificates (other than the Class A-R, Class P and Class C Certificates), 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 amounts approximately equal to the aggregate
Certificate Principal Balance of the Offered Certificates on such Interest
Determination Date, 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 U.S. 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 on such Interest Determination Date.

      Reference Banks: Barclays Bank PLC, Deutsche Bank and NatWest, N.A.,
provided that if any of the foregoing banks are not suitable to serve as a
Reference Bank, then any leading banks selected by the Trustee which are engaged
in transactions in Eurodollar deposits in the international Eurocurrency market
(i) with an established place of business in London, England, (ii) not
controlling, under the control of or under common control with the Depositor or
any affiliate thereof and (iii) which have been designated as such by the
Trustee.

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

      Regular Certificate: Any Offered Certificate other than a Class A-R
Certificate.

      Relief Act: The Servicemembers Civil Relief Act.

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

      REMIC I: The segregated pool of assets subject hereto, constituting a
portion of the primary trust created hereby and to be administered hereunder,
with respect to which a separate REMIC election is to be made, consisting of:
(i) the Mortgage Loans and the related Mortgage Files; (ii) all payments on and
collections in respect of the Mortgage Loans due after the Cut-off Date (other
than Monthly Payments due in July 2004 and reflected in the Cut-off Date
Principal Balance) as shall be on deposit in the Certificate Account and
identified as belonging to the Trust Fund; (iii) property which secured a
Mortgage Loan and which has been acquired for the benefit of the
Certificateholders by foreclosure or deed in lieu of foreclosure; (iv) Required
Insurance Policies pertaining to the Mortgage Loans, if any; and (v) all
proceeds of clauses (i) through (iv) above. The Corridor Contracts and Carryover
Reserve Fund will not be assets of REMIC I.

      REMIC I Interest Loss Allocation Amount: With respect to any Distribution
Date, an amount equal to (a) the product of (i) the aggregate Uncertificated
Principal Balance of the REMIC I Regular Interests then outstanding and (ii) the
Uncertificated Pass-Through Rate for REMIC I Regular Interest LT-AA minus the
Marker Rate, divided by (b) 12.

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<PAGE>

      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 LT-AA, REMIC I Regular Interest LT-1A, REMIC I Regular Interest
LT-2A, REMIC I Regular Interest LT-M1, REMIC I Regular Interest LT-M2, REMIC I
Regular Interest LT-M3, REMIC I Regular Interest LT-M4, REMIC I Regular Interest
LT-M5, REMIC 1 Regular Interest LT-M6, REMIC 1 Regular Interest LT-M-7, REMIC
Regular Interest LT-M8, REMIC I Regular Interest LT-B, REMIC I Regular Interest
LT-ZZ, REMIC I Regular Interest LT-P and REMIC I Regular Interest LT-R.

      REMIC I Overcollateralized Amount: With respect to any date of
determination, (i) 0.50% of the aggregate Uncertificated Principal Balances of
the REMIC I Regular Interests minus (ii) the Uncertificated Principal Balances
of Regular Interest LT-1A, REMIC I Regular Interest LT-2A, REMIC I Regular
Interest LT-M1, REMIC I Regular Interest LT-M2, REMIC I Regular Interest LT-M3,
REMIC I Regular Interest LT-M4, REMIC I Regular Interest LT-M5, REMIC 1 Regular
Interest LT-M6, REMIC 1 Regular Interest LT-M-7, REMIC Regular Interest LT-M8,
and REMIC I Regular Interest LT-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 the product of (i) the aggregate Stated Principal
Balance of the Mortgage Loans then outstanding and (ii) 1 minus a fraction, the
numerator of which is two times the sum of the Uncertificated Principal Balances
of REMIC I Regular Interests LT-1A, LT-2A, LT-M1, LT-M2, LT-M3, LT-M4, LT-M5,
REMIC 1 Regular Interest LT-M6, REMIC 1 Regular Interest LT-M-7, REMIC Regular
Interest LT-M8, and LT-B and the denominator of which is the sum of the
Uncertificated Principal Balances of REMIC I Regular Interests LT-1A, LT-2A,
LT-M1, LT-M2, LT-M3, LT-M4, LT-M5, REMIC 1 Regular Interest LT-M6, REMIC 1
Regular Interest LT-M-7, REMIC Regular Interest LT-M8, LT-B and LT-ZZ.

      REMIC I Regular Interests: REMIC I Regular Interest LT-AA, Regular
Interest LT-1A, REMIC I Regular Interest LT-2A, REMIC I Regular Interest LT-M1,
REMIC I Regular Interest LT-M2, REMIC I Regular Interest LT-M3, REMIC I Regular
Interest LT-M4, REMIC I Regular Interest LT-M5, REMIC 1 Regular Interest LT-M6,
REMIC 1 Regular Interest LT-M-7, REMIC Regular Interest LT-M8,REMIC I Regular
Interest LT-B, REMIC I Regular Interest LT-ZZ, REMIC, REMIC I Regular Interest
LT-P, REMIC I Regular Interest LT-R, REMIC I Regular Interest LT-1SUB, REMIC I
Regular Interest LT-1GRP, REMIC I Regular Interest LT-2SUB, REMIC I Regular
Interest LT-2GRP and REMIC I Regular Interest LT-XX.

      REMIC I Regular Interest LT-AA: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-1A: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal

                                       43
<PAGE>

Balance, that bears interest at the related Uncertificated REMIC I Pass-Through
Rate, and that has such other terms as are described herein.

      REMIC I Regular Interest LT-2A: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M1: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M2: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M3: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M4: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M5: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M6: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M7: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-M8: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

                                       44
<PAGE>

      REMIC I Regular Interest LT-B: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-ZZ: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-P: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-R: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-1SUB: A regular interest in REMIC I that is
held as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-1GRP: A regular interest in REMIC I that is
held as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-2SUB: A regular interest in REMIC I that is
held as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-2GRP: A regular interest in REMIC I that is
held as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-XX: A regular interest in REMIC I that is held
as an asset of REMIC II, that has an initial principal balance equal to the
related Uncertificated Principal Balance, that bears interest at the related
Uncertificated REMIC I Pass-Through Rate, and that has such other terms as are
described herein.

      REMIC I Regular Interest LT-ZZ Maximum Interest Deferral Amount: With
respect to any Distribution Date, the sum of (a) the excess of (i)
Uncertificated Accrued Interest calculated

                                       45
<PAGE>

with the Uncertificated Pass-Through Rate for REMIC I Regular Interest LT-ZZ and
an Uncertificated Principal Balance equal to the excess of (x) the
Uncertificated Principal Balance of REMIC I Regular Interest LT-ZZ over (y) the
REMIC I Overcollateralized Amount, in each case for such Distribution Date, over
(ii) Uncertificated Accrued Interest on REMIC I Regular Interests LT-1A, LT-2A,
LT-M1, LT-M2, LT-M3, LT-M4, LT-M5, LT-M6, LT-M7, LT-M8 and LT-B, with the rate
on each such REMIC I Regular Interest subject to a cap equal to the Pass-Through
Rate on the Corresponding Certificate for the purpose of this calculation.

      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 LT-1SUB, REMIC I Regular Interest LT-1GRP, REMIC I Regular
Interest LT-2SUB, REMIC I Regular Interest LT2-GRP and REMIC I Regular Interest
LT-XX.

      REMIC I Subordinated Balance Ratio: The ratio among the Uncertificated
Principal Balances of each REMIC I Regular Interest ending with the designation
"SUB,", 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 the related Loan Group over (y) the Certificate Principal
Balance of the Class A Certificates, Class R Certificates and Class P
Certificates in the related Loan Group.

      REMIC II Regular Certificates: Any of the Class 1-A, Class 2-A, Class M-1,
Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8,
Class B, Class C or Class P Certificates.

      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
temporary and final regulations (or, to the extent not inconsistent with such
temporary or final regulations, proposed regulations) and published rulings,
notices and announcements promulgated thereunder, as the foregoing may be in
effect from time to time.

      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 substituted by the Seller for a
Deleted Mortgage Loan, which must, on the date of such substitution, as
confirmed in a Request for Release, substantially in the form of Exhibit N, (i)
have a Stated Principal Balance, after deduction of the principal portion of the
Scheduled Payment due in the month of substitution, not in excess of, and not
less than 90% of the Stated Principal Balance of the Deleted Mortgage Loan; (ii)
with respect to any Fixed Rate Mortgage Loan, have a Mortgage Rate not less than
or no more than 1% per annum higher than the Mortgage Rate of the Deleted
Mortgage Loan and, with respect to any Adjustable Rate Mortgage Loan: (a) have a
Maximum Mortgage Rate no more than 1% per annum higher or lower than the Maximum
Mortgage Rate of the Deleted Mortgage Loan; (b) have a Minimum Mortgage Rate no
more than 1% per annum higher or lower than the Minimum Mortgage Rate of the
Deleted Mortgage Loan; (c) have the same Index, Periodic Rate Cap and intervals
between Adjustment Dates as that of the Deleted Mortgage Loan and a Gross Margin
not more than 1% per annum higher or lower than that of the Deleted

                                       46
<PAGE>

Mortgage Loan; and (d) not permit conversion of the related Mortgage Rate to a
fixed Mortgage Rate; (iii) have the same or higher credit quality
characteristics than that of the Deleted Mortgage Loan; (iv) at the time of
transfer to the Trust Fund, be accruing interest at a Mortgage Rate not more
than 1% per annum higher or lower than that of the Deleted Mortgage Loan; (v)
have a Loan-to-Value Ratio no higher than that of the Deleted Mortgage Loan;
(vi) have a remaining term to maturity no greater than (and not more than one
year less than) that of the Deleted Mortgage Loan; (vii) not permit conversion
of the Mortgage Rate from a fixed rate to a variable rate or visa versa; (viii)
provide for a prepayment charge on terms substantially similar to those of the
prepayment charge, if any, of the Deleted Mortgage Loan; (ix) have the same lien
priority as the Deleted Mortgage Loan; (x) constitute the same occupancy type as
the Deleted Mortgage Loan; (xi) [reserved], and (xii) comply with each
representation and warranty (other than a statistical representation or
warranty) set forth in Section 2.03 hereof.

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

      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.

      Responsible Officer: When used with respect to the Trustee, any Vice
President, any Assistant Vice President, the Secretary, any Assistant Secretary,
any Trust Officer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also to whom, with respect to a particular matter, such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.

      Rolling Delinquency Percentage: With respect to any Distribution Date on
or after the Stepdown Date, the average, over the past three months, of a
fraction (expressed as a percentage), (a) the numerator of which is the
aggregate Stated Principal Balances for such Distribution Date of all Mortgage
Loans 60 or more days delinquent as of the last day of the preceding month
(including Mortgage Loans in bankruptcy, foreclosure and REO Properties) and (b)
the denominator of which is the aggregate Stated Principal Balances of the
Mortgage Loans for such Distribution Date.

      S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc. or
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: Countrywide Home Loans, Inc., a New York corporation, and its
successors and assigns, in its capacity as seller of the Mortgage Loans to the
Depositor.

      Seller Shortfall Interest Requirement: For the Master Servicer Advance
Date in August 2004, to the extent not cover by Excess Cashflow, an amount equal
to 30 days interest on the Stated Principal Balance of each Mortgage

                                       47
<PAGE>

Loans that does not have a scheduled payment of interest due in the related Due
Period at the Net Mortgage Rates for such Mortgage Loans.

      Senior Certificates: The Class 1-A, Class 2-A and Class A-R Certificates.

      Senior Enhancement Percentage: With respect to each Distribution Date on
or after the Stepdown Date, the fraction (expressed as a percentage) (1) the
numerator of which is the excess of (a) the aggregate Stated Principal Balance
of the Mortgage Loans for the preceding Distribution Date over (b) (i) before
the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A
Certificates have been reduced to zero, the aggregate Certificate Principal
Balance of the Class 1-A Certificates and Class 2-A Certificates, or (ii) after
the Certificate Principal Balances of the Class 1-A Certificates and Class 2-A
Certificates have been reduced to zero, the Certificate Principal Balance of the
most senior Class of Certificates outstanding as of the preceding Master
Servicer Advance Date and (2) the denominator of which is the aggregate Stated
Principal Balance of the Mortgage Loans for the preceding Distribution Date.

      Servicing Advances: All customary, reasonable and necessary "out of
pocket" costs and expenses incurred in the performance by the Master Servicer of
its servicing obligations 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, (iii) the
management and liquidation of any REO Property and (iv) compliance with the
obligations under Section 3.10.

      Servicing Fee: As to each Mortgage Loan and any Distribution Date, an
amount equal to one month's interest at the Servicing Fee Rate on the Stated
Principal Balance of such Mortgage Loan or, in the event of any payment of
interest that accompanies a Principal Prepayment in full made by the Mortgagor,
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: With respect to each Mortgage Loan, 0.50% per annum.

      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 by the Master Servicer on the Closing Date pursuant to this
Agreement, as such list may from time to time be amended.

      Stated Principal Balance: With respect to any Mortgage Loan or related REO
Property (i) as of the Cut-off Date, the unpaid principal balance of the
Mortgage Loan as of such date (before any adjustment to the amortization
schedule for any moratorium or similar waiver or grace period), after giving
effect to any partial Prepayments or Liquidation Proceeds received prior to such
date and to the payment of principal due on or prior to such date and
irrespective any delinquency in payment by the related mortgagor with respect to
Actuarial Mortgage Loans, and (ii) as of any Distribution Date, the Stated
Principal Balance of the Mortgage Loan as of its Cut-off Date, minus the sum of
(a) the principal portion of the Scheduled Payments (x) due with respect to such
Mortgage Loan during each Due Period ending prior to such Distribution Date and
(y) that were received by the Master Servicer as of the close of business on the

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<PAGE>

Determination Date related to such Distribution Date or with respect to which
Advances were made as of the Master Servicer Advance Date related to such
Distribution Date, (b) all Principal Prepayments with respect to such Mortgage
Loan received by the Master Servicer during each Prepayment Period ending prior
to such Distribution Date, and (c) all Liquidation Proceeds collected with
respect to such Mortgage Loan during each Due Period ending prior to such
Distribution Date, to the extent applied by the Master Servicer as recoveries of
principal in accordance with Section 3.12. The Stated Principal Balance of any
Mortgage Loan that becomes a Liquidated Loan will be zero on the Distribution
Date following the Due Period in which such Mortgage Loan becomes a Liquidated
Loan. References herein to the Stated Principal Balance the Mortgage Loans at
any time shall mean the aggregate Stated Principal Balances of all Mortgage
Loans in the Trust Fund as of such time.

      Stepdown Date: The earlier to occur of (i) the Distribution Date following
the Distribution Date on which the aggregate Certificate Principal Balance of
the Class 1-A Certificates and Class 2-A Certificates is reduced to zero and
(ii) the later to occur of (a) the Distribution Date in August 2007 or (b) the
first Distribution Date on which the aggregate Certificate Principal Balance of
the Class 1-A Certificates and Class 2-A Certificates (after calculating
anticipated distributions on such Distribution Date) is less than or equal to
65.30% of the aggregate Stated Principal Balance of the Mortgage Loans for such
Distribution Date.

      Subordinate Certificates: The Class M-1, Class M-2, Class M-3, Class M-4,
Class M-5, Class M-6, Class M-7, Class M-8 and Class B Certificates.

      Subordinated Corridor Contract: The transaction evidenced by the
Confirmation and Agreement for the benefit of the Subordinate Certificateholders
(as assigned to the Trustee pursuant to the Subordinated Corridor Contract
Assignment Agreement), a form of which is attached hereto as Exhibit R.

      Subordinated Corridor Contract Assignment Agreement: The Assignment
Agreement regarding the Subordinated Corridor Contract dated as of the Closing
Date among the Seller, the Trustee and the Corridor Contract Counterparty, a
form of which is attached hereto as Exhibit S.

      Subordinated Corridor Contract Payment Amount: The amount, if any,
received by the Trustee for the benefit of the Trust Fund in respect of the
Subordinated Corridor Contract.

      Subordinated Corridor Contract Termination Date: The Distribution Date in
September 2010.

      Subordinated Confirmation And Agreement: The Confirmation and Agreement
dated June 30, 2004, reference number 3608495 3608493, evidencing the
Subordinated Corridor Contract.

      Subservicer: As defined in Section 3.02(a).

      Subservicing Agreement: As defined in Section 3.02(a).

                                       49
<PAGE>

      Subsequent Recoveries: Unexpected recoveries, net of reimbursable
expenses, with respect to Mortgage Loans that have been previously liquidated
and that resulted in a Realized Loss.

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

      Substitution Amount: With respect to any Mortgage Loan substituted
pursuant to Section 2.03(c), the excess of (x) the principal balance of the
Mortgage Loan that is substituted for, over (y) the principal balance of the
related substitute Mortgage Loan, each balance being determined as of the date
of substitution.

      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. Initially, this person shall be the Trustee.

      Tax Matters Person Certificate: The Class A-R Certificate with a
Denomination of $0.05.

      Three-Year Hybrid Mortgage Loan: A Mortgage Loan having a Mortgage Rate
that is fixed for 36 months after origination thereof before such Mortgage Rate
becomes subject to adjustment.

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

      Trigger Event: With respect to any Distribution Date on or after the
Stepdown Date, either a Delinquency Trigger Event or a Cumulative Loss Trigger
Event with respect to that Distribution Date.

      Trust Fund: The corpus of the trust created hereunder consisting of (i)
the Mortgage Loans and all interest and principal received on or with respect
thereto on and after the Cut-off Date to the extent not applied in computing the
Cut-off Date Principal Balance thereof, exclusive of interest not required to be
deposited in the Certificate Account pursuant to Section 3.05(b)(ii); (ii) the
Certificate Account, the Distribution Account, the Carryover Reserve Fund and
all amounts deposited therein pursuant to the applicable provisions of this
Agreement; (iii) the Corridor Contracts; (iv) property that secured a Mortgage
Loan and has been acquired by foreclosure, deed in lieu of foreclosure or
otherwise; (v) the mortgagee's rights under any insurance policies with respect
to the Mortgage Loan; and (vi) all proceeds of the conversion, voluntary or
involuntary, of any of the foregoing into cash or other liquid property.

      Trustee: The Bank of New York, a New York banking corporation, not in its
individual capacity, but solely in its capacity as trustee for the benefit of
the Certificateholders under this Agreement, and any successor thereto, and any
corporation or national banking association resulting from or surviving any
consolidation or merger to which it or its successors may be a party and any
successor trustee as may from time to time be serving as successor trustee
hereunder.

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<PAGE>

      Trustee Advance Rate: With respect to any Advance made by the Trustee
pursuant to Section 4.01(b), a per annum rate of interest determined as of the
date of such Advance equal to the Prime Rate in effect on such date plus 5.00%.

      Trustee Fee: As to any Distribution Date, an amount equal to one-twelfth
of the Trustee Fee Rate multiplied by the aggregate Stated Principal Balance of
the Mortgage Loans for such Distribution Date.

      Trustee Fee Rate: With respect to each Mortgage Loan, 0.009% per annum.

      Two-Year Hybrid Mortgage Loan: A Mortgage Loan having a Mortgage Rate that
is fixed for 24 months after origination thereof before such Mortgage Rate
becomes subject to adjustment.

      Uncertificated Accrued Interest: With respect to any Uncertificated
Regular Interest for any Distribution Date, one month's interest at the related
Uncertificated Pass-Through Rate for such Distribution Date, accrued on the
Uncertificated Principal, immediately prior to such Distribution Date.
Uncertificated Accrued Interest for the Uncertificated Regular Interests shall
accrue on the basis of a 360-day year consisting of twelve 30-day months. 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 Compensating
Interest) incurred in respect of the Mortgage Loans for any Distribution Date
shall be allocated among REMIC I Regular Interest LT-AA, REMIC I Regular
Interest LT-1A, REMIC I Regular Interest LT-2A, REMIC I Regular Interest LT-M1,
REMIC I Regular Interest LT-M2, REMIC I Regular Interest LT-M3, REMIC I Regular
Interest LT-M4, REMIC I Regular Interest LT-M5, REMIC 1 REGULAR Interest LT-M6,
REMIC 1 Regular Interest LT-M7, REMIC 1 Regular Interest LT-M8, REMIC I Regular
Interest LT-B, REMIC I Regular Interest LT-ZZ, pro rata based on, and to the
extent of, one month's interest at the then applicable respective 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
Compensating Interest) 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 LT-1SUB, REMIC I Regular Interest LT-1GRP,
REMIC I Regular Interest LT-2SUB, REMIC I Regular Interest LT-2GRP and REMIC I
Regular Interest LT-XX, 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.

      Uncertificated Pass-Through Rate: The Uncertificated REMIC I Pass-Through
Rate.

      Uncertificated Principal Balance: The principal amount of any
Uncertificated Regular Interest outstanding as of any date of determination. The
Uncertificated Principal Balance of

                                       51
<PAGE>

each Uncertificated Regular Interest shall be reduced by all distributions of
principal made on such Uncertificated Regular Interest, as applicable, on such
Distribution Date and, if and to the extent necessary and appropriate, shall be
further reduced in such Distribution Date by Realized Losses. The Uncertificated
Principal Balance of each Uncertificated Regular Interest shall never be less
than zero.

      Uncertificated REMIC I Pass-Through Rate: With respect to REMIC I Regular
Interest LT-AA, REMIC I Regular Interest LT-1A, REMIC I Regular Interest LT-2A,
REMIC I Regular Interest LT-M1, REMIC I Regular Interest LT-M2, REMIC I Regular
Interest LT-M3, REMIC I Regular Interest LT-M4, REMIC I Regular Interest LT-M5,
REMIC 1 REGULAR Interest LT-M6, REMIC 1 Regular Interest LT-M7, REMIC 1 Regular
Interest LT-M8, REMIC I Regular Interest LT-B, REMIC I Regular Interest LT-ZZ,
REMIC I Regular Interest LT-P, REMIC I Regular Interest LT-AR, REMIC I Regular
Interest LT-1SUB, REMIC I Regular Interest LT-2SUB and REMIC I Regular Interest
LT-XX, the weighted average of the Adjusted Net Mortgage Rates of the Mortgage
Loans. With respect to REMIC I Regular Interest LT-1GRP, the weighted average of
the Adjusted Net Mortgage Rates of the Group 1 Mortgage Loans and with respect
REMIC I Regular Interest LT-2GRP, the weighted average of the Adjusted Net
Mortgage Rates of the Group 2 Mortgage Loans.

      Uncertificated Regular Interests: The REMIC I Regular Interests.

      Underwriter: Countrywide Securities Corporation.

      Underwriter's Exemption: Prohibited Transaction Exemption 2002-41, 67 Fed.
Reg. 54487 (2002), as amended (or any successor thereto), or any substantially
similar administrative exemption granted by the U.S. Department of Labor.

      Unpaid Realized Loss Amount: For any Class of Subordinate Certificates,
the portion of the aggregate Applied Realized Loss Amount previously allocated
to that Class remaining unpaid from prior Distribution Dates, as reduced by the
amount of the increase in the related Certificate Principal Balance due to the
receipt of Subsequent Recoveries.

      Voting Rights: The portion of the voting rights of all the Certificates
that is allocated to any Certificates for purposes of the voting provisions
hereunder. Voting Rights allocated to each Class of Certificates shall be
allocated 97% to the Certificates other than the Class A-R, Class C and Class P
Certificates (with the allocation among the Certificates to be in proportion to
the Certificate Principal Balance of each Class relative to the Certificate
Principal Balance of all other such Classes), and 1% to each of the Class A-R,
Class C and Class P Certificates. Voting Rights will be allocated among the
Certificates of each such Class in accordance with their respective Percentage
Interests.

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<PAGE>

                                   ARTICLE II

                          CONVEYANCE OF MORTGAGE LOANS;
                         REPRESENTATIONS AND WARRANTIES

      Section 2.01 Conveyance of Mortgage Loans.

      (a) 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 Mortgage Loans, including all interest and principal
received and receivable by the Seller on or with respect to the Mortgage Loans
after the Cut-off Date (to the extent not applied in computing the Cut-off Date
Principal Balance thereof) or deposited into the Certificate Account by the
Seller as a Certificate Account Deposit as provided in this Agreement, other
than principal due on the Mortgage Loans on or prior to the Cut-off Date and
interest accruing prior to the Cut-off Date. The Seller confirms that,
concurrently with the transfer and assignment, it has deposited into the
Certificate Account the Certificate Account Deposit.

      Immediately upon the conveyance of the Mortgage Loans referred to in the
preceding paragraph, the Depositor sells, transfers, assigns, sets over and
otherwise conveys to the Trustee for benefit of the Certificateholders, without
recourse, all right title and interest in the Mortgage Loans.

      The Seller further agrees to assign all of its right, title and interest
in and to the interest rate cap transactions evidenced by the Confirmation And
Agreements , and to cause all of its obligations in respect of such transactions
to be assumed by, the Trustee on behalf of the Trust Fund, on the terms and
conditions set forth in the Corridor Contract Assignment Agreements.

      (b) [reserved]

      (c) 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 of this Agreement, hereby sells, transfers, assigns and otherwise
conveys to the Trustee for the use and benefit of the Certificateholders,
without recourse, all right title and interest in the portion of the Trust Fund
not otherwise conveyed to the Trustee pursuant to Sections 2.01(a) or (b).

      (d) [reserved]

      (e) [reserved]

      (f) [reserved]

      (g) In connection with the transfer and assignment of each Mortgage Loan,
the Depositor has delivered to, and deposited with, the Trustee (or, in the case
of the Delay Delivery Mortgage Loans, will deliver to, and deposit with, the
Trustee within the time periods specified

                                       53
<PAGE>

in the definition of Delay Delivery Mortgage Loans) (except as provided in
clause (vi) below) for the benefit of the Certificateholders, the following
documents or instruments with respect to each such Mortgage Loan so assigned
(with respect to each Mortgage Loan, clause (i) through (vi) below, together,
the "Mortgage File" for each such Mortgage Loan):

            (i) the original Mortgage Note, endorsed by the Seller or the
      originator of such Mortgage Loan, without recourse, in the following form:
      "Pay to the order of ________________ without recourse", with all
      intervening endorsements that show a complete chain of endorsement from
      the originator to the Seller, or, if the original Mortgage Note has been
      lost or destroyed and not replaced, an original lost note affidavit from
      the Seller, stating that the original Mortgage Note was lost or destroyed,
      together with a copy of the related Mortgage Note;

            (ii) in the case of each Mortgage Loan that is not a MERS Mortgage
      Loan, the original recorded Mortgage, and in the case of each MERS
      Mortgage Loan, the original Mortgage, noting the presence of the MIN of
      the Mortgage Loan and language indicating that the Mortgage Loan is a MOM
      Loan if the Mortgage Loan is a MOM Loan, with evidence of recording
      indicated thereon, or a copy of the Mortgage certified by the public
      recording office in which such Mortgage has been recorded;

            (iii) in the case of each Mortgage Loan that is not a MERS Mortgage
      Loan, a duly executed assignment of the Mortgage to "Asset-Backed
      Certificates, Series 2004-BC3, CWABS, Inc., by The Bank of New York, a New
      York banking corporation, as trustee under the Pooling and Servicing
      Agreement dated as of July 1, 2004, without recourse" (each such
      assignment, when duly and validly completed, to be in recordable form and
      sufficient to effect the assignment of and transfer to the assignee
      thereof, under the Mortgage to which such assignment relates);

            (iv) the original recorded assignment or assignments of the Mortgage
      together with all interim recorded assignments of such Mortgage (noting
      the presence of a MIN in the case of each MERS Mortgage Loan);

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

            (vi) the original or duplicate original lender's title policy or a
      printout of the electronic equivalent and all riders thereto or, in the
      event such original title policy has not been received from the insurer,
      such original or duplicate original lender's title policy and all riders
      thereto shall be delivered within one year of the Closing Date.

      In addition, in connection with the assignment of any MERS Mortgage Loan,
the Seller agrees that it will cause, at the Seller's own expense, the MERS(R)
System to indicate (and provide evidence to the Trustee that it has done so)
that such Mortgage Loans have been assigned by the Seller 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 "[IDENTIFY
TRUSTEE SPECIFIC CODE]" in the field "[IDENTIFY THE FIELD NAME

                                       54
<PAGE>

FOR TRUSTEE]" which identifies the Trustee and (b) the code "[IDENTIFY SERIES
SPECIFIC CODE NUMBER]" 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.

      In the event that in connection with any Mortgage Loan that is not a MERS
Mortgage Loan the Seller cannot deliver the original recorded Mortgage or all
interim recorded assignments of the Mortgage satisfying the requirements of
clause (ii), (iii) or (iv) concurrently with the execution and delivery hereof,
the Seller shall deliver or cause to be delivered to the Trustee a true copy of
such Mortgage and of each such undelivered interim assignment of the Mortgage
each certified by the Seller, the applicable title company, escrow agent or
attorney, or the originator of such Mortgage, as the case may be, to be a true
and complete copy of the original Mortgage or assignment of Mortgage submitted
for recording. For any such Mortgage Loan that is not a MERS Mortgage Loan the
Seller shall promptly deliver or cause to be delivered to the Trustee such
original Mortgage and such assignment or assignments with evidence of recording
indicated thereon upon receipt thereof from the public recording official, or a
copy thereof, certified, if appropriate, by the relevant recording office, but
in no event shall any such delivery be made later than 270 days following the
Closing Date; provided that in the event that by such date the Seller is unable
to deliver or cause to be delivered each such Mortgage and each interim
assignment by reason of the fact that any such documents have not been returned
by the appropriate recording office, or, in the case of each interim assignment,
because the related Mortgage has not been returned by the appropriate recording
office, the Seller shall deliver or cause to be delivered such documents to the
Trustee as promptly as possible upon receipt thereof. If the public recording
office in which a Mortgage or interim assignment thereof is recorded retains the
original of such Mortgage or assignment, a copy of the original Mortgage or
assignment so retained, with evidence of recording thereon, certified to be true
and complete by such recording office, shall satisfy the Seller's obligations in
Section 2.01. If any document submitted for recording pursuant to this Agreement
is (x) lost prior to recording or rejected by the applicable recording office,
the Seller shall immediately prepare or cause to be prepared a substitute and
submit it for recording, and shall deliver copies and originals thereof in
accordance with the foregoing or (y) lost after recording, the Seller shall
deliver to the Trustee a copy of such document certified by the applicable
public recording office to be a true and complete copy of the original recorded
document. The Seller shall promptly forward or cause to be forwarded to the
Trustee (x) from time to time additional original documents evidencing an
assumption or modification of a Mortgage Loan and (y) any other documents
required to be delivered by the Depositor or the Master Servicer to the Trustee
within the time periods specified in this Section 2.01.

      With respect to each Mortgage Loan other than a MERS Mortgage Loan as to
which the related Mortgaged Property and Mortgage File are located in (a) the
State of California or (b) any other jurisdiction under the laws of which the
recordation of the assignment specified in clause (iii) above is not necessary
to protect the Trustee's and the Certificateholders' interest in the related
Mortgage Loan, as evidenced by an Opinion of Counsel, delivered by the Seller to
the

                                       55
<PAGE>

Trustee and a copy to the Rating Agencies, in lieu of recording the assignment
specified in clause (iii) above, the Seller may deliver an unrecorded assignment
in blank, in form otherwise suitable for recording to the Trustee; provided that
if the related Mortgage has not been returned from the applicable public
recording office, such assignment, or any copy thereof, of the Mortgage may
exclude the information to be provided by the recording office. As to any
Mortgage Loan other than a MERS Mortgage Loan, the procedures of the preceding
sentence shall be applicable only so long as the related Mortgage File is
maintained in the possession of the Trustee in the State or jurisdiction
described in such sentence. In the event that with respect to Mortgage Loans
other than MERS Mortgage Loans (i) the Seller, the Depositor or the Master
Servicer gives written notice to the Trustee that recording is required to
protect the right, title and interest of the Trustee on behalf of the
Certificateholders in and to any Mortgage Loan, (ii) a court recharacterizes the
sale of the Mortgage Loans as a financing, or (iii) as a result of any change in
or amendment to the laws of the State or jurisdiction described in the first
sentence of this paragraph or any applicable political subdivision thereof, or
any change in official position regarding application or interpretation of such
laws, including a holding by a court of competent jurisdiction, such recording
is so required, the Trustee shall complete the assignment in the manner
specified in clause (iii) of the second paragraph of this Section 2.01 and the
Seller shall submit or cause to be submitted for recording as specified above
or, should the Seller fail to perform such obligations, the Trustee shall cause
the Master Servicer, at the Master Servicer's expense, to cause each such
previously unrecorded assignment to be submitted for recording as specified
above. In the event a Mortgage File is released to the Master Servicer as a
result of the Master Servicer's having completed a Request for Release in the
form of Exhibit M, the Trustee shall complete the assignment of the related
Mortgage in the manner specified in clause (iii) of the second paragraph of this
Section 2.01.

      So long as the Trustee maintains an office in the State of California, the
Trustee shall maintain possession of and not remove or attempt to remove from
the State of California any of the Mortgage Files as to which the related
Mortgaged Property is located in such State. In the event that the Seller fails
to record an assignment of a Mortgage Loan as herein provided within 90 days of
notice of an event set forth in clause (i), (ii) or (iii) of the above
paragraph, the Master Servicer shall prepare and, if required hereunder, file
such assignments for recordation in the appropriate real property or other
records office. The Seller hereby appoints the Master Servicer (and any
successor servicer hereunder) as its attorney-in-fact with full power and
authority acting in its stead for the purpose of such preparation, execution and
filing.

      In the case of Mortgage Loans that become the subject of a Principal
Prepayment between the Closing Date and the Cut-off Date, the Seller shall
deposit or cause to be deposited in the Certificate Account the amount required
to be deposited therein with respect to such payment pursuant to Section 3.05
hereof.

      Notwithstanding anything to the contrary in this Agreement, within thirty
days after the Closing Date, the Seller shall either (i) deliver to the Trustee
the Mortgage File as required pursuant to this Section 2.01 for each Delay
Delivery Mortgage Loan or (ii) (A) repurchase the Delay Delivery Mortgage Loan
or (B) substitute the Delay Delivery Mortgage Loan for a Replacement Mortgage
Loan, which repurchase or substitution shall be accomplished in the manner and
subject to the conditions set forth in Section 2.03, provided that if the Seller
fails to

                                       56
<PAGE>

deliver a Mortgage File for any Delay Delivery Mortgage Loan within the period
provided in the prior sentence, the cure period provided for in Section 2.02 or
in Section 2.03 shall not apply to the initial delivery of the Mortgage File for
such Delay Delivery Mortgage Loan, but rather the Seller shall have five (5)
Business Days to cure such failure to deliver; and provided further, that the
Seller shall use its best efforts to substitute rather than repurchase. The
Seller shall promptly provide each Rating Agency with written notice of any
cure, repurchase or substitution made pursuant to the proviso of the preceding
sentence. On or before the thirtieth (30th) day (or if such thirtieth day is not
a Business Day, the succeeding Business Day) after the Closing Date (in the case
of the Mortgage Loans), the Trustee shall, in accordance with the provisions of
Section 2.02, send a Delay Delivery Certification substantially in the form
annexed hereto as Exhibit G-3 (with any applicable exceptions noted thereon) for
all Delay Delivery Mortgage Loan delivered within thirty (30) days after such
date. The Trustee will promptly send a copy of such Delay Delivery Certification
to each Rating Agency.

      Section 2.02 Acceptance of the Mortgage Loans.

      (a) The Trustee acknowledges receipt, subject to the limitations contained
in and any exceptions noted in the Initial Certification in the form annexed
hereto as Exhibit G-1 and in the list of exceptions attached thereto, of the
documents referred to in clauses (i) and (iii) of Section 2.01(g) above with
respect to the Mortgage Loans and all other assets included in the Trust Fund
and declares that it holds and will hold such documents and the other documents
delivered to it constituting the Mortgage Files, and that it holds or will hold
such other assets included in the Trust Fund, in trust for the exclusive use and
benefit of all present and future Certificateholders.

      The Trustee agrees to execute and deliver on the Closing Date to the
Depositor, the Master Servicer and the Seller an Initial Certification
substantially in the form annexed hereto as Exhibit G-1 to the effect that, as
to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), the documents described in
Section 2.01(g)(i) and, in the case of each Mortgage Loan that is not a MERS
Mortgage Loan, the documents described in Section 2.01(g)(iii), with respect to
such Mortgage Loan are in the Trustee's possession, and based on its review and
examination and only as to the foregoing documents, such documents appear
regular on their face and relate to such Mortgage Loan. The Trustee agrees to
execute and deliver within thirty (30) days after the Closing Date to the
Depositor, the Master Servicer and the Seller an Interim Certification
substantially in the form annexed hereto as Exhibit G-2 to the effect that, as
to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any
Mortgage Loan paid in full or any Mortgage Loan specifically identified in such
certification as not covered by such certification), all documents required to
be delivered to the Trustee pursuant to this Agreement with respect to such
Mortgage Loan are in its possession (except those described in Section
2.01(g)(vi)) and based on its review and examination and only as to the
foregoing documents, (i) such documents appear regular on their face and relate
to such Mortgage Loan, and (ii) the information set forth in items (i), (iv),
(v), (vi), (viii), (xi) and (xiv) of the definition of the "Mortgage Loan
Schedule" accurately reflects information set forth in the Mortgage File. On or
before the thirtieth (30th) day after the Closing Date (or if such thirtieth day
is not a Business Day, the succeeding Business Day), the Trustee shall deliver
to the Depositor, the Master Servicer and the Seller a Delay Delivery
Certification with respect to the

                                       57
<PAGE>

Mortgage Loans substantially in the form annexed hereto as Exhibit G-3, with any
applicable exceptions noted thereon. The Trustee shall be under no duty or
obligation to inspect, review or examine such 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 in the real estate records or that they are other than what they
purport to be on their face.

      Not later than 180 days after the Closing Date, the Trustee shall deliver
to the Depositor, the Master Servicer and the Seller (and to any
Certificateholder that so requests) a Final Certification with respect to the
Mortgage Loans substantially in the form annexed hereto as Exhibit H, with any
applicable exceptions noted thereon.

      In connection with the Trustee's completion and delivery of such Final
Certification, the Trustee shall review each Mortgage File with respect to the
Mortgage Loans to determine that such Mortgage File contains the documents
listed in Section 2.01(g). If, in the course of such review, the Trustee finds
any document or documents constituting a part of such Mortgage File that do not
meet the requirements of clauses (i)-(iv) and (vi) of Section 2.01(g), the
Trustee shall include such exceptions in such Final Certification (and the
Trustee shall state in such Final Certification whether any Mortgage File does
not then include the original or duplicate original lender's title policy or a
printout of the electronic equivalent and all riders thereto). If the public
recording office in which a Mortgage or assignment thereof is recorded retains
the original of such Mortgage or assignment, a copy of the original Mortgage or
assignment so retained, with evidence of recording thereon, certified to be true
and complete by such recording office, shall be deemed to satisfy the
requirements of clause (ii), (iii) or (iv) of Section 2.01(g), as applicable.
The Seller shall promptly correct or cure such defect referred to above within
90 days from the date it was so notified of such defect and, if the Seller does
not correct or cure such defect within such period, the Seller shall either (A)
if the time to cure such defect expires prior to the end of the second
anniversary of the Closing Date, 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 (B) purchase
such Mortgage Loan from the Trust Fund within 90 days from the date the Seller
was notified of such defect in writing at the Purchase Price of such Mortgage
Loan; provided that any such substitution pursuant to (A) above or repurchase
pursuant to (B) above shall not be effected prior to the delivery to the Trustee
of the Opinion of Counsel required by Section 2.05 hereof and any substitution
pursuant to (A) above shall not be effected prior to the additional delivery to
the Trustee of a Request for Release substantially in the form of Exhibit N. No
substitution will be made in any calendar month after the Determination Date for
such month. The Purchase Price for any such Mortgage Loan shall be deposited by
the Seller in the Certificate Account and, upon receipt of such deposit and
certification with respect thereto in the form of Exhibit N hereto, the Trustee
shall release the related Mortgage File to the Seller and shall execute and
deliver at the Seller's request such instruments of transfer or assignment as
the Seller has prepared, in each case without recourse, as shall be necessary to
vest in the Seller, or a designee, the Trust Fund's interest in any Mortgage
Loan released pursuant hereto. If pursuant to the foregoing provisions the
Seller repurchases an Mortgage Loan that is a MERS Mortgage Loan, the Master
Servicer shall cause MERS to execute and deliver an assignment of the Mortgage
in recordable form to transfer the Mortgage

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from MERS to the Seller and shall cause such Mortgage to be removed from
registration on the MERS(R) System in accordance with MERS' rules and
regulations.

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

      It is understood and agreed that the obligation of the Seller to
substitute for or to purchase any Mortgage Loan that does not meet the
requirements of Section 2.02(a)(A) or (B) above shall constitute the sole remedy
respecting such defect available to the Trustee, the Depositor and any
Certificateholder against the Seller.

      (b) [reserved]

      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 Seller and the Trustee as follows, as of the date hereof with respect to the
Mortgage Loans:

            (i) The Master Servicer is duly organized as a Texas limited
      partnership and is validly existing and in good standing under the laws of
      the State of Texas and is duly authorized and qualified to transact any
      and all business contemplated by this Agreement to be conducted by the
      Master Servicer in any state in which a Mortgaged Property is located or
      is otherwise not required under applicable law to effect such
      qualification and, in any event, is in compliance with the doing business
      laws of any such state, to the extent necessary to ensure its ability to
      enforce each Mortgage Loan, 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) The Master Servicer has the full partnership power and
      authority to sell and service each Mortgage Loan, and to execute, deliver
      and perform, and to enter into and consummate the transactions
      contemplated by this Agreement and has duly authorized by all necessary
      corporate action on the part of the Master Servicer the execution,
      delivery and performance of this Agreement; and this Agreement, assuming
      the due authorization, execution and delivery hereof by the other parties
      hereto, constitutes a legal, valid and binding obligation of the Master
      Servicer, enforceable against the Master Servicer 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.

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<PAGE>

            (iii) The execution and delivery of this Agreement by the Master
      Servicer, the servicing of the Mortgage Loans by the Master Servicer 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 Master
      Servicer and will not (A) result in a material breach of any term or
      provision of the certificate of limited partnership, partnership agreement
      or other organizational document of the Master Servicer 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 Master Servicer 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 Master Servicer of any
      court, regulatory body, administrative agency or governmental body having
      jurisdiction over the Master Servicer; and the Master Servicer 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
      Master Servicer's ability to perform or meet any of its obligations under
      this Agreement.

            (iv) The Master Servicer 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 the Master
      Servicer's knowledge, threatened, against the Master Servicer that would
      materially and adversely affect the execution, delivery or enforceability
      of this Agreement or the ability of the Master Servicer to service the
      Mortgage Loans or to perform any of its other obligations 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 Master Servicer of, or compliance by the Master
      Servicer with, this Agreement or the consummation of the transactions
      contemplated hereby, or if any such consent, approval, authorization or
      order is required, the Master Servicer has obtained the same.

            (vii) The Master Servicer is a member of MERS in good standing, and
      will comply in all material respects with the rules and procedures of MERS
      in connection with the servicing of the Mortgage Loans for as long as such
      Mortgage Loans are registered with MERS.

      (b) The Seller hereby represents and warrants to the Depositor, the Master
Servicer and the Trustee as follows, as of the Cut-off Date (unless otherwise
indicated or the context otherwise requires, percentages with respect to the
Mortgage Loans in a Loan Group are measured by the Cut-off Date Principal
Balance of the Mortgage Loans in the related Loan Group):

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<PAGE>

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

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

            (iii) The execution and delivery of this Agreement by the Seller,
      the sale of the Mortgage Loans by the Seller under this Agreement, the
      consummation of any other of the transactions contemplated by this
      Agreement, and the fulfillment of or compliance with the terms hereof 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) 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

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<PAGE>

      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) The information set forth on Exhibit F-1 hereto with respect
      to each Mortgage Loan is true and correct in all material respects as of
      the Closing Date.

            (viii) The Seller will treat the transfer of the Mortgage Loans to
      the Depositor as a sale of the Mortgage Loans for all tax, accounting and
      regulatory purposes.

            (ix) None of the Mortgage Loans are more than 60 days delinquent in
      payment of principal and interest.

            (x) No Mortgage Loan secured by a first lien on the related
      Mortgaged Property had a Loan-to-Value Ratio at origination in excess of
      100%.

            (xi) Each Mortgage Loan is secured by a valid and enforceable first
      lien on the related Mortgaged Property, subject only to (1) the lien of
      non-delinquent current real property taxes and assessments, (2) covenants,
      conditions and restrictions, rights of way, easements and other matters of
      public record as of the date of recording of such Mortgage, such
      exceptions appearing of record being acceptable to mortgage lending
      institutions generally or specifically reflected in the appraisal made in
      connection with the origination of the related Mortgage Loan, and (3)
      other matters to which like properties are commonly subject that do not
      materially interfere with the benefits of the security intended to be
      provided by such Mortgage.

            (xii) Immediately prior to the assignment of each Mortgage Loan to
      the Depositor, the Seller had good title to, and was the sole owner of,
      such Mortgage Loan free and clear of any pledge, lien, encumbrance or
      security interest and had full right and authority, subject to no interest
      or participation of, or agreement with, any other party, to sell and
      assign the same pursuant to this Agreement.

            (xiii) There is no delinquent tax or assessment lien against any
      Mortgaged Property.

            (xiv) There is no valid offset, claim, defense or counterclaim to
      any Mortgage Note or Mortgage, including the obligation of the Mortgagor
      to pay the unpaid principal of or interest on such Mortgage Note.

            (xv) There are no mechanics' liens or claims for work, labor or
      material affecting any Mortgaged Property that are or may be a lien prior
      to, or equal with, the lien

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      of such Mortgage, except those that are insured against by the title
      insurance policy referred to in item (xviii) below.

            (xvi) As of the Closing Date, to the best of Seller's knowledge,
      each Mortgaged Property is free of material damage and is in good repair.

            (xvii) As of the Closing Date neither the Seller nor any prior
      holder of any Mortgage has modified the Mortgage in any material respect
      (except that a Mortgage Loan may have been modified by a written
      instrument that has been recorded or submitted for recordation, if
      necessary, to protect the interests of the Certificateholders and the
      original or a copy of which has been delivered to the Trustee); satisfied,
      cancelled or subordinated such Mortgage in whole or in part; released the
      related Mortgaged Property in whole or in part from the lien of such
      Mortgage; or executed any instrument of release, cancellation,
      modification (except as expressly permitted above) or satisfaction with
      respect thereto.

            (xviii) A lender's policy of title insurance together with a
      condominium endorsement and extended coverage endorsement, if applicable,
      in an amount at least equal to the Cut-off Date Stated Principal Balance
      of each such Mortgage Loan or a commitment (binder) to issue the same was
      effective on the date of the origination of each Mortgage Loan, each such
      policy is valid and remains in full force and effect, and each such policy
      was issued by a title insurer qualified to do business in the jurisdiction
      where the Mortgaged Property is located and acceptable to Fannie Mae or
      Freddie Mac and is in a form acceptable to Fannie Mae or Freddie Mac,
      which policy insures the Seller and successor owners of indebtedness
      secured by the insured Mortgage, as to the first priority lien, of the
      Mortgage subject to the exceptions set forth in paragraph (iv) above and
      against any loss by reason of the invalidity or unenforceability of the
      lien resulting from the provisions of the Mortgage providing for
      adjustment in the mortgage interest rate and/or monthly payment; to the
      best of the Seller's knowledge, no claims have been made under such
      mortgage title insurance policy and no prior holder of the related
      Mortgage, including the Seller, has done, by act or omission, anything
      that would impair the coverage of such mortgage title insurance policy.

            (xix) No Mortgage Loan was the subject of a Principal Prepayment in
      full between the Closing Date and the Cut-off Date.

            (xx) To the best of the Seller's knowledge, all of the improvements
      that were included for the purpose of determining the Appraised Value of
      the Mortgaged Property lie wholly within the boundaries and building
      restriction lines of such property, and no improvements on adjoining
      properties encroach upon the Mortgaged Property.

            (xxi) To the best of the Seller's knowledge, no improvement located
      on or being part of the Mortgaged Property is in violation of any
      applicable zoning law or regulation. To the best of the Seller's
      knowledge, all inspections, licenses and certificates required to be made
      or issued with respect to all occupied portions of the Mortgaged Property
      and, with respect to the use and occupancy of the same, including but not
      limited to certificates of occupancy and fire underwriting certificates,
      have been made or obtained

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<PAGE>

      from the appropriate authorities, unless the lack thereof would not have a
      material adverse effect on the value of such Mortgaged Property, and the
      Mortgaged Property is lawfully occupied under applicable law.

            (xxii) The Mortgage Note and the related Mortgage are genuine, and
      each is the legal, valid and binding obligation of the maker thereof,
      enforceable in accordance with its terms and under applicable law, except
      that (a) the enforceability thereof may be limited by bankruptcy,
      insolvency, moratorium, receivership and other similar laws relating to
      creditors' rights generally and (b) the remedy of specific performance and
      injunctive and other forms of equitable relief may be subject to equitable
      defenses and to the discretion of the court before which any proceeding
      therefor may be brought. To the best of the Seller's knowledge, all
      parties to the Mortgage Note and the Mortgage had legal capacity to
      execute the Mortgage Note and the Mortgage and each Mortgage Note and
      Mortgage have been duly and properly executed by such parties.

            (xxiii) The proceeds of the Mortgage Loan have been fully disbursed,
      there is no requirement for future advances thereunder, and any and all
      requirements as to completion of any on-site or off-site improvements and
      as to disbursements of any escrow funds therefor have been complied with.
      All costs, fees and expenses incurred in making, or closing or recording
      the Mortgage Loans were paid.

            (xxiv) The related Mortgage contains customary and enforceable
      provisions that render the rights and remedies of the holder thereof
      adequate for the realization against the Mortgaged Property of the
      benefits of the security, including, (i) in the case of a Mortgage
      designated as a deed of trust, by trustee's sale, and (ii) otherwise by
      judicial foreclosure.

            (xxv) With respect to each Mortgage constituting a deed of trust, a
      trustee, duly qualified under applicable law to serve as such, has been
      properly designated and currently so serves and is named in such Mortgage,
      and no fees or expenses are or will become payable by the
      Certificateholders to the trustee under the deed of trust, except in
      connection with a trustee's sale after default by the Mortgagor.

            (xxvi) Each Mortgage Note and each Mortgage is in substantially one
      of the forms attached hereto as Exhibit P acceptable in form to Fannie Mae
      or Freddie Mac.

            (xxvii) There exist no deficiencies with respect to escrow deposits
      and payments, if such are required, for which customary arrangements for
      repayment thereof have not been made, and no escrow deposits or payments
      of other charges or payments due the Seller have been capitalized under
      the Mortgage or the related Mortgage Note.

            (xxviii) The origination, underwriting, servicing and collection
      practices used by the Seller with respect to each Mortgage Loan have been
      in all respects legal, proper, prudent and customary in the mortgage
      lending and servicing business.

            (xxix) There is no pledged account or other security other than real
      estate securing the Mortgagor's obligations.

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<PAGE>

            (xxx) No Mortgage Loan has a shared appreciation feature, or other
      contingent interest feature.

            (xxxi) Each Mortgage Loan contains a customary "due on sale" clause.

            (xxxii) No more than approximately 8.19% and 2.01% of the Mortgage
      Loans in Loan Group 1 and Loan Group 2, respectively, are secured by two-
      to four-family dwellings. No more than approximately 5.05% and 5.05% of
      the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, are
      secured by condominium units. No more than approximately 0.15% and 0.46%
      of the Mortgage Loans in Loan Group 1 and Loan Group 2, respectively, are
      secured by high rise condominium units. No less than approximately 76.24%
      and 76.85% of the Mortgage Loans in Loan Group 1 and Loan Group 2,
      respectively, are secured by single family detached dwellings. No more
      than approximately 0.04% of the Mortgage Loans in Group 1 and none of the
      Mortgage Loans in Group 2 are secured by manufactured housing. No more
      than approximately 9.34% and 20.98% of the Mortgage Loans in Loan Group 1
      and Loan Group 2, respectively, are secured by PUDs.

            (xxxiii) No Mortgage Loan in Loan Group 1 and Loan Group 2 had a
      principal balance in excess of $444,151.29 and $646,538.72, respectively,
      at origination.

            (xxxiv) To the extent required under applicable law, each originator
      and subsequent mortgagee or servicer of the Mortgage Loan complied with
      all licensing requirements and was authorized to transact and do business
      in the jurisdiction in which the related Mortgaged Property is located at
      all times when it held or serviced the Mortgage Loan. Any and all
      requirements of any federal, state or local laws or regulations,
      including, without limitation, usury, truth-in-lending, real estate
      settlement procedures, consumer credit protection, anti-predatory lending,
      fair credit reporting, unfair collection practice, equal credit
      opportunity, fair housing and disclosure laws and regulations, applicable
      to the solicitation, origination, collection and servicing of such
      Mortgage Loan have been complied with in all material respects; and any
      obligations of the holder of the Mortgage Note, Mortgage and other loan
      documents have been complied with in all material respects; servicing of
      each Mortgage Loan has been in accordance with prudent mortgage servicing
      standards, any applicable laws, rules and regulations and in accordance
      with the terms of the Mortgage Notes, Mortgage and other loan documents,
      whether such origination and servicing was done by Seller, its affiliates,
      or any third party which originated the Mortgage Loan on behalf of, or
      sold the Mortgage Loan to, any of them, or any servicing agent of any of
      the foregoing;

            (xxxv) Each Mortgage Loan was originated on or after April 25, 2002;

            (xxxvi) Each Two-Year Hybrid Mortgage Loan had an initial Adjustment
      Date no later than October 1, 2006; each Three-Year Hybrid Mortgage Loan
      had an initial Adjustment Date no later than September 1, 2007; each
      Five-Year Hybrid Mortgage Loan had an initial Adjustment Date no later
      than September 1, 2009.

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<PAGE>

            (xxxvii) Approximately 93.56% and 93.26% of the Mortgage Loans in
      Loan Group 1 and Loan Group 2, respectively, provide for a prepayment
      penalty.

            (xxxviii) On the basis of representations made by the Mortgagors in
      their loan applications, no less than approximately 94.44% and 94.76% of
      the owner-occupied Mortgage Loans in Loan Group 1 and Loan Group 2,
      respectively, are secured by owner-occupied Mortgaged Properties that are
      primary residences and no more than approximately 5.57% and 5.24% of the
      owner-occupied Mortgage Loans in Loan Group 1 and Loan Group 2,
      respectively, are secured by owner-occupied Mortgaged Properties that are
      secondary residences.

            (xxxix) At the Cut-off Date, the improvements upon each Mortgaged
      Property are covered by a valid and existing hazard insurance policy with
      a generally acceptable carrier that provides for fire and extended
      coverage and coverage for such other hazards as are customary in the area
      where the Mortgaged Property is located in an amount that is at least
      equal to the lesser of (i) the maximum insurable value of the improvements
      securing such Mortgage Loan or (ii) the greater of (a) the outstanding
      principal balance of the Mortgage Loan and (b) an amount such that the
      proceeds of such policy shall be sufficient to prevent the Mortgagor
      and/or the mortgagee from becoming a co-insurer. If the Mortgaged Property
      is a condominium unit, it is included under the coverage afforded by a
      blanket policy for the condominium unit. All such individual insurance
      policies and all flood policies referred to in item (xl) below contain a
      standard mortgagee clause naming the Seller or the original mortgagee, and
      its successors in interest, as mortgagee, and the Seller has received no
      notice that any premiums due and payable thereon have not been paid; the
      Mortgage obligates the Mortgagor thereunder to maintain all such
      insurance, including flood insurance, at the Mortgagor's cost and expense,
      and upon the Mortgagor's failure to do so, authorizes the holder of the
      Mortgage to obtain and maintain such insurance at the Mortgagor's cost and
      expense and to seek reimbursement therefor from the Mortgagor.

            (xl) If the Mortgaged Property is in an area identified in the
      Federal Register by the Federal Emergency Management Agency as having
      special flood hazards, a flood insurance policy in a form meeting the
      requirements of the current guidelines of the Flood Insurance
      Administration is in effect with respect to such Mortgaged Property with a
      generally acceptable carrier in an amount representing coverage not less
      than the least of (A) the original outstanding principal balance of the
      Mortgage Loan, (B) the minimum amount required to compensate for damage or
      loss on a replacement cost basis, or (C) the maximum amount of insurance
      that is available under the Flood Disaster Protection Act of 1973, as
      amended.

            (xli) To the best of the Seller's knowledge, there is no proceeding
      occurring, pending or threatened for the total or partial condemnation of
      the Mortgaged Property.

            (xlii) There is no material monetary default existing under any
      Mortgage or the related Mortgage Note and, to the best of the Seller's
      knowledge, there is no material event that, with the passage of time or
      with notice and the expiration of any grace or cure

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<PAGE>

      period, would constitute a default, breach, violation or event of
      acceleration under the Mortgage or the related Mortgage Note; and the
      Seller has not waived any default, breach, violation or event of
      acceleration.

            (xliii) Each Mortgaged Property is improved by a one- to four-family
      residential dwelling, including condominium units and dwelling units in
      PUDs. To the best of the Seller's knowledge, no Mortgaged Property
      includes a cooperative or a mobile home or constitutes other than real
      property under state law.

            (xliv) Each Mortgage Loan is being serviced by the Master Servicer,
      or, if a Mortgage Loan is being serviced by the originator of such
      Mortgage Loan, the Master Servicer and the originator have agreed to
      transfer the servicing of such Mortgage Loan on or prior to September 1,
      2004.

            (xlv) Any future advances made prior to the Cut-off Date have been
      consolidated with the outstanding principal amount secured by the
      Mortgage, and the secured principal amount, as consolidated, bears a
      single interest rate and single repayment term reflected on the Mortgage
      Loan Schedule. The consolidated principal amount does not exceed the
      original principal amount of the Mortgage Loan. The Mortgage Note does not
      permit or obligate the Master Servicer to make future advances to the
      Mortgagor at the option of the Mortgagor.

            (xlvi) All taxes, governmental assessments, insurance premiums,
      water, sewer and municipal charges, leasehold payments or ground rents
      that previously became due and owing have been paid, or an escrow of funds
      has been established in an amount sufficient to pay for every such item
      that remains unpaid and that has been assessed, but is not yet due and
      payable. Except for (A) payments in the nature of escrow payments, and (B)
      interest accruing from the date of the Mortgage Note or date of
      disbursement of the Mortgage proceeds, whichever is later, to the day that
      precedes by one month the Due Date of the first installment of principal
      and interest, including without limitation, taxes and insurance payments,
      the Master Servicer has not advanced funds, or induced, solicited or
      knowingly received any advance of funds by a party other than the
      Mortgagor, directly or indirectly, for the payment of any amount required
      by the Mortgage.

            (xlvii) The Mortgage Loans were underwritten in all material
      respects in accordance with customary and prudent underwriting guidelines
      generally used by originators of credit blemished quality mortgage loans.

            (xlviii) Prior to the approval of the Mortgage Loan application, an
      appraisal of the related Mortgaged Property was obtained from a qualified
      appraiser, duly appointed by the originator, who had no interest, direct
      or indirect, in the Mortgaged Property or in any loan made on the security
      thereof, and whose compensation is not affected by the approval or
      disapproval of the Mortgage Loan; such appraisal is in a form acceptable
      to Fannie Mae and Freddie Mac.

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            (xlix) None of the Mortgage Loans is a graduated payment mortgage
      loan or a growing equity mortgage loan, and no Mortgage Loan is subject to
      a buydown or similar arrangement.

            (l) The Mortgage Rates borne by the Mortgage Loans in Loan Group 1
      as of the Cut-off Date ranged from 4.500% per annum to 11.890% per annum
      and the weighted average Mortgage Rate as of the Cut-off Date was 6.994%
      per annum. The Mortgage Rates borne by the Mortgage Loans in Loan Group 2
      as of the Cut-off Date ranged from 4.700% per annum to 10.290% per annum
      and the weighted average Mortgage Rate as of the Cut-off Date was 6.101%
      per annum.

            (li) The Mortgage Loans were selected from among the outstanding
      one- to four-family mortgage loans in the Seller's portfolio at the
      Closing Date, as to which the representations and warranties made as to
      the Mortgage Loans set forth in this Section 2.03(b) can be made. No
      selection was made in a manner that would adversely affect the interests
      of Certificateholders.

            (lii) The Gross Margins on the Adjustable Rate Mortgage Loans that
      are Mortgage Loans in Loan Group 1 range from approximately 3.375% to
      10.690% and the weighted average Gross Margin was approximately 6.144%.
      The Gross Margins on the Adjustable Rate Mortgage Loans that are Mortgage
      Loans in Loan Group 2 range from approximately 3.750% to 10.040% and the
      weighted average Gross Margin was approximately 5.811%.

            (liii) Each Mortgage Loan has a payment date on or before the Due
      Date in the month of the first Distribution Date.

            (liv) The Mortgage Loans, individually and in the aggregate, conform
      in all material respects to the descriptions thereof in the Prospectus
      Supplement.

            (lv) There is no obligation on the part of the Seller under the
      terms of the Mortgage or related Mortgage Note to make payments in
      addition to those made by the Mortgagor.

            (lvi) Any leasehold estate securing a Mortgage Loan has a term of
      not less than five years in excess of the term of the related Mortgage
      Loan.

            (lvii) Each Mortgage Loan represents a "qualified mortgage" within
      the meaning of Section 860(a)(3) of the Code (but without regard to the
      rule in Treasury Regulation ss. 1.860G 2(f)(2) that treats a defective
      obligation as a qualified mortgage, or any substantially similar successor
      provision) and applicable Treasury regulations promulgated thereunder.

            (lviii) No Mortgage Loan was either a "consumer credit contract" or
      a "purchase money loan" as such terms are defined in 16 C.F.R. Section 433
      nor is any Mortgage Loan a "mortgage" as defined in 15 U.S.C. ss.
      1602(aa).

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            (lix) The information set forth in the Prepayment Charge Schedule
      with respect to each Mortgage Loan is complete, true and correct in all
      material respects at the date or dates respecting which such information
      is furnished and each Prepayment Charge is permissible and enforceable in
      accordance with its terms under applicable law upon the Mortgagor's full
      and voluntary principal prepayment (except to the extent that: (1) the
      enforceability thereof may be limited by bankruptcy, insolvency,
      moratorium, receivership and other similar laws relating to creditors'
      rights generally; or (2) the collectibility thereof may be limited due to
      acceleration in connection with a foreclosure or other involuntary
      prepayment).

            (lx) No Mortgage Loan is a "high cost home loan" as defined in the
      Georgia Fair Lending Act, as amended. No Mortgage Loan with a principal
      balance at origination (or modification) equal to or less than the
      mortgage loan balance limit of Fannie Mae in effect at the time of
      origination (or modification) and secured by owner-occupied real property
      located in the State of Georgia was originated (or modified) on or after
      October 1, 2002 through and including March 6, 2003.

            (lxi) No Mortgage Loan is a "high cost home loan" as defined in New
      York Banking Law 6-1.

            (lxii)No Mortgage Loan is classified as (a) a high cost mortgage
      loan under the Home Ownership and Equity Protection Act of 1994 or (b) a
      "high cost" loan under any other applicable state, federal or local law.

            (lxiii) No Mortgage Loan is a High Cost Loan or Covered Loan, as
      applicable (as such terms are defined in Standard & Poor's LEVELS(R)
      Glossary, Version 5.6 Revised, Appendix E, attached hereto as Exhibit U)
      and no Mortgage Loan originated on or after October 1, 2002 through March
      6, 2003 is governed by the Georgia Fair Lending Act.

      (c) Upon discovery by any of the parties hereto of a breach of a
representation or warranty set forth in Section 2.03(a) or (b), that materially
and adversely affects the interests of the Certificateholders in any Mortgage
Loan, the party discovering such breach shall give prompt notice thereof to the
other parties. Each of the Master Servicer and the Seller (each, a "Representing
Party") hereby covenants with respect to a breach of the representations and
warranties set forth in Sections 2.03(a) and (b), that within 90 days of the
earlier of the discovery by such Representing Party or receipt of written notice
by such Representing Party from any party of a breach of any representation or
warranty set forth herein made 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, shall, (i)
if such 90 day period expires prior to the second anniversary of the Closing
Date, remove such Mortgage Loan (a "Deleted Mortgage Loan") from the Trust Fund
and substitute in its place a 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 the

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Opinion of Counsel 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 substantially in the form of Exhibit M. Any
Representing Party liable for a breach under this Section 2.03 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, any Representing Party liable for a breach under this Section
2.03 shall, unless it cures such breach in a timely fashion pursuant to this
Section 2.03, promptly notify the Master Servicer whether such Representing
Party intends either to repurchase, or to substitute for, the Mortgage Loan
affected by such breach. With respect to the representations and warranties
described in this Section that are made to the best of the Representing Party's
knowledge, if it is discovered by any of the Depositor, the Master Servicer, the
Seller or the Trustee that the substance of such representation and warranty is
inaccurate and such inaccuracy materially and adversely affects the value of the
related Mortgage Loan, notwithstanding the Representing Party's lack of
knowledge with respect to the substance of such representation or warranty, such
inaccuracy shall be deemed a breach of the applicable representation or
warranty.

      With respect to any Replacement Mortgage Loan or Loans, the Seller
delivering such Replacement Mortgage Loan shall deliver to the Trustee for the
benefit of the Certificateholders the related Mortgage Note, Mortgage and
assignment of the Mortgage, and such other documents and agreements as are
required by Section 2.01, with the Mortgage Note endorsed and the Mortgage
assigned as required by Section 2.01. No substitution 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 delivering such Replacement
Loan on such Distribution Date. 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 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. Upon
such substitution, the Replacement Mortgage Loan or Loans shall be subject to
the terms of this Agreement in all respects, and the Seller delivering such
Replacement Mortgage Loan shall be deemed to have made with respect to such
Replacement Mortgage Loan or Loans, as of the date of substitution, the
representations and warranties set forth in Section 2.03(b) with respect to such
Mortgage Loan. Upon any such substitution and the deposit to the Certificate
Account of the amount required to be deposited therein in connection with such
substitution as described in the following paragraph, the Trustee shall release
to the Representing Party the Mortgage File relating to such Deleted Mortgage
Loan and held for the benefit of the Certificateholders and shall execute and
deliver at the Master Servicer's direction such instruments of transfer or
assignment as have been prepared by the Master Servicer, in each case without
recourse, 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.

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      For any month in which the Seller substitutes one or more Replacement
Mortgage Loans for one or more Deleted Mortgage Loans, the Master Servicer will
determine the amount (if any) by which the aggregate principal balance of all
such 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 all such Deleted Mortgage
Loans. An amount equal to the aggregate of the deficiencies described in the
preceding sentence (such amount, the "Substitution Adjustment Amount") shall be
forwarded by the Seller to the Master Servicer and deposited by the Master
Servicer into the Certificate Account not later than 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 a Seller shall have repurchased a Mortgage Loan, the
Purchase Price therefor shall be deposited in the Certificate Account pursuant
to Section 3.08 on the Determination Date for the Distribution Date in the month
following the month during which such Seller became obligated to repurchase or
replace such Mortgage Loan and upon such deposit of the Purchase Price, the
delivery of the Opinion of Counsel required by Section 2.05, if any, and the
receipt of a Request for Release in the form of Exhibit N hereto, the Trustee
shall release the related Mortgage File held for the benefit of the
Certificateholders to such Seller, and the Trustee shall execute and deliver at
such Person's direction the related instruments of transfer or assignment
prepared by such 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 such 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 remedy 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 Files to the Trustee for the benefit
of the Certificateholders.

      Section 2.04 Representations and Warranties of the Depositor.

      The Depositor hereby represents and warrants to the Seller, the Master
Servicer and the Trustee as follows, as of the date hereof:

      (i) The Depositor is duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
full power and authority (corporate and other) necessary to own or hold its
properties and to conduct its business as now conducted by it and to enter into
and perform its obligations under this Agreement.

      (ii) The Depositor has the full corporate power and authority to execute,
deliver and perform, and to enter into and consummate the transactions
contemplated by, this Agreement and has duly authorized, by all necessary
corporate action on its part, the execution, delivery and performance of this
Agreement; and this Agreement, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes a legal, valid and
binding obligation of the Depositor, enforceable against the Depositor in
accordance with its terms, subject, as to enforceability, to (i) bankruptcy,
insolvency, reorganization, moratorium and other similar laws

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<PAGE>

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 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) 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 and 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 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 with respect
to each Mortgage Loan as of the Closing Date, that 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 two immediately preceding paragraphs shall survive delivery of the
Mortgage Files to the Trustee. Upon discovery by the Depositor or the Trustee of
a breach of any of the foregoing representations and warranties set forth in the
immediately preceding paragraph (referred to herein as a "breach"), which breach
materially and adversely affects the interest of the Certificateholders, the
party discovering such breach shall give prompt written notice to the others and
to each Rating Agency. The Depositor hereby covenants with respect to the
representations and warranties made by it in this Section 2.04 that within 90
days of the earlier of the discovery it or receipt of written notice by it from
any party of a breach of any representation or warranty set forth herein made
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

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such breach is not so cured, shall repurchase or replace the affected Mortgage
Loan or Loans in accordance with the procedure set forth in Section 2.03(c).

      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, 2.03 or 2.04
shall be made unless the Representing Party making such repurchase or
substitution 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 the Trust Fund or
contributions after the Closing Date, as defined in sections 860F(a)(2) and
860G(d) of the Code, respectively or (ii) cause the Trust Fund 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, 2.03 or 2.04) upon the earlier of (a)
the occurrence of a default or imminent default with respect to such loan and
(b) receipt by the Trustee of an Opinion of Counsel 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, the Master Servicer or
the Trustee that any Mortgage Loan does not constitute a "qualified mortgage"
within the meaning of section 860G(a)(3) of the Code, the party discovering such
fact shall promptly (and in any event within 5 Business Days of discovery) give
written notice thereof to the other parties. In connection therewith, the
Trustee shall require the Seller, at the Seller's option, to either (i)
substitute, if the conditions in Section 2.03(b) 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 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 Authentication and Delivery of Certificates.

      The Trustee acknowledges the transfer and assignment to it of the Trust
Fund and, concurrently with such transfer and assignment, has executed,
authenticated 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 to the best
of its ability, to the end that the interests of the Holders of the Certificates
may be adequately and effectively protected.

      Section 2.07 Covenants of the Master Servicer.

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      The Master Servicer hereby covenants to the Depositor, the Seller and the
Trustee as follows:

      (a) the Master Servicer shall comply in the performance of its obligations
under this Agreement with all reasonable rules and requirements of the insurer
under each Required Insurance Policy; and

      (b) no written information, certificate of an officer, statement furnished
in writing or written report delivered to the Depositor, any affiliate of the
Depositor or the Trustee and prepared by the Master Servicer pursuant to this
Agreement will contain any untrue statement of a material fact or omit to state
a material fact necessary to make the information, certificate, statement or
report not misleading.

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                                   ARTICLE III

                          ADMINISTRATION AND SERVICING
                                OF MORTGAGE LOANS

      Section 3.01 Master Servicer to Service Mortgage Loans.

      For and on behalf of the Certificateholders, the Master Servicer shall
service and administer the Mortgage Loans in accordance with customary and usual
standards of practice of prudent mortgage loan lenders in the respective states
in which the 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 3.02 hereof,
subject to the terms hereof (i) to execute and deliver, on behalf of the
Certificateholders and the Trustee, customary consents or waivers and other
instruments and documents, (ii) to consent to transfers of any Mortgaged
Property and assumptions of the Mortgage Notes and related Mortgages (but only
in the manner provided in this Agreement), (iii) to collect any Insurance
Proceeds and other Liquidation Proceeds, and (iv) subject to Section 3.12(a), 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 or the Certificateholders in any Mortgage Loan or the rights and
interests of the Depositor and the Trustee under this Agreement. The Master
Servicer shall represent and protect the interest of the Trust Fund in the same
manner as it currently protects its own interest in mortgage loans in its own
portfolio in any claim, proceeding or litigation regarding a Mortgage Loan and
shall not make or permit any modification, waiver or amendment of any term of
any Mortgage Loan which would cause any REMIC to fail to qualify as a REMIC or
result in the imposition of any tax under Section 860(a) or 860(d) of the Code,
but in any case not in any manner that is a lesser standard than that provided
in the first sentence of this Section 3.01. Without limiting the generality of
the foregoing, the Master Servicer, in its own name or in the name of the
Depositor and the Trustee, is hereby authorized and empowered by the Depositor
and the Trustee, when the Master Servicer believes it appropriate in its
reasonable judgment, to execute and deliver, on behalf of the Trustee, the
Depositor, the Certificateholders or any of them, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge and all
other comparable instruments, with respect to the Mortgage Loans, and with
respect to the Mortgaged Properties held for the benefit of the
Certificateholders. The Master Servicer shall prepare and deliver to the
Depositor and/or the Trustee 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. The Master Servicer further is authorized and empowered
by the Trustee, on behalf of the Certificateholders and the Trustee, in its own
name or in the name of the Subservicer, when the Master Servicer or the
Subservicer, as the case may be, believes it appropriate in its best judgment to
register any Mortgage Loan on the MERS(R) System, or cause the removal from the
registration of any Mortgage Loan on the MERS(R) System, to execute and deliver,
on behalf of the Trustee and the Certificateholders or any of

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<PAGE>

them, any and all instruments of assignment and other comparable instruments
with respect to such assignment or re-recording of a Mortgage in the name of
MERS, solely as nominee for the Trustee and its successors and assigns.

      In accordance with the standards of the preceding paragraph, the Master
Servicer shall advance or cause to be advanced funds as necessary for the
purpose of effecting the payment of taxes and assessments on the Mortgaged
Properties, which advances shall be reimbursable in the first instance from
related collections from the Mortgagors pursuant to Section 3.06, and further as
provided in Section 3.08. 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 Certificateholders, be added to the
Stated Principal Balance under the related Mortgage Loans, notwithstanding that
the terms of such Mortgage Loans so permit.

      The Master Servicer shall deliver a list of Servicing Officers to the
Trustee by the Closing Date.

      Section 3.02 Subservicing; Enforcement of the Obligations of Master
Servicer.

      (a) The Master Servicer may arrange for the subservicing of any Mortgage
Loan by a subservicer (each, a "Subservicer") pursuant to a subservicing
agreement (each, a "Subservicing Agreement"); provided that such subservicing
arrangement and the terms of the related subservicing agreement must provide for
the servicing of such Mortgage Loans in a manner consistent with the servicing
arrangements contemplated hereunder. Notwithstanding the provisions of any
subservicing agreement, any of the provisions of this Agreement relating to
agreements or arrangements between the Master Servicer or a subservicer or
reference to actions taken through a Master Servicer or otherwise, the Master
Servicer shall remain obligated and liable to the Depositor, the Trustee and the
Certificateholders for the servicing and administration of the Mortgage Loans in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such subservicing agreements or
arrangements or by virtue of indemnification from the subservicer and to the
same extent and under the same terms and conditions as if the Master Servicer
alone were servicing and administering the Mortgage Loans. Every subservicing
agreement entered into by the Master Servicer shall contain a provision giving
the successor Master Servicer the option to terminate such agreement in the
event a successor Master Servicer is appointed. All actions of each subservicer
performed pursuant to the related subservicing agreement shall be performed as
an agent of the Master Servicer with the same force and effect as if performed
directly by the Master Servicer.

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

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      Section 3.03 Rights of the Depositor, the Seller and the Trustee in
                   Respect of the Master Servicer.

      None of the Trustee, the Seller or the Depositor shall have any
responsibility or liability for any action or failure to act by the Master
Servicer, and none of them is obligated to supervise the performance of the
Master Servicer hereunder or otherwise.

      Section 3.04 Trustee to Act as Master Servicer.

      In the event that the Master Servicer shall for any reason no longer be
the Master Servicer hereunder (including by reason of an Event of Default), the
Trustee or its designee shall thereupon assume all of the rights and obligations
of the Master Servicer hereunder arising thereafter (except that the Trustee
shall not be (i) liable for losses of the Master Servicer pursuant to Section
3.10 hereof or any acts or omissions of the predecessor Master Servicer
hereunder, (ii) obligated to make Advances if it is prohibited from doing so by
applicable law, (iii) obligated to effectuate repurchases or substitutions of
Mortgage Loans hereunder, including pursuant to Section 2.02 or 2.03 hereof,
(iv) responsible for expenses of the Master Servicer pursuant to Section 2.03 or
(v) deemed to have made any representations and warranties hereunder, including
pursuant to Section 2.03 or the first paragraph of Section 6.02 hereof). If the
Master Servicer shall for any reason no longer be the Master Servicer (including
by reason of any Event of Default), the Trustee (or any other successor
servicer) may, at its option, succeed to any rights and obligations of the
Master Servicer under any subservicing agreement in accordance with the terms
thereof; provided that the Trustee (or any other successor servicer) shall not
incur any liability or have any obligations in its capacity as servicer under a
subservicing agreement arising prior to the date of such succession unless it
expressly elects to succeed to the rights and obligations of the Master Servicer
thereunder; and the Master Servicer shall not thereby be relieved of any
liability or obligations under the subservicing agreement arising prior to the
date of such succession.

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

      Section 3.05 Collection of Mortgage Loan Payments; Certificate Account;
                   Distribution Account; Seller Shortfall Interest Requirement.

      (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 or any Prepayment Charge or penalty interest in connection with the
prepayment of a Mortgage Loan and (ii) extend the due dates for payments due on
a Mortgage Note for a period not greater than 270 days. In the event of any such
arrangement, the Master Servicer shall make Advances

                                       77
<PAGE>

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. The Master Servicer shall not be required to
institute or join in litigation with respect to collection of any payment
(whether under a Mortgage, Mortgage Note or otherwise or against any public or
governmental authority with respect to a taking or condemnation) if it
reasonably believes that enforcing the provision of the Mortgage or other
instrument pursuant to which such payment is required is prohibited by
applicable law.

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

            (ii) all payments on account of interest on the Mortgage Loans net
      of the related Servicing Fee permitted under Section 3.15, other than
      interest accrued on the Mortgage Loans prior to the Cut-off Date, and the
      Certificate Account Deposit;

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

            (iv) all Compensating Interest;

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

            (vi) any amounts required to be deposited by the Master Servicer
      pursuant to Section 3.10 hereof;

            (vii) the Purchase Price and any Substitution Adjustment Amount;

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

            (ix) the Seller Shortfall Interest Requirement;

            (x) all Prepayment Charges collected; and

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

      The foregoing requirements for remittance by the Master Servicer into the
Certificate Account shall be exclusive, it being understood and agreed that,
without limiting the generality of the foregoing, payments in the nature of
prepayment penalties, late payment charges or assumption fees, if collected,
need not be remitted by the Master Servicer. In the event that the

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<PAGE>

Master Servicer shall remit any amount not required to be remitted and not
otherwise subject to withdrawal pursuant to Section 3.08 hereof, it may at any
time withdraw or direct the institution maintaining the Certificate Account, to
withdraw such amount from the Certificate Account, any provision herein to the
contrary notwithstanding. Such withdrawal or direction may be accomplished by
delivering written notice thereof to the institution maintaining the Certificate
Account, that describes the amounts deposited in error in the Certificate
Account. The Master Servicer shall maintain adequate records with respect to all
withdrawals made pursuant to this Section. All funds deposited in the
Certificate Account shall be held in trust for the Certificateholders until
withdrawn in accordance with Section 3.08.

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

            (i) the aggregate amount remitted by the Master Servicer pursuant to
      the second paragraph of Section 3.08(a); and

            (ii) any amount required to be deposited by the Master Servicer
      pursuant to Section 3.05(f) in connection with any losses on Permitted
      Investments.

      The foregoing requirements for remittance by the Master Servicer and
deposit by the Trustee into the Distribution Account shall be exclusive. 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 3.08
hereof, it may at any time direct the Trustee to withdraw such amount from the
Distribution Account, any provision herein to the contrary notwithstanding. Such
direction may be accomplished by delivering a written notice to the Trustee that
describes the amounts deposited in error in the Distribution Account. All funds
deposited in the Distribution Account shall be held by the Trustee in trust for
the Certificateholders until disbursed in accordance with this Agreement or
withdrawn in accordance with Section 3.08. In no event shall the Trustee incur
liability for withdrawals from the Distribution Account at the direction of the
Master Servicer.

      (d) No later than 1:00 p.m. Pacific time on the Business Day prior to the
Master Servicer Advance Date in August 2004, the Seller shall remit to the
Master Servicer, and the Master Servicer shall deposit in the Certificate
Account, the Seller Shortfall Interest Requirement (if any) for such Master
Servicer Advance Date.

      (e) [reserved]

      (f) Each institution that maintains the Certificate Account or the
Distribution Account shall invest the funds in each such account, as directed by
the Master Servicer, in Permitted Investments, which shall mature not later than
(x) in the case of the Certificate Account, the second Business Day next
preceding the related Distribution Account Deposit Date (except that if such
Permitted Investment is an obligation of the institution that maintains such
Certificate Account, then such Permitted Investment shall mature not later than
the Business Day next preceding such Distribution Account Deposit Date) and (y)
in the case of the Distribution Account, the Business Day immediately preceding
the first Distribution Date that follows the

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date of such investment (except that if such Permitted Investment is an
obligation of the institution that maintains such Distribution Account, then
such Permitted Investment shall mature not later than such Distribution Date),
in each case, 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. In the case of the Certificate Account and the
Distribution Account, 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, all income
and gain net of any losses realized from any such investment shall be for the
benefit of the Seller and shall be remitted to the Seller as provided herein.
The amount of any losses incurred in the Certificate Account or the Distribution
Account in respect of any such investments shall be deposited by the Master
Servicer in the Certificate Account or paid to the Trustee for deposit into the
Distribution Account out of the Master Servicer's own funds immediately as
realized. Any losses incurred in the Carryover Reserve Fund in respect of any
such investments shall be charged against amounts on deposit in the Carryover
Reserve Fund (or such investments) immediately as realized. The Trustee shall
not be liable for the amount of any loss incurred in respect of any investment
or lack of investment of funds held in the Certificate Account, the Distribution
Account, the Carryover Reserve Fund and made in accordance with this Section
3.05 (or in the case of the Carryover Reserve Fund, Section 4.08).

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

      (h) The Trustee shall establish and maintain, on behalf of the Class P
Certificateholders, the Class P Distribution Account. Funds in the Class P
Distribution Account shall be held in trust for the Class P Certificateholders
for the uses and purposes set forth in this Agreement. Such funds may not be
invested.

      Section 3.06 Collection of Taxes, Assessments and Similar Items; Escrow
                   Accounts.

      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 pursuant to
Sections 3.01 hereof (with respect to taxes and assessments and insurance
premiums) and 3.10 hereof (with respect to hazard insurance), to refund to any
Mortgagors any sums as may be determined to be overages, to pay interest, if
required by law or

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the terms of the related Mortgage or Mortgage Note, to Mortgagors on balances in
the Escrow Account or to clear and terminate the Escrow Account at the
termination of this Agreement in accordance with Section 9.01 hereof. The Escrow
Accounts shall not be a part of the Trust Fund.

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

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

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

      Section 3.08 Permitted Withdrawals from the Certificate Account,
                   Distribution Account and the Carryover Reserve Fund.

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

      (i) to pay to the Master Servicer (to the extent not previously paid to or
withheld by the Master Servicer), as servicing compensation in accordance with
Section 3.15, 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
3.15;

      (ii) to reimburse each of the Master Servicer and the Trustee for Advances
made by it with respect to the Mortgage Loans, such right of reimbursement
pursuant to this subclause (ii) being limited to amounts received on particular
Mortgage Loan(s) (including, for this purpose, Liquidation Proceeds and
Subsequent Recoveries) 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 each of the Master Servicer and the Trustee for any
Nonrecoverable Advance previously made by it;

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

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<PAGE>

      (v) to pay the Master Servicer any unpaid Servicing Fees and to reimburse
it for any unreimbursed Servicing Advances, the Master Servicer's right to
reimbursement of Servicing Advances pursuant to this subclause (v) with respect
to any Mortgage Loan being limited to amounts received on particular Mortgage
Loan(s) (including, for this purpose, Liquidation Proceeds and Subsequent
Recoveries and purchase and repurchase proceeds) that represent late recoveries
of the payments for which such advances were made pursuant to Section 3.01 or
Section 3.06;

      (vi) to pay to the Seller, the Depositor or the Master Servicer, 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 3.12, all
amounts received thereon and not taken into account in determining the related
Stated Principal Balance of such repurchased Mortgage Loan;

      (vii) to reimburse the Seller, the Master Servicer or the Depositor for
expenses incurred by any of them in connection with the Mortgage Loans or
Certificates and reimbursable pursuant to Section 6.03 hereof provided that such
amount shall only be withdrawn following the withdrawal from the Certificate
Account for deposit into the Distribution Account pursuant to the following
paragraph;

      (viii) to withdraw pursuant to Section 3.05 any amount deposited in the
Certificate Account and not required to be deposited therein; and

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

      In addition, no later than 1:00 p.m. Pacific time on the Distribution
Account Deposit Date, the Master Servicer shall withdraw from the Certificate
Account and remit to the Trustee the Interest Remittance Amount and the
Principal Remittance Amount for each Loan Group for such Distribution Date to
the extent on deposit in the Certificate Account, and the Trustee shall deposit
such amount in the Distribution Account.

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

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

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            (i) to pay to the Master Servicer, as additional servicing
      compensation, earnings on or investment income with respect to funds in or
      credited to the Distribution Account;

            (ii) to pay the Trustee the Trustee Fee on each Distribution Date;

            (iii) to withdraw pursuant to Section 3.05 any amount deposited in
      the Distribution Account and not required to be deposited therein;

            (iv) to reimburse the Trustee for any unreimbursed Advances made by
      it pursuant to Section 4.01(b) hereof, such right of reimbursement
      pursuant to this subclause (iv) being limited to (x) amounts received on
      the related Mortgage Loan(s) in respect of which any such Advance was made
      and (y) amounts not otherwise reimbursed to the Trustee pursuant to
      Section 3.08(a)(ii) hereof;

            (v) to reimburse the Trustee for any Nonrecoverable Advance
      previously made by the Trustee pursuant to Section 4.01(b) hereof, such
      right of reimbursement pursuant to this subclause (v) being limited to
      amounts not otherwise reimbursed to the Trustee pursuant to Section
      3.08(a)(iii) hereof; and

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

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

            (i) to withdraw pursuant to Section 3.05 any amount deposited in the
      Carryover Reserve Fund and not required to be deposited therein; and

            (ii) to clear and terminate the Carryover Reserve Fund upon
      termination of the Agreement pursuant to Section 9.01 hereof.

      Section 3.09 [Reserved.]

      Section 3.10 Maintenance of Hazard Insurance.

      The Master Servicer shall cause to be maintained, for each Mortgage Loan,
hazard insurance with extended coverage in an amount that is at least equal to
the lesser of (i) the maximum insurable value of the improvements securing such
Mortgage Loan and (ii) the greater of (a) the outstanding principal balance of
the Mortgage Loan and (b) an amount such that the proceeds of such policy shall
be sufficient to prevent the related Mortgagor and/or mortgagee from becoming a
co-insurer. 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

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or deed in lieu of foreclosure of any Mortgage Loan, to the extent described
below. Pursuant to Section 3.05 hereof, 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 Certificate
Account. Any cost incurred by the Master Servicer in maintaining any such
insurance shall not, for the purpose of calculating monthly distributions to the
Certificateholders or remittances to the Trustee for their benefit, be added to
the principal balance of the Mortgage Loan, notwithstanding that the terms of
the Mortgage Loan so permit. Such costs shall be recoverable by the Master
Servicer out of late payments by the related Mortgagor or out of Liquidation
Proceeds to the extent permitted by Section 3.08 hereof. It is understood and
agreed that no earthquake or other additional insurance is to be required of any
Mortgagor or maintained on property acquired in respect of a Mortgage other than
pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance. If the Mortgaged Property
is located at the time of origination of the Mortgage Loan in a federally
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 lesser of (i) the original
principal balance of the related Mortgage Loan, (ii) the replacement value of
the improvements that are part of such Mortgaged Property, or (iii) the maximum
amount of such insurance available for the related Mortgaged Property under the
Flood Disaster Protection Act of 1973, as amended.

      Section 3.11 Enforcement of Due-On-Sale Clauses; Assumption Agreements.

      (a) Except as otherwise provided in this Section 3.11(a), 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
3.11(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 3.11(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

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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 3.11(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 3.11(a) hereof, in any case in which a
Mortgaged Property has been conveyed to a Person by a Mortgagor, and such Person
is to enter into an assumption agreement or modification agreement or supplement
to the Mortgage Note or Mortgage that requires the signature of the Trustee, or
if an instrument of release signed by the Trustee is required releasing the
Mortgagor from liability on the Mortgage Loan, the Master Servicer shall prepare
and deliver or cause to be prepared and delivered to the Trustee for signature
and shall direct, in writing, the Trustee to execute the assumption agreement
with the Person to whom the Mortgaged Property is to be conveyed and such
modification agreement or supplement to the Mortgage Note or Mortgage or other
instruments as are reasonable or necessary to carry out the terms of the
Mortgage Note or Mortgage or otherwise to comply with any applicable laws
regarding assumptions or the transfer of the Mortgaged Property to such Person.
In connection with any such assumption, no material term of the Mortgage Note
(including, but not limited to, the Mortgage Rate, the amount of the Scheduled
Payment, the Maximum Mortgage Rate, the Minimum Mortgage Rate, the Gross Margin,
the Periodic Rate Cap, the Adjustment Date 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 Servicer in accordance with its underwriting 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 3.12 Realization Upon Defaulted Mortgage Loans; Determination of
                   Excess Proceeds and Realized Losses; Repurchase 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 Liquidation Proceeds (respecting which it shall have priority for
purposes of withdrawals from the Certificate

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<PAGE>

Account pursuant to Section 3.08 hereof). The Master Servicer shall be
responsible for all other costs and expenses incurred by it in any such
proceedings; provided that it shall be entitled to reimbursement thereof from
the proceeds of liquidation of the related Mortgaged Property, as contemplated
in Section 3.08 hereof. 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 (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 Master Servicer shall ensure
that the title to such REO Property references this Agreement and the Trustee's
capacity thereunder. Pursuant to its efforts to sell such REO Property, the
Master Servicer shall either itself or through an agent selected by the Master
Servicer 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 Master Servicer
deems to be in the best interest of the Master Servicer and the
Certificateholders for the period prior to the sale of such REO Property. The
Master Servicer shall prepare for and deliver to the Trustee a statement with
respect to each REO Property that has been rented showing the aggregate rental
income received and all expenses incurred in connection with the management and
maintenance of such REO Property at such times as is necessary to enable the
Trustee to comply with the reporting requirements of the REMIC Provisions. The
net monthly rental income, if any, from such REO Property shall be deposited in
the Certificate Account no later than the close of business on each
Determination Date. The Master Servicer shall perform the tax reporting and
withholding 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 as
soon as practicable in a manner that maximizes the Liquidation Proceeds, but in
no event later than three years after its acquisition by the Trust Fund or, at
the expense of the Trust Fund, the Master Servicer shall 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. In the event the Trustee shall have
been supplied with an Opinion of Counsel (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 the Trust Fund as defined in section
860F of the Code or cause the Trust Fund to fail to qualify as a REMIC at any
time that any Certificates are outstanding, the Trust Fund may continue to hold
such Mortgaged Property (subject to any conditions contained in such Opinion of
Counsel) after the expiration of such three-year period. Notwithstanding any
other provision of this Agreement, no Mortgaged

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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 the Trust Fund 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
this Agreement, to be payments on account of principal and interest on the
related Mortgage Notes and shall be deposited into the Certificate Account. To
the extent the 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
Certificate Account on the next succeeding Determination Date following receipt
thereof for distribution on the related Distribution Date, except that any
Excess 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 3.08(a)(v) or this Section 3.12; second,
to reimburse the Master Servicer for any unreimbursed Advances, pursuant to
Section 3.08(a)(ii) or this Section 3.12; 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 Due Date occurring in 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 Proceeds and Realized Losses, if any, for
the related Prepayment Period.

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      (c) The Master Servicer, in its sole discretion, shall have the right to
elect (by written notice sent to the Trustee) to purchase for its own account
from the Trust Fund any Mortgage Loan that is 150 days or more delinquent during
any Calendar Quarter at a price equal to the Purchase Price; provided, however,
that the Master Servicer may only exercise this right during the period
beginning on the first Business Day of the following Calendar Quarter, and
ending at the close of business on the second-to-last Business Day of such
following Calendar Quarter in which such Mortgage Loan became 150 days
delinquent (such month, the "Eligible Repurchase Month"); provided further, that
any such Mortgage Loan which becomes current but thereafter becomes delinquent
may be purchased by the Master Servicer pursuant to this Section in any ensuing
Eligible Repurchase Month. The Purchase Price for any Mortgage Loan purchased
hereunder shall be delivered to the Trustee for deposit in the Certificate
Account and the Trustee, upon receipt of such deposit and a Request for Release
from the Master Servicer in the form of Exhibit N hereto, shall release or cause
to be released to the purchaser of such Mortgage Loan the related Mortgage File
and shall execute and deliver such instruments of transfer or assignment
prepared by the purchaser of such Mortgage Loan, in each case without recourse,
as shall be necessary to vest in the purchaser of such Mortgage Loan any
Mortgage Loan released pursuant hereto and the purchaser of such Mortgage Loan
shall succeed to all the Trustee's right, title and interest in and to such
Mortgage Loan and all security and documents related thereto. Such assignment
shall be an assignment outright and not for security. The purchaser of such
Mortgage Loan shall thereupon own such Mortgage Loan, and all security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto.

      Section 3.13 Trustee to Cooperate; Release of Mortgage Files.

      Upon the payment in full of any Mortgage Loan, or the receipt by the
Master Servicer of a notification that payment in full will be escrowed in a
manner customary for such purposes, the Master Servicer will promptly notify the
Trustee by delivering a Request for Release substantially in the form of Exhibit
N. Upon receipt of such request, the Trustee shall promptly release the related
Mortgage File to the Master Servicer, and the Trustee shall at the Master
Servicer's direction execute and deliver to the Master Servicer the request for
reconveyance, deed of reconveyance or release or satisfaction of mortgage or
such instrument releasing the lien of the Mortgage in each case provided by the
Master Servicer, together with the Mortgage Note with written evidence of
cancellation thereon. The Master Servicer is authorized to cause the removal
from the registration on the MERS(R) System of such Mortgage and to execute and
deliver, on behalf of the Trust Fund and the Certificateholders or any of them,
any and all instruments of satisfaction or cancellation or of partial or full
release. No expenses incurred in connection with any instrument of satisfaction
or deed of reconveyance shall be chargeable to the Certificate Account, the
Distribution Account, the Carryover Reserve Fund or the related subservicing
account. From time to time and as shall be appropriate for the servicing or
foreclosure of any Mortgage Loan, including for such purpose, collection under
any policy of flood insurance any fidelity bond or errors or omissions policy,
or for the purposes of effecting a partial release of any Mortgaged Property
from the lien of the Mortgage or the making of any corrections to the Mortgage
Note or the Mortgage or any of the other documents included in the Mortgage
File, the Trustee shall, upon delivery to the Trustee of a Request for Release
in the form of Exhibit M signed by a Servicing Officer, release the Mortgage
File to the Master Servicer. Subject to the further limitations set forth below,
the Master Servicer shall cause the

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Mortgage File or documents so released to be returned to the Trustee when the
need therefor by the Master Servicer no longer exists, unless the Mortgage Loan
is liquidated and the proceeds thereof are deposited in the Certificate Account,
in which case the Trustee shall deliver the Request for Release to the Master
Servicer.

      If the Master Servicer at any time seeks to initiate a foreclosure
proceeding in respect of any Mortgaged Property as authorized by this Agreement,
the Master Servicer shall deliver or cause to be delivered to the Trustee, for
signature, as appropriate, any court pleadings, requests for trustee's sale or
other documents necessary to effectuate such foreclosure or any legal action
brought to obtain judgment against the Mortgagor on the Mortgage Note or the
Mortgage or to obtain a deficiency judgment or to enforce any other remedies or
rights provided by the Mortgage Note or the Mortgage or otherwise available at
law or in equity. Notwithstanding the foregoing, the Master Servicer shall cause
possession of any Mortgage File or of the documents therein that shall have been
released by the Trustee to be returned to the Trustee within 21 calendar days
after possession thereof shall have been released by the Trustee unless (i) the
Mortgage Loan has been liquidated and the Liquidation Proceeds relating to the
Mortgage Loan have been deposited in the Certificate Account, and the Master
Servicer shall have delivered to the Trustee a Request for Release in the form
of Exhibit N or (ii) the Mortgage File or document shall have 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 and the Master Servicer shall have
delivered to the Trustee an Officer's Certificate of a Servicing Officer
certifying as to the name and address of the Person to which the Mortgage File
or the documents therein were delivered and the purpose or purposes of such
delivery.

      Section 3.14 Documents, Records and Funds in Possession of Master Servicer
                   to be Held for the Trustee.

      Notwithstanding any other provisions of this Agreement, the Master
Servicer shall transmit to the Trustee as required by this Agreement all
documents and instruments in respect of a Mortgage Loan coming into the
possession of the Master Servicer from time to time and shall account fully to
the Trustee for any funds received by the Master Servicer or that otherwise are
collected by the Master Servicer as Liquidation Proceeds, Subsequent Recoveries
or Insurance Proceeds in respect of any Mortgage Loan. All Mortgage Files and
funds collected or held by, or under the control of, the Master Servicer in
respect of any Mortgage Loans, whether from the collection of principal and
interest payments or from Liquidation Proceeds, including but not limited to,
any funds on deposit in the Certificate Account, shall be held by the Master
Servicer for and on behalf of the Trust Fund and shall be and remain the sole
and exclusive property of the Trust Fund, subject to the applicable provisions
of this Agreement. The Master Servicer also agrees that it shall not create,
incur or subject any Mortgage File or any funds that are deposited in the
Certificate Account, Distribution Account or Carryover Reserve Fund or in any
Escrow Account (as defined in Section 3.06), 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, a Mortgage Loan, except, however, that the Master
Servicer shall be entitled to

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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 3.15 Servicing Compensation.

      As compensation for its activities hereunder, the Master Servicer shall be
entitled to retain or withdraw from the Certificate Account out of each payment
of interest on a Mortgage Loan included in the Trust Fund an amount equal to
interest at the applicable Servicing Fee Rate on the Stated Principal Balance of
the related Mortgage Loan for the period covered by such interest payment.

      Additional servicing compensation in the form of Excess Proceeds,
assumption fees, late payment charges, Prepayment Interest Excess, and all
income and gain net of any losses realized from Permitted Investments shall be
retained by the Master Servicer to the extent not required to be deposited in
the Certificate Account pursuant to Section 3.05 or 3.12(a) hereof. 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 3.10 hereof and maintenance of the other forms
of insurance coverage required by Section 3.10 hereof) and shall not be entitled
to reimbursement therefor except as specifically provided in Sections 3.08 and
3.12 hereof.

      Section 3.16 Access to Certain Documentation.

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

      Section 3.17 Annual Statement as to Compliance.

      The Master Servicer shall deliver to the Depositor and the Trustee on or
before the 80th day after the end of the Master Servicer's fiscal year,
commencing with its 2004 fiscal year, an Officer's Certificate stating, as to
the signer thereof, that (i) a review of the activities of the Master Servicer
during the preceding calendar year and of the performance of the Master Servicer
under this Agreement has been made under such officer's supervision and (ii) to
the best of such officer's knowledge, based on such review, the Master Servicer
has fulfilled all its obligations under this Agreement throughout such year, or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof and (iii) to the best of such officer's knowledge, each Subservicer has
fulfilled all its obligations under its Subservicing Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation
specifying each such default known to

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such officer and the nature and status thereof. The Trustee shall forward a copy
of each such statement to each Rating Agency. Copies of such statement shall be
provided by the Trustee to any Certificateholder upon request at the Master
Servicer's expense, provided such statement is delivered by the Master Servicer
to the Trustee.

      Section 3.18 Annual Independent Public Accountants' Servicing Statement;
                   Financial Statements.

      On or before the later of (i) the 80th day after the end of the Master
Servicer's fiscal year, commencing with its 2004 fiscal year or (ii) within 30
days of the issuance of the annual audited financial statements beginning with
the audit for the period ending in 2004, the Master Servicer at its expense
shall cause a nationally recognized firm of independent public accountants (who
may also render other services to the Master Servicer, the Seller or any
affiliate thereof) that is a member of the American Institute of Certified
Public Accountants to furnish a report to the Trustee, Depositor and the Seller
in compliance with the Uniform Single Attestation Program for Mortgage Bankers.
Copies of such report shall be provided by the Trustee to any Certificateholder
upon request at the Master Servicer's expense, provided such report is delivered
by the Master Servicer to the Trustee. Upon written request, the Master Servicer
shall provide to the Certificateholders its publicly available annual financial
statements (or, for so long as Countrywide Home Loans Servicing LP is the Master
Servicer hereunder, the Master Servicer's parent company's publicly available
annual financial statements), if any, promptly after they become available.

      Section 3.19 The Corridor Contracts.

      The Seller shall assign all of its right, title and interest in and to the
interest rate cap transactions evidenced by the Corridor Contracts to, and shall
cause all of its obligations in respect of such transaction to be assumed by,
the Trustee on behalf of the Trust Fund, on the terms and conditions set forth
in the Corridor Contract Assignment Agreements. The Corridor Contracts will be
assets of the Trust Fund but will not be assets of any REMIC. The Master
Servicer, on behalf of the Trustee, shall deposit any amounts received from time
to time with respect to the Corridor Contracts into the Carryover Reserve Fund.
The parties hereto acknowledge and agree that the Trustee is directed and
authorized by the Depositor to sign the Corridor Contract Assignment Agreements
and shall be fully protected in relying thereon. The representations made by the
Bank of New York as Assignee under the Corridor Contract Assignment Agreements
are made by the Trustee on behalf of, and solely as Trustee (and not in its
individual capacity) for the Trust Fund. The representations made by the Bank of
New York as Assignee under the Corridor Contract Assignment Agreements are made
by the Trustee on behalf of, and solely as Trustee (and not in its individual
capacity) for the Trust Fund.

      The Master Servicer, on behalf of the Trustee, shall prepare and deliver
any notices required to be delivered under the Corridor Contracts.

      The Master Servicer, on behalf of the Trustee, shall act as calculation
agent and/or shall terminate the Corridor Contracts, in each case upon the
occurrence of certain events of default or termination events to the extent
specified thereunder. Upon any such termination, the Corridor Contract
Counterparty will be obligated to pay the Trustee or the Master Servicer for the
benefit

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of the Trust Fund an amount in respect of such termination. Any amounts
received by the Trustee or the Master Servicer for the benefit of the Trust
Fund, as the case may be, in respect of such termination shall be deposited and
held in the Carryover Reserve Fund to pay Net Rate Carryover for the applicable
Certificates (by deposit of the amount of any such Net Rate Carryover in the
Carryover Reserve Fund for payment to the related Certificateholders) as
provided in Section 4.04(a) on Distribution Dates following such termination to
and including the Cap Contract Termination Date. On the related Corridor
Contract Termination Date, after all other distributions on such date, if any
such amounts in respect of early termination remain in the Carryover Reserve
Fund, such amounts shall be distributed by the Trustee to the Class C
Certificateholder.

      Section 3.20 Prepayment Charges.

      (a) Notwithstanding anything in this Agreement to the contrary, in the
event of a Principal Prepayment in full or in part of a Mortgage Loan, the
Master Servicer may not waive any Prepayment Charge or portion thereof required
by the terms of the related Mortgage Note unless (i) the Master Servicer
determines that such waiver would maximize recovery of Liquidation Proceeds for
such Mortgage Loan, taking into account the value of such Prepayment Charge, or
(ii) (A) the enforceability thereof is limited (1) by bankruptcy, insolvency,
moratorium, receivership, or other similar law relating to creditors' rights
generally or (2) due to acceleration in connection with a foreclosure or other
involuntary payment, or (B) the enforceability is otherwise limited or
prohibited by applicable law. In the event of a Principal Prepayment in full or
in part with respect to any Mortgage Loan, the Master Servicer shall deliver to
the Trustee an Officer's Certificate substantially in the form of Exhibit T no
later than the third Business Day following the immediately succeeding
Determination Date with a copy to the Class P Certificateholders. If the Master
Servicer has waived or does not collect all or a portion of a Prepayment Charge
relating to a Principal Prepayment in full or in part due to any action or
omission of the Master Servicer, other than as provided above, the Master
Servicer shall deliver to the Trustee, together with the Principal Prepayment in
full or in part, the amount of such Prepayment Charge (or such portion thereof
as had been waived) for deposit into the Certificate Account (not later than the
immediately succeeding Master Servicer Advance Date, in the case of such
Prepayment Charge) for distribution in accordance with the terms of this
Agreement.

      (b) Upon discovery by the Master Servicer or a Responsible Officer of the
Trustee of a breach of the foregoing subsection (a), the party discovering the
breach shall give prompt written notice to the other parties.

      (c) The Seller represents and warrants to the Depositor and the Trustee,
as of the Closing Date, that the information in the Prepayment Charge Schedule
(including the attached prepayment charge summary) is complete and accurate in
all material respects at the dates as of which the information is furnished and
each Prepayment Charge is permissible and enforceable in accordance with its
terms under applicable state law, except as the enforceability thereof is
limited due to acceleration in connection with a foreclosure or other
involuntary payment.

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      (d) Upon discovery by the Master Servicer or a Responsible Officer of the
Trustee of a breach of the foregoing clause (c) that materially and adversely
affects right of the Holders of the Class P Certificates to any Prepayment
Charge, the party discovering the breach shall give prompt written notice to the
other parties. Within 60 days of the earlier of discovery by the Master Servicer
or receipt of notice by the Master Servicer of breach, the Master Servicer shall
cure the breach in all material respects or shall pay into the Certificate
Account the amount of the Prepayment Charge that would otherwise be due from the
Mortgagor, less any amount representing such Prepayment Charge previously
collected and paid by the Master Servicer into the Certificate Account.

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                                   ARTICLE IV

                                DISTRIBUTIONS AND
                         ADVANCES BY THE MASTER SERVICER

      Section 4.01 Advances.

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

      (b) If the Master Servicer determines that it will be unable to comply
with its obligation to make the Advances as and when described in the second
sentence of Section 4.01(a), it shall use its best efforts to give written
notice thereof to the Trustee (each such notice a "Trustee Advance Notice"; and
such notice may be given by telecopy), not later than 3:00 P.M., New York time,
on the Business Day immediately preceding the related Master Servicer Advance
Date, specifying the amount that it will be unable to deposit (each such amount
an "Advance Deficiency") and certifying that such Advance Deficiency constitutes
an Advance hereunder and is not a Nonrecoverable Advance. If the Trustee
receives a Trustee Advance Notice on or before 3:30 P.M., New York time on a
Master Servicer Advance Date, the Trustee shall, not later than 3:00 P.M., New
York time, on the related Distribution Date, deposit in the Distribution Account
an amount equal to the Advance Deficiency identified in such Trustee Advance
Notice unless it is prohibited from so doing by applicable law. Notwithstanding
the foregoing, the Trustee shall not be required to make such deposit if the
Trustee shall have received written notification from the Master Servicer that
the Master Servicer has deposited or caused to be deposited in the Certificate
Account an amount equal to such Advance Deficiency. All Advances made by the
Trustee pursuant to this Section 4.01(b) shall accrue interest on behalf of the
Trustee at the Trustee Advance Rate from and including the date such Advances
are made to but excluding the date of repayment, with such interest being an
obligation of the Master Servicer and not the Trust Fund. The Master Servicer
shall reimburse the Trustee for the amount of any Advance made by the Trustee
pursuant to this Section 4.01(b) together with accrued interest, not later than
6:00 P.M., New York time on the Business Day following the related Distribution
Date. In the event that the Master Servicer does not reimburse the Trustee in
accordance with the requirements of the preceding sentence, the Trustee shall
immediately (a)

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terminate all of the rights and obligations of the Master Servicer under this
Agreement in accordance with Section 7.01 and (b) subject to the limitations set
forth in Section 3.04, assume all of the rights and obligations of the Master
Servicer hereunder.

      (c) The Master Servicer, not later than the close of business on the
second Business Day immediately preceding each Distribution Date, shall deliver
to the Trustee a report (in the form and substance reasonably satisfactory to
the Trustee) that indicates (i) the Mortgage Loans with respect to which the
Master Servicer has determined that the related Scheduled Payments should be
advanced and (ii) the amount of the related Scheduled Payments. The Master
Servicer shall deliver to the Trustee on the related Master Servicer Advance
Date an Officer's Certificate of a Servicing Officer indicating the amount of
any proposed Advance determined by the Master Servicer to be a Nonrecoverable
Advance.

      Section 4.02 Reduction of Servicing Compensation in Connection with
                   Prepayment Interest Shortfalls.

      In the event that any Mortgage Loan is the subject of a Prepayment
Interest Shortfall, the Master Servicer shall, to the extent of one-half of the
Servicing Fee for such Distribution Date, deposit into the Certificate Account,
as a reduction of the Servicing Fee (but not in excess of one-half thereof) 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 Trust Fund or the Certificateholders.

      Section 4.03 [Reserved]

      Section 4.04 Distributions

      (a) On each Distribution Date, the Interest Funds for such Distribution
Date shall be allocated by the Trustee from the Distribution Account in the
following order of priority, until such Interest Funds have been fully
disbursed:

            (i) concurrently

                  (A) from the Interest Funds for Loan Group 1 (and after the
            distribution of Interest Funds from Loan Group 2 as provided in
            clause (B) below, from Interest Funds for Loan Group 2), to the
            Class 1-A Certificates, the Class 1-A Current Interest and any Class
            1-A Interest Carry Forward Amount, and

                  (B) from the Interest Funds for Loan Group 2 (and after the
            distribution of Interest Funds from Loan Group 1 as provided in
            clause (A) above, from Interest Funds for Loan Group 1), to the
            Class 2-A Certificates, the Class 2-A Current Interest and any Class
            2-A Interest Carry Forward Amount;

            (ii) from the Interest Funds for both Loan Groups to the Class M-1
      Certificates, the Class M-1 Current Interest;

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<PAGE>

            (iii) from the Interest Funds for both Loan Groups to the Class M-2
      Certificates, the Class M-2 Current Interest;

            (iv) from the Interest Funds for both Loan Groups to the Class M-3
      Certificates, the Class M-3 Current Interest;

            (v) from the Interest Funds for both Loan Groups to the Class M-4
      Certificates, the Class M-4 Current Interest;

            (vi) from the Interest Funds for both Loan Groups to the Class M-5
      Certificates, the Class M-5 Current Interest;

            (vii) from the Interest Funds for both Loan Groups to the Class M-6
      Certificates, the Class M-6 Current Interest;

            (viii) from the Interest Funds for both Loan Groups to the Class M-7
      Certificates, the Class M-7 Current Interest;

            (ix) from the Interest Funds for both Loan Groups to the Class M-8
      Certificates, the Class M-8 Current Interest;

            (x) from the Interest Funds for both Loan Groups to the Class B
      Certificates, the Class B Current Interest; and

            (xi) any remainder, as part of the Excess Cashflow.

      (b) On each Distribution Date on or prior to the related Corridor Contract
Termination Date, amounts received in respect of the Corridor Contracts for such
Distribution Date will be deposited in the Carryover Reserve Fund to be
distributed to each applicable Class of Certificates (other than the Class A-R
Certificates and Class P Certificates) pursuant to Section 4.04(e)(iv);
provided, however, that if the Corridor Contracts are subject to early
termination, early termination payments shall be held by the Trustee until the
related Corridor Contract Termination Date and deposited in the Carryover
Reserve Fund, as necessary, to pay any Net Rate Carryover as provided in Section
3.19.

      (c) Upon the earlier of (a) the exercise of the Optional Termination by
the Master Servicer pursuant to Section 9.01 and (b) the Class P Principal
Distribution Date, all funds on deposit in the Class P Distribution Account
shall be distributed the Class P Certificates.

      (d) On each Distribution Date, the Principal Distribution Amount for such
Distribution Date with respect to each Loan Group shall be allocated by the
Trustee from the Distribution Account in the following order of priority until
such Principal Distribution Amount has been fully distributed:

            (i) with respect to any Distribution Date prior to the Stepdown Date
      or as to which a Trigger Event is in effect:

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                  (A) concurrently, (i) the Class 1-A Principal Distribution
            Amount will be distributed sequentially to the Class A-R
            Certificates or Class 1-A Certificates, in that order until the
            Certificate Principal Balance of each such Class is reduced to zero
            and (ii) the Class 2-A Principal Distribution Amount will be
            distributed to the Class 2-A Certificates, until the Certificate
            Principal Balance thereof is reduced to zero; provided, however,
            that (x) after the Certificate Principal Balance of the Class 1-A
            Certificates has been reduced to zero, the Principal Distribution
            Amount for Loan Group 1 will be applied to the Class 2-A
            Certificates until the Certificate Principal Balance thereof is
            reduced to zero and (y) after the Certificate Principal Balance of
            the Class 2-A Certificates has been reduced to zero, the Principal
            Distribution Amount for Loan Group 2 will be applied to the Class
            1-A Certificates until the Certificate Principal Balance thereof is
            reduced to zero;

                  (B) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-1 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (C) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-2 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (D) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-3 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (E) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-4 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (F) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-5 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (G) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-6 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (H) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-7 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

                  (I) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class M-8 Certificates, until the Certificate
            Principal Balance thereof is reduced to zero;

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                  (J) the remaining Principal Distribution Amount for both Loan
            Groups, to the Class B Certificates, until the Certificate Principal
            Balance thereof is reduced to zero; and

                  (K) any remainder, as part of the Excess Cashflow.

            (ii) with respect to each Distribution Date on and after the
      Stepdown Date and as to which a Trigger Event is not in effect:

                  (A) concurrently, (i) the Class 1-A Principal Distribution
            Amount shall be distributed to the Class 1-A Certificates, until the
            Certificate Principal Balance thereof is reduced to zero and (ii)
            the Class 2-A Principal Distribution Amount shall be distributed to
            the Class 2-A Certificates until the Certificate Principal Balance
            thereof Class is reduced to zero; provided, however that (x) after
            the Certificate Principal Balance of the Class 1-A Certificates has
            been reduced to zero, the remaining Class 1-A Principal Distribution
            Amount will be applied to the Class 2-A Certificates to the extent
            of the Class 2-A Principal Distribution Amount remaining
            undistributed until the Certificate Principal Balance thereof is
            reduced to zero and (y) after the Certificate Principal Balance of
            the Class 2-A Certificates has been reduced to zero, the remaining
            Class 2-A Principal Distribution Amount will be applied to the Class
            1-A Certificates to the extent of the Class 1-A Principal
            Distribution Amount remaining undistributed until the Certificate
            Principal Balance thereof is reduced to zero;

                  (B) to the Class M-1 Certificates, the Class M-1 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (C) to the Class M-2 Certificates, the Class M-2 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (D) to the Class M-3 Certificates, the Class M-3 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (E) to the Class M-4 Certificates, the Class M-4 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (F) to the Class M-5 Certificates, the Class M-5 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (G) to the Class M-6 Certificates, the Class M-6 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (H) to the Class M-7 Certificates, the Class M-7 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

                  (I) to the Class M-8 Certificates, the Class M-8 Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero;

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                  (G) to the Class B Certificates, the Class B Principal
            Distribution Amount, until the Certificate Principal Balance thereof
            is reduced to zero; and

                  (H) any remainder, as part of the Excess Cashflow.

      (e) With respect to any Distribution Date, any Excess Cashflow and each
Corridor Contract Payment Amount will be paid to the classes of Certificates,
after payment of the Seller Shortfall Interest Requirement, if any, as follows:

            (i) from Excess Cashflow from both Loan Groups, to the holders of
      the Class or Classes of Offered Certificates (other than the Class A-R
      Certificates) then entitled to receive distributions in respect of
      principal, in an amount equal to the Extra Principal Distribution Amount,
      payable to such holders as part of the Principal Distribution Amount
      pursuant to Section 4.04(d) above;

            (i) from any remaining Excess Cashflow from both Loan Groups,
      sequentially to the holders of the Class M-1, Class M-2, Class M-3, Class
      M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class B Certificates,
      in that order, in an amount equal to any Interest Carry Forward Amount for
      such Class or Classes;

            (ii) from any remaining Excess Cashflow from both Loan Groups,
      sequentially to the holders of the Class M-1, Class M-2, Class M-3, Class
      M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class B Certificates,
      in that order, in an amount equal to the Unpaid Realized Loss Amounts for
      such Class or Classes;

            (iii) (a) from the Class 1-A Corridor Contract Payment Amount, to
      the Class 1-A Certificates, until the related Net Rate Carryover is
      reduced to zero, (b) from the Class 2-A Corridor Contract Payment Amount,
      to the Class 2-A Certificates, until the related Net Rate Carryover is
      reduced to zero, and (c) from the Subordinated Corridor Contract Payment
      Amount, to the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5,
      Class M-6, Class M-7, Class M-8 and Class B Certificates, on a pro rata
      basis, based on the Certificate Principal Balances thereof, to the extent
      needed to pay any related Net Rate Carryover for each such Class; provided
      that any Subordinated Corridor Contract Payment Amount remaining after
      such allocation to pay Net Rate Carryover based on the Certificate
      Principal Balances of these Certificates will be distributed to each such
      Class of Subordinated Certificates with respect to which there remains any
      unpaid Net Rate Carryover (after the distribution based on Certificate
      Principal Balances), pro rata, based on the amount of such unpaid Net Rate
      Carryover, until reduced to zero;

            (iv) from any remaining Excess Cashflow from both Loan Groups and
      any remaining Corridor Contract Payment Amounts as provided in clause (iv)
      above, to the Class 1-A, Class 2-A, Class M-1, Class M-2, Class M-3, Class
      M-4, Class M-5, Class M-6, Class M-7, Class M-8 and Class B Certificates,
      on a pro rata basis, based on the Certificate Principal Balances thereof,
      to the extent needed to pay any remaining Net Rate Carryover for each such
      Class; provided that any amounts remaining after such allocation to pay
      Net Rate Carryover based on the Certificate Principal Balances of these
      Certificates will be distributed to each such Class of Certificates with
      respect to which there remains any unpaid Net Rate Carryover (after the
      distribution based on Certificate

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      Principal Balances), pro rata, based on the amount of such unpaid Net Rate
      Carryover, until reduced to zero

            (v) from any remaining Excess Cashflow from both Loan Groups, to the
      Class C Certificates, (x) the Current Interest for such Class and (y) any
      remaining Excess Cashflow shall be paid to the Class C Certificates;

            (vi) from any remaining Excess Cashflow from both Loan Groups and
      any remaining Corridor Contract Payment Amount, if (x) the related
      Corridor Contract has not been terminated or (y) on any Distribution Date
      on or after the related Corridor Contract Termination Date, to the Class C
      Certificates; and

            (vii) any remaining Excess Cashflow from both Loan Groups, to the
      Class A-R Certificates.

      (f) On each Distribution Date, all Prepayment Charges (including amounts
deposited in connection with the full or partial waiver of such Prepayment
Charges pursuant to Section 3.20) shall be distributed to the Class P
Certificates.

      (g) To the extent that a Class of Certificates (other than the Class A-R,
Class C and Class P Certificates) receives interest in excess of the Net Rate
Cap, such interest shall be treated as having been paid to the Carryover Reserve
Fund and then paid by the Carryover Reserve Fund to such Certificateholders.

      (h) [reserved]

      (i) On each Distribution Date, the Trustee shall allocate the Applied
Realized Loss Amount to reduce the Certificate Principal Balances of the
Subordinate Certificates in the following order of priority:

            (i) to the Class B Certificates until the Class B Certificate
      Principal Balance is reduced to zero;

            (ii) to the Class M-8 Certificates until the Class M-8 Certificate
      Principal Balance is reduced to zero;

            (iii) to the Class M-7 Certificates until the Class M-7 Certificate
      Principal Balance is reduced to zero;

            (iv) to the Class M-6 Certificates until the Class M-6 Certificate
      Principal Balance is reduced to zero;

            (v) to the Class M-5 Certificates until the Class M-5 Certificate
      Principal Balance is reduced to zero;

            (vi) to the Class M-4 Certificates until the Class M-4 Certificate
      Principal Balance is reduced to zero;

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<PAGE>

            (vii) to the Class M-3 Certificates until the Class M-3 Certificate
      Principal Balance is reduced to zero;

            (viii) to the Class M-2 Certificates until the Class M-2 Certificate
      Principal Balance is reduced to zero; and

            (ix) to the Class M-1 Certificates until the Class M-1 Certificate
      Principal Balance is reduced to zero.

      (j) Subject to Section 9.02 hereof respecting the final distribution, on
each Distribution Date the Trustee shall make distributions to each
Certificateholder of record on the preceding Record Date either by wire transfer
in immediately available funds to the account of such holder at a bank or other
entity having appropriate facilities therefor, if (i) such Holder has so
notified the Trustee at least 5 Business Days prior to the related Record Date
and (ii) such Holder shall hold Regular Certificates with aggregate principal
denominations of not less than $1,000,000 or evidencing a Percentage Interest
aggregating 10% or more with respect to such Class or, if not, by check mailed
by first class mail to such Certificateholder at the address of such holder
appearing in the Certificate Register. Notwithstanding the foregoing, but
subject to Section 9.02 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.

      On or before 5:00 p.m. Pacific time on the fifth Business Day following
each Determination Date (but in no event later than 5:00 p.m. Pacific time on
the third Business Day before the related Distribution Date), the Master
Servicer shall deliver a report to the Trustee in the form of a computer
readable magnetic tape (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 make the required
distributions for the related Distribution Date (the "Remittance Report"). The
Trustee shall not be responsible to recompute, recalculate or verify information
provided to it by the Master Servicer and shall be permitted to conclusively
rely on any information provided to it by the Master Servicer.

      Section 4.05 Monthly Statements to Certificateholders.

      (a) Not later than each Distribution Date, the Trustee shall prepare and
cause to be forwarded by first class mail to each Holder of a Class of
Certificates of the Trust Fund, the Master Servicer, the Seller 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 and (B) the aggregate of all
      scheduled payments of principal included therein;

            (ii) the amount of such distribution to Holders of each Class
      allocable to interest;

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<PAGE>

            (iii) any Interest Carry Forward Amount for each Class;

            (iv) the Certificate Principal 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 the Mortgage
      Loans for the Mortgage Pool and each Loan Group;

            (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 Certificates with
      respect to the current Accrual Period;

            (viii) with respect to the August 2004 Distribution Date, the Seller
      Shortfall Interest Requirement (if any) for the related Master Servicer
      Advance Date;

            (ix) the amount of Advances for each Loan Group included in the
      distribution on such Distribution Date;

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

            (xi) [reserved];

            (xii) the number and aggregate principal amounts of Mortgage Loans
      in each Loan Group: (A) Delinquent (exclusive of Mortgage Loans in
      foreclosure) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days,
      and (B) in foreclosure and Delinquent (1) 30 to 59 days, (2) 60 to 89 days
      and (3) 90 or more days, in each case as of the close of business on the
      last day of the calendar month preceding such Distribution Date;

            (xiii) with respect to any Mortgage Loan that became an REO Property
      during the preceding calendar month in each Loan Group, the loan number
      and Stated Principal Balance of such Mortgage Loan;

            (xiv) and the aggregate Stated Principal Balances of any Mortgage
      Loans converted to REO Properties as of the close of business on the
      Determination Date preceding such Distribution Date;

            (xv) the aggregate Stated Principal Balances of all Liquidated
      Loans;

            (xvi) with respect to any Liquidated Loan in each Loan Group, the
      loan number and Stated Principal Balance relating thereto;

            (xvii) whether a Trigger Event is in effect;

            (xviii) any Net Rate Carryover paid on each Class of Certificates
      (other than the Class A-R, Class C and Class P Certificates) and any
      remaining Net Rate Carryover

                                      102
<PAGE>

      remaining on each Class of Certificates (other than the Class A-R, Class C
      and Class P Certificates) on such Distribution Date;

            (xix) the amount of Prepayment Charges collected or waived by the
      Master Servicer;

            (xx) [reserved];

            (xxi) [reserved]; and

            (xxii) the amount, if any, due, and the amount received under each
      Cap Contract for such Distribution Date.

      (b) The Trustee's responsibility for disbursing the above information to
the Certificateholders is limited to the availability, timeliness and accuracy
of the information derived from the Master Servicer. The Trustee will send a
copy of each statement provided pursuant to this Section 4.05 to each Rating
Agency. The Trustee may make the above information available to
Certificateholders via the Trustee's website at http://www.mbsreporting.com.

      (c) Within a reasonable period of time after the end of each calendar
year, the Trustee shall cause to be furnished to each Person who at any time
during the calendar year was a Certificateholder, a statement containing the
information set forth in clauses (a)(i), (a)(ii) and (a)(vi) of this Section
4.05 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 Class A-R Certificates the Form 1066 and each Form
1066Q and shall respond promptly to written requests made not more frequently
than quarterly by any Holder of Class A-R Certificates with respect to the
following matters:

            (i) The original projected principal and interest cash flows on the
      Closing Date on each related 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 related 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 related Class of regular or
      residual interests created hereunder and to the

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<PAGE>

      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 the related 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 the
      related REMIC; and

            (vii) Any taxes (including penalties and interest) imposed on the
      related 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 8.11.

      Section 4.06 [Reserved]

      Section 4.07 [Reserved]

      Section 4.08 Carryover Reserve Fund.

      (a) On the Closing Date, the Trustee shall establish and maintain in its
name, in trust for the benefit of the Holders of the Certificates, the Carryover
Reserve Fund. The Carryover Reserve Fund shall be an Eligible Account, and funds
on deposit therein shall be held separate and apart from, and shall not be
commingled with, any other moneys, including without limitation, other moneys
held by the Trustee pursuant to this Agreement.

      (b) The Trustee shall make withdrawals from the Carryover Reserve Fund to
make distributions of amounts payable from each Corridor Contract to the related
Certificates pursuant to paragraph (e) of Section 4.04 hereof. Any amounts
remaining after the distributions required pursuant to preceding sentence shall
be distributed to the Class C Certificates; provided, however, that if a
Corridor Contract is subject to early termination, early termination payments
received on such Corridor Contract will be held by the Trustee until the related
Corridor Contract Termination Date and deposited in the Carryover Reserve Fund
as necessary to cover any Net Rate Carryover on the Certificates entitled
thereto on future Distribution Dates.

      (c) Funds in the Carryover Reserve Fund may be invested in Permitted
Investments. Any earnings on such amounts shall be payable to the Class C
Certificates. The Class C Certificates shall evidence ownership of the Carryover
Reserve Fund for federal tax purposes and the Holders thereof evidencing not
less than 50% of the Voting Rights of such Class shall direct the Trustee in
writing as to the investment of amounts therein. In the absence of such written
direction, all funds in the Carryover Reserve Fund shall be invested by the
Trustee in The Bank of New York cash reserves.

                                      104
<PAGE>

      (d) Upon termination of the Trust Fund, any amounts remaining in the
Carryover Reserve Fund shall be distributed to the Holders of the Class C
Certificates in the same manner as if distributed pursuant to Section 4.04(f)
hereof.

      Section 4.09 Distributions on the REMIC I Regular Interests.

      (a) (1)(A) 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 AR Certificates (in respect
of the Class R-I Interest), as the case may be:

            (i) first, (a) to Holders of REMIC I Regular Interest LT-AA, REMIC
      Regular Interest LT-11 REMIC Regular Interest LT-2A, REMIC I Regular
      Interest LT-M1, REMIC I Regular Interest LT-M2, REMIC Regular Interest
      LT-M3, REMIC Regular Interest LT-M4, REMIC Regular Interest LT-M5, REMIC 1
      REGULAR Interest LT-M6, REMIC 1 Regular Interest LT-M7, REMIC 1 Regular
      Interest LT-M8, REMIC Regular Interest LT-B, REMIC I Regular Interest
      LT-ZZ, REMIC I Regular Interest LT-P and REMIC I Regular Interest LT-R,
      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
      LT-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 LT-ZZ Maximum Interest Deferral Amount and such amount
      will be payable to the Holders of REMIC Regular Interest LT-1A, REMIC
      Regular Interest LT-2A, REMIC I Regular Interest LT-M1, REMIC I Regular
      Interest LT-M2, REMIC Regular Interest LT-M3, REMIC Regular Interest
      LT-M4, REMIC Regular Interest LT-M5, REMIC 1 REGULAR Interest LT-M6, REMIC
      1 Regular Interest LT-M7, REMIC 1 Regular Interest LT-M8 and REMIC Regular
      Interest LT-B 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 LT-ZZ shall
      be increased by such amount; and

      (b) to Holders of REMIC I Regular Interest LT-1SUB, REMIC I Regular
Interest LT-1GRP, REMIC I Regular Interest LT-2SUB, REMIC I Regular Interest
LT-2GRP and REMIC I Regular Interest LT-XX, 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

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

            (a) 98.00% of such remainder (other than amounts payable under
      clause (c) below), to the Holders of REMIC I Regular Interest LT-AA and
      REMIC I Regular Interest LT-P, until the Uncertificated Principal Balance
      of such REMIC I Regular

                                      105
<PAGE>

      Interest is reduced to zero, provided, however, that REMIC I Regular
      Interest LT-P shall not be reduced until the Distribution Date immediately
      following the expiration of the latest Prepayment Charge as identified on
      the Prepayment Charge Schedule or any Distribution Date thereafter, at
      which point such amount shall be distributed to REMIC I Regular Interest
      LT-P, until $100 has been distributed pursuant to this clause;

            (b) 2.00% of such remainder first, to the Holders of REMIC I Regular
      Interest LT-1A, REMIC I Regular Interest LT-2A, REMIC I Regular Interest
      LT-M1, REMIC I Regular Interest LT-M2, REMIC I Regular Interest LT-M3,
      REMIC I Regular Interest LT-M4, REMIC I Regular Interest LT-M5, REMIC 1
      REGULAR Interest LT-M6, REMIC 1 Regular Interest LT-M7, REMIC 1 Regular
      Interest LT-M8 and REMIC Regular Interest LT-B, 1.00% 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 and second, to the Holders of REMIC
      I Regular Interest LT-ZZ, until the Uncertificated Principal Balance of
      such REMIC I Regular Interest is reduced to zero; then

            (c) any remaining amount to the Holders of the Class AR Certificates
      (in respect of the Class R-I Interest); and

provided, however, that (i) 98.00% and (ii) 2.00% of any principal payments that
are attributable to an Overcollateralization Reduction Amount shall be allocated
to Holders of (i) REMIC I Regular Interest LT-AA and REMIC I Regular Interest
LT-P, in that order and (ii) REMIC I Regular Interest LT-ZZ, respectively;
provided that REMIC I Regular Interest LT-P shall not be reduced until the
Distribution Date immediately following the expiration of the latest Prepayment
Charge as identified on the Prepayment Charge Schedule or any Distribution Date
thereafter, at which point such amount shall be distributed to REMIC I Regular
Interest LT-P, until $100 has been distributed pursuant to this clause.

      On each Distribution Date, all amounts representing Prepayment Charges in
respect of the Mortgage Loans received during the related Prepayment Period will
be distributed by REMIC I to the Holders of REMIC I Regular Interest LT-P. The
payment of the foregoing amounts to the Holders of REMIC I Regular Interest LT-P
shall not reduce the Uncertificated Principal Balance thereof.

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

            (a) Distributions of principal shall be deemed to be made to the
      REMIC I Regular Interests first, so as to keep the Uncertificated
      Principal Balance of each REMIC I Regular Interest ending with the
      designation "GRP" equal to 0.01% of the aggregate Stated Principal Balance
      of the Mortgage Loans in the related Group; second, to each REMIC I
      Regular Interest ending with the designation "SUB," 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 Group

                                      106
<PAGE>

      over (y) the Certificate Principal Balance of the Class A Certificate in
      the related 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 LT-XX.

            (b) Notwithstanding the distributions described in this Section
      4.09, distribution of funds shall be made only in accordance with Section
      4.04.

      Section 4.10 [Reserved].

      Section 4.11 Allocation of Realized Losses on the REMIC I Regular
Interests.

      (a) The REMIC I Marker Percentage of all Realized Losses on the Mortgage
Loans shall be allocated by the Trustee on each Distribution Date to the
following REMIC I Regular Interests in the specified percentages, as follows:
first, to Uncertificated Interest payable to the REMIC I Regular Interest LT AA
and REMIC I Regular Interest LT 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 LT AA and
REMIC I Regular Interest LT 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 LT AA, REMIC I
Regular Interest LT B and REMIC I Regular Interest LT ZZ, 98%, 1.00% and 1%,
respectively, until the Uncertificated Principal Balances of REMIC I Regular
Interest LT B has been reduced to zero; fourth, to the Uncertificated Principal
Balances of REMIC I Regular Interest LT AA, REMIC I Regular Interest LT M8 and
REMIC I Regular Interest LT ZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest LT M8 has been
reduced to zero; fifth, to the Uncertificated Principal Balances of REMIC I
Regular Interest LT AA, REMIC I Regular Interest LT M7 and REMIC I Regular
Interest LT ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest LT M7 has been reduced to zero; sixth, to
the Uncertificated Principal Balances of REMIC I Regular Interest LT AA, REMIC I
Regular Interest LT M6 and REMIC I Regular Interest LT ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest LT M6 has been reduced to zero; seventh to the Uncertificated Principal
Balances of REMIC I Regular Interest LT AA, REMIC I Regular Interest LT M5 and
REMIC I Regular Interest LT ZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest LT M5 has been
reduced to zero; eighth to the Uncertificated Principal Balances of REMIC I
Regular Interest LT AA, REMIC I Regular Interest LT M4 and REMIC I Regular
Interest LT ZZ, 98%, 1% and 1%, respectively, until the Uncertificated Principal
Balance of REMIC I Regular Interest LT M4 has been reduced to zero; ninth to the
Uncertificated Principal Balances of REMIC I Regular Interest LT AA, REMIC I
Regular Interest LT M3 and REMIC I Regular Interest LT ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest LT M3 has been reduced to zero; tenth to the Uncertificated Principal
Balances of REMIC I Regular Interest LT AA, REMIC I Regular Interest LT M2 and
REMIC I Regular Interest LT ZZ, 98%, 1% and 1%, respectively, until the
Uncertificated Principal Balance of REMIC I Regular Interest LT M2 has been
reduced to zero; and eleventh sixth to the

                                      107
<PAGE>

Uncertificated Principal Balances of REMIC I Regular Interest LT AA, REMIC I
Regular Interest LT M1 and REMIC I Regular Interest LT ZZ, 98%, 1% and 1%,
respectively, until the Uncertificated Principal Balance of REMIC I Regular
Interest LT M1 has been reduced to zero.

      (b) 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 "GRP" equal to 0.01% of the
aggregate Stated Principal Balance of the Mortgage Loans in the related Group;
second, to each REMIC I Regular Interest ending with the designation "SUB," 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 Group over (y) the Certificate Principal
Balance of the Senior Certificate in the related 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 LT-XX.

      Section 4.12 The Class P Certificates.

      On the Closing Date, $100 shall be deposited into the Class P Distribution
Account and shall be held in trust for the benefit of the Class P
Certificateholders for payment pursuant to Section 4.04 upon the earlier of (a)
the exercise of the Optional Termination by the Master Servicer pursuant to
Section 9.01 and (b) the Class P Principal Distribution Date. Such funds may not
be invested.

                                       108
<PAGE>

                                    ARTICLE V

                                THE CERTIFICATES

      Section 5.01 The Certificates.

      The Certificates shall be substantially in the forms attached hereto as
Exhibits A-1 through A-8, B, C and D. The Certificates shall be issuable in
registered form, in the minimum dollar denominations, integral dollar multiples
in excess thereof and aggregate dollar denominations as set forth in the
following table:

<TABLE>
<CAPTION>
                           Minimum        Integral Multiples in      Original Certificate
        Class           Denomination        Excess of Minimum         Principal Balance
   ---------------    ----------------   -----------------------    ----------------------
<S>                     <C>                        <C>                  <C>
          1-A             $20,000                  $1,000               $316,030,000.00
          2-A             $20,000                  $1,000               $ 64,220,000.00
          A-R           $99.95(1)                     N/A               $        100.00
          M-1             $20,000                  $1,000               $ 14,625,000.00
          M-2             $20,000                  $1,000               $ 12,375,000.00
          M-3             $20,000                  $1,000               $  8,550,000.00
          M-4             $20,000                  $1,000               $  7,425,000.00
          M-5             $20,000                  $1,000               $  6,525,000.00
          M-6             $20,000                  $1,000               $  5,625,000.00
          M-7             $20,000                  $1,000               $  5,625,000.00
          M-8             $20,000                  $1,000               $  4,500,000.00
            B             $20,000                  $1,000               $  4,500,000.00
            C                 20%                      1%               $          0.00
            P                 20%                      1%               $        100.00
</TABLE>

      (1) The Tax Matters Person Certificate may be issued in a denomination of
$0.05.

      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 a certificate of
authentication substantially in the form set forth as attached hereto executed
by the Trustee by manual signature, and such certificate of authentication upon
any Certificate shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their

                                      109
<PAGE>

authentication. On the Closing Date, the Trustee shall authenticate the
Certificates to be issued at the written direction of the Depositor, or any
affiliate thereof.

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

      (a) The Trustee shall maintain, or cause to be maintained in accordance
with the provisions of Section 5.09 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 state securities laws, in order to assure
compliance with the Securities Act and such state securities laws, the
Certificateholder desiring to effect such Transfer and such Certificateholder's
prospective transferee shall each certify to the Trustee in writing the facts
surrounding the Transfer in substantially the forms set forth in Exhibit J (the
"Transferor Certificate") and (i) deliver a letter in substantially the form of
either Exhibit K (the "Investment Letter") or Exhibit L (the "Rule 144A Letter")
or (ii) there shall be delivered to the Trustee at the expense of the
Certificateholder desiring to effect such transfer an Opinion of Counsel that
such Transfer may be made pursuant to an exemption from the Securities Act. The
Depositor shall provide to any Holder of a Private Certificate and any
prospective transferee designated by any such Holder, information regarding the
related Certificates and the Mortgage Loans and such other information as shall
be necessary to satisfy the condition to eligibility set

                                      110
<PAGE>

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 or a Subordinate
Certificate shall be made unless the Trustee shall have received either (i) a
representation from the transferee of such Certificate acceptable to and in form
and substance satisfactory to the Trustee (in the event such Certificate is a
Private Certificate that is a Definitive Certificate, such requirement is
satisfied only by the Trustee's receipt of a representation letter from the
transferee substantially in the form of Exhibit K or Exhibit L, or in the event
such Certificate is a Class A-R Certificate, such requirement is satisfied only
by the Trustee's receipt of a representation letter from the transferee
substantially in the form of Exhibit I), to the effect that such transferee is
not an employee benefit plan or arrangement subject to Section 406 of ERISA or a
plan or arrangement subject to Section 4975 of the Code, nor a Person acting on
behalf of any such plan or arrangement or using the assets of any such plan or
arrangement to effect such transfer, or (ii) in the case of the Subordinate
Certificates, a representation from the transferee of such Certificates that (A)
it has acquired and is holding such Certificate in reliance on the Underwriters'
Exemption and that it understands that there are certain conditions to the
availability of the Underwriters' Exemption, including that the Certificate must
be rated, at the time of purchase, not less than "BBB-" or its equivalent by one
of the Rating Agencies or (B) the purchaser is an insurance company which is
purchasing such Certificates with funds contained in an "insurance company
general account" (as such term is defined in Section V(e) of Prohibited
Transaction Class Exemption 95-60 ("PTCE 95-60")) and the conditions of Sections
I and III of PTCE 95-60 have been satisfied or (iii) in the case of the Class C
Certificates or the Class P Certificates if such Certificates have been offered
in a placement or underwriting which meets the requirements of the Underwriter's
Exemption, a representation that the purchaser is an insurance company which is
purchasing such Certificates with funds contained in or "insurance company
general account" (as such term is defined in Section V(e) of PTCE 95-60) and the
conditions of sections I and III of PTCE 95-60 have been satisfied, or in the
case of any ERISA-Restricted Certificate presented for registration in the name
of an employee benefit plan subject to ERISA, or a plan or arrangement subject
to Section 4975 of the Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other person acting on behalf
of any such plan or arrangement, or using such plan's or arrangement's assets,
an opinion of counsel satisfactory to the Trustee, for the benefit of the
Trustee, the Seller, the Depositor and the Master Servicer, and on which they
may rely, which opinion of counsel shall not be an expense of either the Trustee
or the Trust Fund, addressed to the Trustee to the effect that the purchase and
holding of such ERISA-Restricted Certificate is permissible under applicable
law, 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
Depositor, the Seller, the Master Servicer or Trustee to any obligation, or
liability

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(including liabilities or obligations under ERISA or Section 4975 of the Code)
in addition to those expressly undertaken in this Agreement or to any liability.
For purposes of the preceding sentence, with respect to an ERISA-Restricted
Certificate that is not a Book-Entry Certificate or a Class A-R Certificate, in
the event the representation letter referred to in the preceding sentence is not
so furnished, such representation shall be deemed to have been made to the
Trustee by the transferee's (including an initial acquiror's) acceptance of such
ERISA-Restricted Certificate. Notwithstanding anything else to the contrary
herein, any purported transfer of an ERISA-Restricted Certificate or a
Subordinate Certificate to or on behalf of an employee benefit plan subject to
ERISA or the Code other than as described above shall be void and of no effect.
Any purported beneficial owner whose acquisition or holding of the Certificate
or interest therein was effected in violation of the conditions described in
this paragraph shall indemnify and hold harmless the Depositor, the Trustee, the
Master Servicer, the Seller, any Subservicer and the Trust Fund from and against
any and all liabilities, claims, costs or expenses incurred by those parties as
a result of that acquisition or holding.

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

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

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

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

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

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

            (v) The Depositor shall use its best efforts to make available, upon
      receipt of written request from the Trustee, all information necessary to
      compute any tax imposed under Section 860E(e) of the Code as a result of a
      Transfer of an Ownership Interest in a Class A-R Certificate to any Holder
      who is not a Permitted Transferee.

      The restrictions on Transfers of a Class A-R Certificate set forth in this
Section 5.02(c) shall cease to apply (and the applicable portions of the legend
on a Class A-R Certificate may be deleted) with respect to Transfers occurring
after delivery to the Trustee of an Opinion of Counsel, which Opinion of Counsel
shall not be an expense of the Trust Fund, the Trustee, the Seller or the Master
Servicer, to the effect that the elimination of such restrictions will not cause
any REMIC hereunder to fail to qualify as a REMIC at any time that the
Certificates are outstanding or result in the imposition of any tax on the Trust
Fund, a Certificateholder or another Person. Each Person holding or acquiring
any Ownership Interest in a Class A-R Certificate hereby consents to any
amendment of this Agreement that, based on an Opinion of Counsel furnished to
the Trustee, is reasonably necessary (a) to ensure that the record ownership of,
or any beneficial interest in, a Class A-R 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 Class A-R 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 representation letters and
opinions referred to above in this Section 5.02 in connection with any Transfers
shall be at the expense of the parties to such Transfers.

      Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.

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      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 Master Servicer and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Trustee that such Certificate has been acquired by a bona fide purchaser,
the Trustee shall execute, 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 5.03, the Trustee may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Trustee) connected therewith. Any replacement Certificate issued
pursuant to this Section 5.03 shall constitute complete and indefeasible
evidence of ownership 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 5.03
shall be canceled and destroyed by the Trustee in accordance with its standard
procedures without liability on its part.

      Section 5.04 Persons Deemed Owners.

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

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

      If three or more Certificateholders and/or Certificate Owners (a) request
such information in writing from the Trustee, (b) state that such
Certificateholders and/or Certificate Owners desire to communicate with other
Certificateholders and/or Certificate Owners with respect to their rights under
this Agreement or under the Certificates, and (c) provide a copy of the
communication that such Certificateholders and/or Certificate Owners propose to
transmit or if the Depositor or Master Servicer shall request such information
in writing from the Trustee, then the Trustee shall, within ten Business Days
after the receipt of such request, provide the Depositor, the Master Servicer or
such Certificateholders and/or Certificate Owners at such recipients' expense
the most recent list of the Certificateholders and/or Certificate Owners of the
Trust Fund held by the Trustee, if any. The Depositor and every
Certificateholder or Certificate Owner, 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 5.06 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

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such Certificates will receive a definitive certificate representing such
Certificate Owner's interest in such Certificates, except as provided in Section
5.08. Unless and until definitive, fully registered Certificates ("Definitive
Certificates") have been issued to the Certificate Owners of such Certificates
pursuant to Section 5.08:

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

      (b) the Depositor, the Seller, the Master Servicer 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 5.08, 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 5.07 Notices to Depository.

      Whenever any notice or other communication is required to be given to
Certificateholders of the 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 5.08 Definitive Certificates.

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      If, after Book-Entry Certificates have been issued with respect to any
Certificates, (a) the Depositor 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 Trustee or the
Depositor is unable to locate a qualified successor or (b) 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 Certificate
Owners of such Class 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 authenticate 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 5.09 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 in New York City where Certificates may
be surrendered for registration of transfer or exchange. The Trustee initially
designates its offices at 101 Barclay Street, New York, New York 10286,
Attention: Corporate Trust MBS Administration, as offices for such purposes. The
Trustee will give prompt written notice to the Certificateholders of any change
in such location of any such office or agency.

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                                   ARTICLE VI

                THE DEPOSITOR, THE MASTER SERVICER AND THE SELLER

      Section 6.01 Respective Liabilities of the Depositor, the Master Servicer
                   and the Seller.

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

      Section 6.02 Merger or Consolidation of the Depositor, the Master Servicer
                   or the Seller.

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

      Any Person into which the Depositor, the Master Servicer or the Seller may
be merged or consolidated, or any Person resulting from any merger or
consolidation to which the Depositor, the Master Servicer or the Seller shall be
a party, or any person succeeding to the business of the Depositor, the Master
Servicer or the Seller, shall be the successor of the Depositor, the Master
Servicer or the Seller, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided that the successor or
surviving Person to the Master Servicer shall be qualified to service mortgage
loans on behalf of Fannie Mae or Freddie Mac.

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

      None of the Depositor, the Seller, the Master Servicer or any of the
directors, officers, employees or agents of the Depositor, the Seller or the
Master Servicer shall be under any liability to the Trust Fund or the
Certificateholders for any action taken or for refraining from the taking of any
action in good faith pursuant to this Agreement, or for errors in judgment;
provided that this provision shall not protect the Depositor, the Seller, the
Master Servicer or any such Person against any breach of representations or
warranties made by it herein or protect the Depositor, the Seller, the Master
Servicer or any such Person from any liability that would otherwise be imposed
by reasons of willful misfeasance, bad faith or gross negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Depositor, the Seller, the Master Servicer and any
director, officer, employee or agent of the Depositor, the Seller or the Master
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
The Depositor, the Seller, the Master Servicer and any director, officer,
employee or agent of the

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Depositor, the Seller or the Master Servicer shall be indemnified by the Trust
Fund and held harmless against any loss, liability or expense incurred in
connection with any audit, controversy or judicial proceeding relating to a
governmental taxing authority or any legal action relating to this Agreement or
the Certificates, other than any loss, liability or expense related to any
specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to this Agreement) and any
loss, liability or expense incurred by reason of willful misfeasance, bad faith
or gross negligence in the performance of duties hereunder or by reason of
reckless disregard of obligations and duties hereunder. None of the Depositor,
the Seller or the Master Servicer shall be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
duties hereunder and that in its opinion may involve it in any expense or
liability; provided that any of the Depositor, the Seller or the Master Servicer
may, in its discretion undertake any such action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
hereto and interests of the Trustee and the Certificateholders hereunder. In
such event, the legal expenses and costs of such action and any liability
resulting therefrom shall be, expenses, costs and liabilities of the Trust Fund,
and the Depositor, the Seller and the Master Servicer shall be entitled to be
reimbursed therefor out of the Certificate Account as provided by Section 3.08
hereof.

      Section 6.04 Limitation on Resignation of Master Servicer.

      The Master Servicer shall not resign from the obligations and duties
hereby imposed on it except upon determination that its duties hereunder are no
longer permissible under applicable law. Any such determination permitting the
resignation of the Master Servicer shall be evidenced by an Opinion of Counsel
to such effect delivered to the Trustee. No such resignation shall become
effective until the Trustee or a successor servicer to such appointment shall
have assumed the Master Servicer's responsibilities, duties, liabilities and
obligations hereunder.

      Section 6.05 Errors and Omissions Insurance; Fidelity Bonds.

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

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                                   ARTICLE VII

                     DEFAULT; TERMINATION OF MASTER SERVICER

      Section 7.01 Events of Default.

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

      (i) any failure by the Master Servicer to deposit in the Certificate
Account or the Distribution Account or remit to the Trustee any payment
(excluding a payment required to be made under Section 4.01 hereof) required to
be made under the terms of this Agreement, which failure shall continue
unremedied for five calendar days and, with respect to a payment required to be
made under Section 4.01 hereof, 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, the Seller 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 representation or warranty
shall prove to be untrue, 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 the Master Servicer by the Trustee or the Depositor, or to
the Trustee by the Holders of Certificates evidencing not less than 25% of the
Voting Rights evidenced by the Certificates; provided that the sixty-day cure
period shall not apply to the initial delivery of the Mortgage File for Delay
Delivery Mortgage Loans nor the failure to repurchase or substitute in lieu
thereof; 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;

      (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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      (vi) the Master Servicer shall fail to reimburse in full the Trustee not
later than 6:00 P.M., New York time on the Business Day following the related
Distribution Date for any Advance made by the Trustee pursuant to Section
4.01(b) together with accrued and unpaid interest.

      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
shall, but only at the direction of the Holders of Certificates evidencing not
less than 25% of the Voting Rights evidenced by the Certificates, by notice in
writing to the Master Servicer (with a copy to each Rating Agency), terminate
all of the rights and obligations of the Master Servicer under this Agreement
and in and to the Mortgage Loans and the proceeds thereof, other than its rights
as a Certificateholder hereunder. 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. The Trustee shall thereupon make any Advance
described in Section 4.01 hereof subject to Section 3.04 hereof. The Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. Unless expressly provided in such written
notice, no such termination shall affect any obligation of the Master Servicer
to pay amounts owed pursuant to Article VIII. The Master Servicer agrees to
cooperate with the Trustee in effecting the termination of the Master Servicer's
responsibilities and rights hereunder, including, without limitation, the
transfer to the Trustee of all cash amounts which shall at the time be credited
to the Certificate Account, or thereafter be received with respect to the
Mortgage Loans. The Trustee shall promptly notify the Rating Agencies of the
occurrence of an Event of Default.

      Notwithstanding any termination of the activities of a Master Servicer
hereunder, such 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 such Master Servicer's rights and obligations as Master
Servicer hereunder and received after such notice, that portion thereof to which
such Master Servicer would have been entitled pursuant to Sections 3.08(a)(i)
through (viii), and any other amounts payable to such Master Servicer hereunder
the entitlement to which arose prior to the termination of its activities
hereunder.

      Section 7.02 Trustee to Act; Appointment of Successor.

      On and after the time the Master Servicer receives a notice of termination
pursuant to Section 7.01 hereof, the Trustee shall, to the extent provided in
Section 3.04, be the successor to the Master Servicer in its capacity as
servicer under this Agreement and the transactions set forth or provided for
herein and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on the Master Servicer by the terms and provisions
hereof and applicable law including the obligation to make advances pursuant to
Section 4.01. As compensation therefor, the Trustee shall be entitled to all
fees, costs and expenses relating to the Mortgage Loans that the Master Servicer
would have been entitled to if the Master Servicer had continued to act
hereunder. Notwithstanding the foregoing, if the Trustee has become the
successor to the Master

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Servicer in accordance with Section 7.01 hereof, the Trustee may, if it shall be
unwilling to so act, or shall, if it is prohibited by applicable law from making
Advances pursuant to Section 4.01 hereof or if it is otherwise unable to so act,
appoint, or petition a court of competent jurisdiction to appoint, any
established mortgage loan servicing institution the appointment of which does
not adversely affect the then current rating of the Certificates by each Rating
Agency as the successor to the Master Servicer hereunder in the assumption of
all or any part of the responsibilities, duties or liabilities of the Master
Servicer hereunder. Any successor Master Servicer shall 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 that is willing to service the
Mortgage Loans and executes and delivers 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 liabilities of the Master
Servicer under Section 6.03 hereof incurred prior to termination of the Master
Servicer under Section 7.01), with like effect as if originally named as a party
to this Agreement; and provided further that each Rating Agency acknowledges
that its 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. No appointment of a successor to the Master Servicer
hereunder shall be effective until the Trustee shall have consented thereto, and
written notice of such proposed appointment shall have been provided by the
Trustee to each Certificateholder. The Trustee shall not resign as servicer
until a successor 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 3.04 hereof, act in such capacity as hereinabove provided. In
connection with such appointment and assumption, the Trustee may make such
arrangements for the compensation of such successor out of payments on Mortgage
Loans as it and such successor shall agree; provided that no such compensation
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 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.

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

      In connection with the termination or resignation of the Master Servicer
hereunder, either (i) the successor Master Servicer, including the Trustee if
the Trustee is acting as successor Master Servicer, shall represent and warrant
that it is a member of MERS in good standing and shall agree to comply in all
material respects with the rules and procedures of MERS in connection with the
servicing of the Mortgage Loans that are registered with MERS, or (ii) the
predecessor Master Servicer shall cooperate with the successor Master Servicer
in causing MERS to execute and deliver an assignment of Mortgage in recordable
form to transfer the Mortgage from MERS to the Trustee and to execute and
deliver such other notices, documents

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and other instruments as may be necessary or desirable to effect a transfer of
such Mortgage Loan or servicing of such Mortgage Loan on the MERS(R) System to
the successor Master Servicer. The predecessor Master Servicer shall file or
cause to be filed any such assignment in the appropriate recording office. The
successor Master Servicer shall cause such assignment to be delivered to the
Trustee or the Custodian promptly upon receipt of the original with evidence of
recording thereon or a copy certified by the public recording office in which
such assignment was recorded.

      Section 7.03 Notification to Certificateholders.

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

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

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                                  ARTICLE VIII

                             CONCERNING THE TRUSTEE

      Section 8.01 Duties of Trustee.

      The Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default that may have occurred, shall undertake to
perform such duties and only such duties as are specifically set forth in this
Agreement. In case an Event of Default has occurred and remains uncured, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.

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

      No provision of this Agreement shall be construed to relieve the Trustee
from liability for its own grossly negligent action, its own gross negligent
failure to act or its own misconduct, its grossly negligent failure to perform
its obligations in compliance with this Agreement, or any liability that would
be imposed by reason of its willful misfeasance or bad faith; provided that:

      (i) prior to the occurrence of an Event of Default, and after the curing
of all such Events of Default that 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, individually or as Trustee, except
for the performance of such duties and obligations as are specifically set forth
in this Agreement, no implied covenants or obligations shall be read into this
Agreement against the Trustee and the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trustee and conforming to the
requirements of this Agreement that it reasonably believed in good faith to be
genuine and to have been duly executed by the proper authorities respecting any
matters arising hereunder;

      (ii) the Trustee shall not be liable, individually or as Trustee, for an
error of judgment made in good faith by a Responsible Officer or Responsible
Officers of the Trustee, unless the Trustee was grossly negligent or acted in
bad faith or with willful misfeasance;

      (iii) the Trustee shall not be liable, individually or as Trustee, with
respect to any action taken, suffered or omitted to be taken by it in good faith
in accordance with the direction of Holders of each Class of Certificates
evidencing not less than 25% of the Voting Rights of such Class relating to the
time, method and place of conducting any proceeding for any remedy

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available to the Trustee, or exercising any trust or power conferred upon the
Trustee under this Agreement; and

      (vi) without in any way limiting the provisions of this Section 8.01 or
Section 8.02 hereof, the Trustee shall be entitled to rely conclusively on the
information delivered to it by the Master Servicer in a Trustee Advance Notice
in determining whether or not it is required to make an Advance under Section
4.01(b), shall have no responsibility to ascertain or confirm any information
contained in any Trustee Advance Notice, and shall have no obligation to make
any Advance under Section 4.01(b) in the absence of a Trustee Advance Notice or
actual knowledge of a Responsible Officer of the Trustee that (A) such Advance
was not made by the Master Servicer and (B) that such Advance is not a
Nonrecoverable Advance.

      Section 8.02 Certain Matters Affecting the Trustee.

      (a) Except as otherwise provided in Section 8.01:

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

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

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

            (iv) prior to the occurrence of an Event of Default hereunder and
      after the curing of all Events of Default that may have occurred, the
      Trustee shall not be bound to make any investigation into the facts or
      matters stated in any resolution, certificate, statement, instrument,
      opinion, report, notice, request, consent, order, approval, bond or other
      paper or document, unless requested in writing so to do by Holders of each
      Class of Certificates evidencing not less than 25% of the Voting Rights of
      such Class;

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

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

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            (vii) the Trustee shall not be liable, individually or as Trustee,
      for any loss on any investment of funds pursuant to this Agreement (other
      than in its commercial capacity as issuer of the investment security);

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

            (ix) the Trustee shall be under no obligation to exercise any of the
      trusts or powers vested in it by this Agreement or to make any
      investigation of matters arising hereunder 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 that may be incurred therein or thereby.

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

      Section 8.03 Trustee Not Liable for Mortgage Loans.

      The recitals contained herein shall be taken as the statements of the
Depositor or the Master Servicer, as the case may be, and the Trustee assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Agreement or of any Mortgage Loan or related
document or of MERS or the MERS(R) System other than with respect to the
Trustee's execution and authentication of the Certificates. The Trustee shall
not be accountable for the use or application by the Depositor or the Master
Servicer of any funds paid to the Depositor or the Master Servicer in respect of
the Mortgage Loans or deposited in or withdrawn from the Certificate Account by
the Depositor or the Master Servicer.

      Section 8.04 Trustee May Own Certificates.

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

      Section 8.05 Master Servicer to Pay Trustee's Fees and Expenses.

      The Master Servicer covenants and agrees to pay or reimburse the Trustee,
upon its request, for all reasonable expenses, disbursements and advances
incurred or made by the Trustee on behalf of the Trust Fund in accordance with
any of the provisions of this Agreement (including, without limitation: (A) the
reasonable compensation and the expenses and disbursements of its counsel, but
only for representation of the Trustee acting in its capacity as Trustee
hereunder and (B) to the extent that the Trustee must engage persons not
regularly in its employ to perform acts or services on behalf of the Trust Fund,
which acts or services are not in

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the ordinary course of the duties of a trustee, paying agent or certificate
registrar, in the absence of a breach or default by any party hereto, the
reasonable compensation, expenses and disbursements of such persons, except any
such expense, disbursement or advance as may arise from its negligence, bad
faith or willful misconduct). The Trustee and any director, officer, employee or
agent of the Trustee shall be indemnified by the Master Servicer and held
harmless against any loss, liability or expense (i) incurred in connection with
any legal action relating to this Agreement or the Certificates, or in
connection with the performance of any of the Trustee's duties hereunder, other
than any loss, liability or expense incurred by reason of willful misfeasance,
bad faith or negligence in the performance of any of the Trustee's duties
hereunder or by reason of reckless disregard of the Trustee's obligations and
duties hereunder and (ii) resulting from any error in any tax or information
return prepared by the Master Servicer. Such indemnity shall survive the
termination of this Agreement or the resignation or removal of the Trustee
hereunder.

      Section 8.06 Eligibility Requirements for Trustee.

      The Trustee hereunder shall, at all times, be a corporation or association
organized and doing business under the laws of a state or the United States of
America, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000, subject to supervision or
examination by federal or state authority and with a credit rating that would
not cause any of the Rating Agencies to reduce their respective ratings of any
Class of Certificates below the ratings issued on the Closing Date (or having
provided such security from time to time as is sufficient to avoid such
reduction). If such corporation or association publishes reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purposes of this Section 8.06
the combined capital and surplus of such corporation or association shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 8.06, the Trustee
shall resign immediately in the manner and with the effect specified in Section
8.07 hereof. The corporation or national banking association serving as Trustee
may have normal banking and trust relationships with the Depositor, the Seller
and the Master Servicer and their respective affiliates; provided that such
corporation cannot be an affiliate of the Master Servicer other than the Trustee
in its role as successor to the Master Servicer.

      Section 8.07 Resignation and Removal of Trustee.

      The Trustee may at any time resign and be discharged from the trusts
hereby created by (1) giving written notice of resignation to the Depositor and
the Master Servicer and by mailing notice of resignation by first class mail,
postage prepaid, to the Certificateholders at their addresses appearing on the
Certificate Register and each Rating Agency, not less than 60 days before the
date specified in such notice when, subject to Section 8.08, such resignation is
to take effect, and (2) acceptance of appointment by a successor trustee in
accordance with Section 8.08 and meeting the qualifications set forth in Section
8.06. If no successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice or

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resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.

      If at any time (i) the Trustee shall cease to be eligible in accordance
with the provisions of Section 8.06 hereof and shall fail to resign after
written request thereto by the Depositor, (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 triplicate, one copy of which instrument shall be delivered to
the Trustee, one copy of which shall be delivered to the Master Servicer and one
copy of which shall be delivered to 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 triplicate, signed by such Holders or
their attorneys-in-fact duly authorized, one complete set of which instruments
shall be delivered by the successor Trustee to the Master Servicer one complete
set to the Trustee so removed and one complete set to the successor so
appointed. Notice of any removal of the Trustee shall be given to each Rating
Agency by the Successor Trustee.

      Any resignation or removal of the Trustee and appointment of a successor
trustee pursuant to any of the provisions of this Section 8.07 shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.08 hereof.

      Section 8.08 Successor Trustee.

      Any successor trustee appointed as provided in Section 8.07 hereof shall
execute, acknowledge and deliver to the Depositor, its predecessor trustee and
the Master Servicer 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
8.08 unless at the time of such acceptance such successor trustee shall be
eligible under the provisions of Section 8.06 hereof and its appointment shall
not adversely affect the then current rating of the Certificates.

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

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appointment by the successor trustee, the successor trustee shall cause such
notice to be mailed at the expense of the Depositor.

      Section 8.09 Merger or Consolidation of Trustee.

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

      Section 8.10 Appointment of Co-Trustee or Separate Trustee.

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

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

      (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 as Trustee hereunder or as
successor to the Master Servicer hereunder), the Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the 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 VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee and a copy thereof given to the
Master Servicer and the Depositor.

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

      Section 8.11 Tax Matters.

      It is intended that the Trust Fund shall constitute, and that the affairs
of the Trust Fund shall be conducted so that each of REMIC I and REMIC II will
qualify 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 and that in such
capacity it shall: (a) prepare and file, or cause to be prepared and filed, in a
timely manner, a U.S. Real Estate Mortgage Investment Conduit Income Tax 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 REMIC created hereunder
containing such information and at the times and in the manner as may be
required by the Code or state or local tax laws, regulations, or rules, and
furnish or cause to be furnished to Certificateholders the schedules, statements
or information at such times and in such manner as may be required thereby; (b)
within thirty days of the Closing Date, furnish or cause to be furnished to the
Internal Revenue Service, on Forms 8811 or as otherwise may be required by the
Code, the name, title, address, and telephone number of the person that the
holders of the Certificates may contact for tax information relating thereto,
together with such additional information as may be required by such Form, and
update such information at the time or times in the manner required by the Code
for the Trust Fund; (c) make or cause to be made elections, on behalf of each
REMIC created hereunder to be treated as a REMIC on the federal tax return

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of each such REMIC for its first taxable year (and, if necessary, under
applicable state law); (d) prepare and forward, or cause to be prepared and
forwarded, to the Certificateholders and to the Internal Revenue Service and, if
necessary, state tax authorities, all information returns and reports as and
when required to be provided to them in accordance with the REMIC Provisions,
including without limitation, the calculation of any original issue discount
using the Prepayment Assumption; (e) provide information necessary for the
computation of tax imposed on the transfer of a Class A-R Certificate to a
Person that is not a Permitted Transferee, or an agent (including a broker,
nominee or other middleman) of a Non-Permitted Transferee, or a pass-through
entity in which a Non-Permitted Transferee is the record holder of an interest
(the reasonable cost of computing and furnishing such information may be charged
to the Person liable for such tax); (f) to the extent that they are under its
control conduct the affairs of the Trust Fund at all times that any Certificates
are outstanding so as to maintain the status of each REMIC created hereunder as
a REMIC under the REMIC Provisions; (g) not knowingly or intentionally take any
action or omit to take any action that would cause the termination of the REMIC
status of any REMIC created hereunder; (h) pay, from the sources specified in
the last paragraph of this Section 8.11, the amount of any federal, state and
local taxes, including prohibited transaction taxes as described below, imposed
on any REMIC created 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) sign or cause to be signed federal, state or local income tax
or information returns; (j) maintain records relating to each REMIC created
hereunder, including but not limited to the income, expenses, assets and
liabilities of each such REMIC, and the fair market value 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; and (k) as and when necessary and appropriate,
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 created 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 any REMIC created 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
Trustee for any losses, liabilities, damages, claims or expenses of the Trustee
arising from any errors, omissions 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.

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      In the event that any tax is imposed on "prohibited transactions" of the
Trust Fund 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 the Trust Fund 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 the
Trust Fund pursuant to Sections 23153 and 24872 of the California Revenue and
Taxation Code if not paid as otherwise provided for herein, such tax shall be
paid by (i) the Trustee, if any such other tax arises out of or results from a
breach by the Trustee of any of its obligations under this Agreement, (ii) (x)
the Master Servicer, in the case of any such minimum tax, and (y) 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 here 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 A-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 (pro rata), second, to the Class M-5
Certificates (pro rata), third, to the Class M-4 Certificates (pro rata),
fourth, to the Class M-3 Certificates (pro rata), fifth, to the Class M-2
Certificates (pro rata), sixth, to the Class M-1 Certificates (pro rata), and
seventh, to the Class 1-A Certificates and Class 2-A Certificates (pro rata).
Notwithstanding anything to the contrary contained herein, to the extent that
such tax is payable by the Class A-R Certificates, the Trustee is hereby
authorized to retain on any Distribution Date, from the Holders of the Class A-R
Certificates (and, if necessary, second, from the Holders of the all 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 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 shall treat the rights of the Class 1-A, Class 2-A, Class M-1,
Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 and
Class B Certificateholders to receive payments from the Carryover Reserve Fund
as rights in an interest rate cap contracts written by the Corridor Contract
Counterparty with respect to the Net Rate Carryover funded by the Corridor
Contracts and Excess Cashflow, in favor of the Certificateholders (other than
the Holders of the Class A-R, Class C and Class P Certificates). Thus, each
Certificate (other than the Class A-R, Class C and Class P Certificates) shall
be treated as representing ownership of not only REMIC II Regular Interests, but
also ownership of an interest in an interest rate cap contract. For purposes of
determining the issue price of the REMIC II Regular Interests, the Trustee shall
assume that the Class I-A Corridor Contract, the Class 2-A Corridor Contract and
Subordinated Corridor Contract have values of $126,414, $48,808 and $50,918
respectively.

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                                   ARTICLE IX

                                   TERMINATION

      Section 9.01 Termination upon Liquidation or Repurchase of all Mortgage
Loans.

      Subject to Section 9.03, the Trust Fund shall terminate and the
obligations and responsibilities of the Depositor, the Master Servicer, the
Seller and the Trustee created hereby 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 the price equal to the sum of (i)
100% of the Stated Principal Balance of each Mortgage Loan plus one month's
accrued interest thereon at the applicable Mortgage Rate less the Servicing Fee
Rate, (ii) the lesser of (x) the appraised value of any REO Property as
determined by the higher of two appraisals completed by two independent
appraisers selected by the Master Servicer at the expense of the Master Servicer
and (y) the Stated Principal Balance of each Mortgage Loan related to any REO
Property and (iii) any remaining unpaid costs and damages incurred by the Trust
Fund that arises out of a violation of any predatory or abusive lending law that
also constitutes an actual breach of representation (xxxiv) of Section 2.03
hereof 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. In no event shall the trusts created hereby continue beyond the
earlier of (i) the expiration of 21 years from the death of the survivor of the
descendants of Joseph P. Kennedy, the late Ambassador of the United States to
the Court of St. James', living on the date hereof and (ii) the Latest Possible
Maturity Date.

      The right to purchase all Mortgage Loans and REO Properties by the Master
Servicer (the party exercising such purchase option, the "Terminator") pursuant
to clause (a) above shall be conditioned upon the Stated Principal Balance of
the Mortgage Loans at the time of any such repurchase, aggregating ten percent
(10%) or less of the aggregate Stated Principal Balance of the Mortgage Loans as
of the Cut-off Date.

      Section 9.02 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 Certificate Account, the Master Servicer
shall direct the Trustee to send a final distribution notice promptly to 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 related 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 Corporate Trust Office of the Trustee. If the Master Servicer elects to
terminate the Trust Fund pursuant to clause (a) of Section 9.01, at least 5 days
prior to the date

                                      132
<PAGE>

notice is to be mailed to the Certificateholders, such electing party shall
notify the Depositor and the Trustee of the date such electing party intends to
terminate the Trust Fund and of the applicable repurchase price of the related
Mortgage Loans and REO Properties.

      Notice of any termination of the Trust Fund, specifying the Distribution
Date on which related Certificateholders may surrender their Certificates for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to related Certificateholders mailed not earlier than the
10th day and no later than the 15th day of the month of such final distribution.
Any such notice shall specify (a) the Distribution Date upon which final
distribution on related Certificates will be made upon presentation and
surrender of such 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 such Certificates at the
office therein specified. The Master Servicer will give such notice to each
Rating Agency at the time such notice is given to the affected
Certificateholders.

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

      Upon presentation and surrender of the related Certificates, the Trustee
shall cause to be distributed to Certificateholders of each affected Class the
amounts allocable to such Certificates held in the Distribution Account (and, if
applicable, the Carryover Reserve Fund) in the order and priority set forth in
Section 4.04 hereof on the final Distribution Date and in proportion to their
respective Percentage Interests.

      In the event that any affected Certificateholders shall not surrender
related 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 related
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 related Certificates shall not have been surrendered for
cancellation, the Class A-R Certificates shall be entitled to all unclaimed
funds and other assets that remain subject hereto.

      Section 9.03 Additional Termination Requirements.

      (a) In the event the Master Servicer exercises its purchase option on the
Mortgage Loans, the Trust Fund shall be terminated in accordance with the
following additional requirements, unless the Trustee has been supplied with an
Opinion of Counsel, at the expense of

                                      133
<PAGE>

the Master Servicer, to the effect that the failure of the Trust Fund to comply
with the requirements of this Section 9.03 will not (i) result in the imposition
of taxes on "prohibited transactions" of a REMIC, or (ii) cause any REMIC
created hereunder 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, which shall in turn specify the first day of such
period in a statement attached to the Trust Fund's final Tax Return pursuant to
Treasury Regulation Section 1.860F 1. The Master Servicer shall prepare a plan
of complete liquidation and shall otherwise 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;

      (2) During such 90 day liquidation period, and at or prior to the time of
making the final payment on the Certificates, the Master Servicer as agent of
the Trustee shall sell all of the assets of the Trust Fund 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 Class A-R Certificateholders all cash on hand (other than cash retained
to meet claims) related to such Class of Certificates, and the Trust Fund shall
terminate at that time.

      (b) By their acceptance of the Certificates, the Holders thereof hereby
authorize the Master Servicer to specify the 90 day liquidation period for the
Trust Fund, which authorization shall be binding upon all successor
Certificateholders.

      (c) The Trustee as agent for each REMIC created hereunder hereby agrees to
adopt and sign such a plan of complete liquidation upon the written request of
the Master Servicer, and, together with the holders of the Class A-R
Certificates, agree to take such other action in connection therewith as may be
reasonably requested by the Master Servicer.

                                       134
<PAGE>

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

      Section 10.01 Amendment.

      This Agreement may be amended from time to time by the Depositor, the
Master Servicer, the Seller and the Trustee, without the consent of any of the
Certificateholders to cure any ambiguity, to correct or supplement any
provisions herein, 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 or to give effect to the expectations of the investors
if such action shall not, as evidenced by an Opinion of Counsel, 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, it being understood and agreed that any such letter in and of
itself will not represent a determination as to the materiality of any such
amendment and will represent a determination only as to the credit issues
affecting any such rating. Notwithstanding the foregoing, no amendment that
significantly changes the permitted activities of the trust created by this
Agreement may be made without the consent of Certificateholders representing not
less than 51% of the Voting Rights of each Class of Certificates affected by
such amendment.

      The Trustee, the Depositor, the Master Servicer and the Seller may also at
any time and from time to time amend this Agreement, without the consent of the
Certificateholders, to modify, eliminate or add to any of its provisions to such
extent as shall be necessary or appropriate to maintain the qualification of the
Trust Fund as a REMIC under the Code or to avoid or minimize the risk of the
imposition of any tax on the Trust Fund pursuant to the Code that would be a
claim against the Trust Fund at any time prior to the final redemption of the
Certificates, provided that the Trustee have been provided an Opinion of
Counsel, which opinion shall be an expense of the party requesting such opinion
but in any case shall not be an expense of the Trustee, 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 Depositor, the
Master Servicer, the Seller and the Trustee and the Holders of each Class of
Certificates adversely affected thereby evidencing not less than a majority
Percentage Interest of the Voting Rights of such Class 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 pursuant to this paragraph shall
(i) reduce in any manner the amount of, or delay the timing of, payments
required to be distributed on any Certificate without the consent of the Holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the Holders of any Class of Certificates in a manner other than as

                                      135
<PAGE>

described in (i), without the consent of the Holders of Certificates of such
Class evidencing 66% or more of the Voting Rights of such Class, or (iii) reduce
the aforesaid percentages of Certificates the Holders of which are required to
consent to any such amendment without the consent of the Holders of all such
Certificates then outstanding.

      Notwithstanding any contrary provision of this Agreement, the Trustee
shall not consent to any amendment to this Agreement unless it shall have first
received an Opinion of Counsel, 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 cause the imposition of any
tax on the Trust Fund or the Certificateholders or cause the Trust Fund to fail
to qualify as a REMIC at any time that any Certificates are outstanding.

      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.

      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 have been complied with; and
(ii) either (A) the amendment does not adversely affect in any material respect
the interests of any Certificateholder or (B) the conclusion set forth in the
immediately preceding clause (A) is not required to be reached pursuant to this
Section 10.01.

      Section 10.02 Recordation of Agreement; Counterparts.

      This Agreement is subject to recordation in all appropriate public offices
for real property records in all the counties or other comparable jurisdictions
in which any or all of the properties subject to the Mortgages are situated, and
in any other appropriate public recording office or elsewhere, such recordation
to be effected by the Master Servicer at its expense.

      For the purpose of facilitating the recordation of this Agreement as
herein provided and for other purposes, this Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and such counterparts shall constitute but one and
the same instrument.

      Section 10.03 Governing Law.

      THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO
BE PERFORMED IN THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES

                                      136
<PAGE>

HERETO AND THE CERTIFICATEHOLDERS SHALL BE DETERMINED IN ACCORDANCE WITH SUCH
LAWS WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF.

      Section 10.04 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 Depositor to
the Trustee be, and be construed as, an absolute sale thereof to the Trustee. It
is, further, not the intention of the parties that such conveyance be deemed a
pledge thereof by the Depositor to the Trustee. However, in the event that,
notwithstanding the intent of the parties, such assets are held to be the
property of the Depositor, or if for any other reason this Agreement is held or
deemed to create a security interest in such assets, then (i) this Agreement
shall be deemed to be a security agreement (within the meaning of the Uniform
Commercial Code of the State of New York) with respect to all such assets and
security interests and (ii) the conveyance provided for in this Agreement shall
be deemed to be an assignment and a grant pursuant to the terms of this
Agreement by the Depositor to the Trustee, for the benefit of the
Certificateholders, of a security interest in all of the assets that constitute
the Trust Fund, whether now owned or hereafter acquired.

      The Depositor for the benefit of the Certificateholders shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in the
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. The Depositor shall
arrange for filing any Uniform Commercial Code continuation statements in
connection with any security interest granted or assigned to the Trustee for the
benefit of the Certificateholders.

      Section 10.05 Notices.

      (a) The Trustee shall use its best efforts to promptly provide notice to
each Rating Agency with respect to each of the following of which it has actual
knowledge:

            (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, 2.04 and 3.12; and

            (v) The final payment to Certificateholders.

                                      137
<PAGE>

      In addition, the Trustee shall promptly furnish to each Rating Agency
copies of the following:

            (i) Each report to Certificateholders described in Section 4.05;

            (ii) Each annual statement as to compliance described in Section
      3.17; and

            (iii) Each annual independent public accountants' servicing report
      described in Section 3.18.

      (b) All directions, demands and notices hereunder shall be in writing and
shall be deemed to have been duly given when sent by facsimile transmission,
first class mail or delivered to (i) in the case of the Depositor, CWABS, Inc.,
4500 Park Granada, Calabasas, California 91302, Attention: Josh Adler, with a
copy to the same address, Attention: Legal Department; (ii) in the case of the
Seller, Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas, California
91302, Attention: Josh Adler, with a copy to the same address, Attention: Legal
Department, or such other address as may be hereafter furnished to the Depositor
and the Trustee by the Master Servicer in writing; (iii) in the case of the
Master Servicer, Countrywide Home Loans Servicing LP, 400 Countrywide Way, Simi
Valley, California 93065, Attention: Mark Wong or such other address as may be
hereafter furnished to the Depositor and the Trustee by the Master Servicer in
writing; (iv) in the case of the Trustee, The Bank of New York, 101 Barclay
Street, New York, New York 10286 Attention: Corporate Trust MBS Administration,
CWABS, Series 2004-BC3, or such other address as the Trustee may hereafter
furnish to the Depositor or the Master Servicer; and (v) in the case of the
Rating Agencies, (y) Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., Attention: Mortgage Surveillance Group, 25
Broadway, 12th Floor, New York, New York 10004, and (z) Moody's Investors
Service, Inc., Residential Mortgage Monitoring Department, 99 Church Street, New
York, New York 10007, or such other address as may hereinafter be furnished to
the Depositor in writing by Moody's. Notices to Certificateholders shall be
deemed given when mailed, first class postage prepaid, to their respective
addresses appearing in the Certificate Register.

      Section 10.06 Severability of Provisions.

      If any one or more of the covenants, agreements, provisions or terms of
this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions or terms shall be deemed severable from the
remaining covenants, agreements, provisions or terms of this Agreement and shall
in no way affect the validity or enforceability of the other provisions of this
Agreement or of the Certificates or the rights of the Holders thereof.

      Section 10.07 Assignment.

      Notwithstanding anything to the contrary contained herein, except as
provided pursuant to Section 6.02, this Agreement may not be assigned by the
Master Servicer without the prior written consent of the Trustee and the
Depositor.

      Section 10.08 Limitation on Rights of Certificateholders

                                      138
<PAGE>

      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 enforcement of
the provisions of this Section 10.08, each and every Certificateholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.

      Section 10.09 Inspection and Audit Rights.

      The Master Servicer agrees that, on reasonable prior notice, it will
permit any representative of the Depositor, the Seller 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,
the Seller or the Trustee and to discuss its affairs, finances and accounts
relating to the Mortgage Loans with its officers, employees and independent
public accountants (and by this provision the Master Servicer hereby authorizes
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 Seller or the

                                      139
<PAGE>

Trustee of any right under this Section 10.09 shall be borne by the party
requesting such inspection; all other such expenses shall be borne by the Master
Servicer.

      Section 10.10 Certificates Nonassessable and Fully Paid.

      It is the intention of the Depositor that Certificateholders shall not be
personally liable for obligations of the Trust Fund, that the interests in the
Trust Fund represented by the Certificates shall be nonassessable for any reason
whatsoever, and that the Certificates, upon due authentication thereof by the
Trustee pursuant to this Agreement, are and shall be deemed fully paid.

                                  *     *     *

                                      140
<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.

                                    CWABS, INC.,
                                    as Depositor

                                    By:
                                       -----------------------------------------
                                    Name:  Ruben Avilez
                                    Title: Vice President

                                    COUNTRYWIDE HOME LOANS, INC.,
                                    as Seller

                                    By:
                                       -----------------------------------------
                                    Name:   Michael Schloessmann
                                    Title:  Vice President

                                    COUNTRYWIDE HOME LOANS
                                    SERVICING LP,
                                    as Master Servicer

                                    By:   COUNTRYWIDE GP, INC.

                                    By:
                                       -----------------------------------------
                                    Name:  Ruben Avilez
                                    Title: Senior Vice President

                                    THE BANK OF NEW YORK,
                                    not in its individual capacity,
                                    but solely as Trustee

                                    By:
                                       -----------------------------------------
                                    Name:  Courtney A. Bartholomew
                                    Title: Vice President

                                      141
<PAGE>

THE BANK OF NEW YORK

(solely with respect to its obligations under Section 4.01(b))

By:____________________________

Name:
Title:

                                      142
<PAGE>

STATE OF CALIFORNIA     )
                        ) ss.:
COUNTY OF LOS ANGELES   )

      On this 30th day of July, 2004, before me, a notary public in and for said
State, appeared Michael Schloessmann, personally known to me on the basis of
satisfactory evidence to be a Vice President of Countrywide Home Loans, 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]

                                      143
<PAGE>

STATE OF CALIFORNIA     )
                        ) ss.:
COUNTY OF LOS ANGELES   )

      On this 30th day of July, 2004, before me, a notary public in and for said
State, appeared Ruben Avilez, personally known to me on the basis of
satisfactory evidence to be a Senior Vice President of Countrywide GP, Inc., the
general partner of Countrywide Home Loans Servicing LP, one of the organizations
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]

                                      144
<PAGE>

STATE OF CALIFORNIA     )
                        ) ss.:
COUNTY OF LOS ANGELES   )

      On this 30th day of July, 2004, before me, a notary public in and for said
State, appeared Ruben Avilez, personally known to me on the basis of
satisfactory evidence to be a Vice President of CWABS, 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]

                                      145
<PAGE>

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

      On this 30th day of July, 2004, before me, a notary public in and for said
State, appeared Courtney A. Bartholomew, personally known to me on the basis of
satisfactory evidence to be a Vice President of The Bank of New York, a New York
banking corporation 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]

                                      146
<PAGE>

                                                                     Exhibit A-1

                          Exhibit A-1 is a photocopy
                       of the Class 1-A Certificate as
                                  delivered.

               [See appropriate documents delivered at closing]

                                      A-1
<PAGE>

                                                                     Exhibit A-2

                           Exhibit A-2 is a photocopy
                          of the Class 2-A Certificate
                                  as delivered.

                [See appropriate documents delivered at closing.]

                                      A-2
<PAGE>

                                                                     Exhibit A-3

                           Exhibit A-3 is a photocopy
                         of the Class M-1 Certificate as
                                   delivered.

                [See appropriate documents delivered at closing]

                                      A-3
<PAGE>

                                                                     Exhibit A-4

                           Exhibit A-4 is a photocopy
                          of the Class M-2 Certificates
                                  as delivered.

                [See appropriate documents delivered at closing.]

                                      A-4
<PAGE>

                                                                     Exhibit A-5

                           Exhibit A-5 is a photocopy
                          of the Class M-3 Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      A-5
<PAGE>

                                                                     Exhibit A-6

                           Exhibit A-6 is a photocopy
                          of the Class M-4 Certificates
                                  as delivered.

                [See appropriate documents delivered at closing.]

                                      A-6
<PAGE>

                                                                     Exhibit A-7

                           Exhibit A-7 is a photocopy
                          of the Class M-5 Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      A-7
<PAGE>

                                                                     Exhibit A-8

                           Exhibit A-8 is a photocopy
                          of the Class M-6 Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      A-8
<PAGE>

                                                                     Exhibit A-9

                           Exhibit A-9 is a photocopy
                          of the Class M-7 Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      A-9
<PAGE>

                                                                    Exhibit A-10

                           Exhibit A-10 is a photocopy
                          of the Class M-8 Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      A-10
<PAGE>

                                                                    Exhibit A-11

                           Exhibit A-11 is a photocopy
                           of the Class B Certificates
                                  as delivered.

                [See appropriate documents delivered at closing.]

                [See appropriate documents delivered at closing]

                                      A-11
<PAGE>

                                                                       Exhibit B

                            Exhibit B is a photocopy
                           of the Class C Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                       B-1
<PAGE>

                                                                       Exhibit C

                            Exhibit C is a photocopy
                           of the Class P Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                       C-1
<PAGE>

                                                                     Exhibit D-1

                           Exhibit D-1 is a photocopy
                          of the Class A-R Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      D-1
<PAGE>

                                                                       Exhibit E

                            Exhibit E is a photocopy
                      of the Tax Matters Person Certificate
                                  as delivered.

                [See appropriate documents delivered at closing]

                                      E-1
<PAGE>

                                                             Exhibit F-1 and F-2

               Exhibit F-1 and F-2 are schedules of Mortgage Loans

         [Delivered to Trustee at closing and on file with the Trustee]

                                  F-1 and F-2

<PAGE>
                                   EXHIBIT G-1

                    FORM OF INITIAL CERTIFICATION OF TRUSTEE

                                     [Date]

[Depositor]

[Seller]

[Master Servicer]

                  Re:   Pooling and Servicing Agreement, dated as of July 1,
                        2004, among CWABS, Inc., as Depositor, Countrywide Home
                        Loans, Inc., as Seller, Countrywide Home Loans Servicing
                        LP, as Master Servicer and The Bank of New York, as
                        Trustee, relating to the Asset-Backed Certificates,
                        Series 2004-BC3
                        --------------------------------------------------------

Gentlemen:

      In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee (the "Trustee"), hereby
certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule
(other than any Mortgage Loan paid in full or listed on the attachment hereto)
it has reviewed the Mortgage File and the Mortgage Loan Schedule and has
determined that: (i) all documents required to be included in the Mortgage File
are in its possession; (ii) such documents have been reviewed by it and appear
regular on their face and relate to such Mortgage Loan; and (iii) based on
examination by it, and only as to such documents, the information set forth in
items (i), (ii), (iii) and (iv) of the definition or description of "Mortgage
Loan Schedule" is correct.

      The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representation that any documents specified in clause (vi) of Section 2.01
should be included in any Mortgage File. The Trustee makes no representations as
to and shall not be responsible to verify: (i) the validity, legality,
sufficiency, enforceability, due authorization, recordability or genuineness of
any of the documents contained in each Mortgage File of any of the Mortgage
Loans identified on the Mortgage Loan Schedule, (ii) the collectability,
insurability, effectiveness or suitability of any such Mortgage Loan, or (iii)
the existence of any assumption, modification, written assurance or substitution
agreement with respect to any Mortgage File if no such documents appear in the
Mortgage File delivered to the Trustee.

                                     G-1-1
<PAGE>

      Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                       The Bank of New York,
                                         as Trustee

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

                                     G-1-2
<PAGE>

                                   EXHIBIT G-2

                    FORM OF INTERIM CERTIFICATION OF TRUSTEE

                                     [Date]

[Depositor]

[Seller]

[Master Servicer]

            Re:   Pooling and Servicing Agreement, dated as of July 1, 2004,
                  among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc.,
                  as Seller, Countrywide Home Loans Servicing LP, as Master
                  Servicer and The Bank of New York, as Trustee, relating to the
                  Asset-Backed Certificates, Series 2004-BC3
                  --------------------------------------------------------------

Gentlemen:

      In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that, except
as listed in the following paragraph, as to each Mortgage Loan listed in the
Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on
the attached list of exceptions) the Trustee has received:

      (i)   the original Mortgage Note, endorsed by the Seller or the originator
            of such Mortgage Loan, without recourse in the following form: "Pay
            to the order of _______________ without recourse", with all
            intervening endorsements that show a complete chain of endorsement
            from the originator to the Seller, or, if the original Mortgage Note
            has been lost or destroyed and not replaced, an original lost note
            affidavit from the Seller, stating that the original Mortgage Note
            was lost or destroyed, together with a copy of the related Mortgage
            Note;

      (ii)  in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
            the original recorded Mortgage, and in the case of each Mortgage
            Loan that is a MERS Mortgage Loan, the original Mortgage, noting
            thereon the presence of the MIN of the Mortgage Loan and language
            indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan
            is a MOM Loan, with evidence of recording indicated thereon, or a
            copy of the Mortgage certified by the public recording office in
            which such Mortgage has been recorded;

      (iii) in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
            a duly executed assignment of the Mortgage to "Asset-Backed
            Certificates, Series 2004-

                                     G-2-1
<PAGE>

            BC3, CWABS, Inc., by The Bank of New York, a New York banking
            corporation, as trustee under the Pooling and Servicing Agreement,
            dated as of July 1, 2004, without recourse", or, in the case of each
            Mortgage Loan with respect to property located in the State of
            California that is not a MERS Mortgage Loan, a duly executed
            assignment of the Mortgage in blank (each such assignment, when duly
            and validly completed, to be in recordable form and sufficient to
            effect the assignment of and transfer to the assignee thereof, under
            the Mortgage to which such assignment relates);

      (iv)  the original recorded assignment or assignments of the Mortgage
            together with all interim recorded assignments of such Mortgage
            [(noting the presence of a MIN in the case of each MERS Mortgage
            Loan)];

      (v)   the original or copies of each assumption, modification, written
            assurance or substitution agreement, if any, with evidence of
            recording thereon if recordation thereof is permissible under
            applicable law; and

      (vi)  the original or duplicate original lender's title policy or a
            printout of the electronic equivalent and all riders thereto or, in
            the event such original title policy has not been received from the
            insurer, any one of an original title binder, an original
            preliminary title report or an original title commitment, or a copy
            thereof certified by the title company, with the original policy of
            title insurance to be delivered within one year of the Closing Date.

      In the event that in connection with any Mortgage Loan that is not a MERS
Mortgage Loan the Seller cannot deliver the original recorded Mortgage or all
interim recorded assignments of the Mortgage satisfying the requirements of
clause (ii), (iii) or (iv), as applicable, the Trustee has received, in lieu
thereof, a true and complete copy of such Mortgage and/or such assignment or
assignments of the Mortgage, as applicable, each certified by the Seller, the
applicable title company, escrow agent or attorney, or the originator of such
Mortgage Loan, as the case may be, to be a true and complete copy of the
original Mortgage or assignment of Mortgage submitted for recording.

      Based on its review and examination and only as to the foregoing
documents, (i) such documents appear regular on their face and related to such
Mortgage Loan, and (ii) the information set forth in items (i), (iv), (v), (vi),
(viii), (xi) and (xiv) of the definition of the "Mortgage Loan Schedule" in
Section 1.01 of the Pooling and Servicing Agreement accurately reflects
information set forth in the Mortgage File.

      The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loan identified on the Mortgage Loan Schedule or (ii) the
collectibility, insurability, effectiveness or suitability of any such Mortgage
Loan.

                                     G-2-2
<PAGE>

      Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                    The Bank of New York,
                                       as Trustee

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

                                     G-2-3
<PAGE>

                                   EXHIBIT G-3

                      FORM OF DELAY DELIVERY CERTIFICATION
                                     [Date]

[Depositor]

[Seller]

[Master Servicer]

                  Re:   Pooling and Servicing Agreement, dated as of July 1,
                        2004 (the "Pooling and Servicing Agreement"), among
                        CWABS, Inc., as Depositor, Countrywide Home Loans, Inc.,
                        as Seller, Countrywide Home Loans Servicing LP, as
                        Master Servicer and The Bank of New York, as Trustee,
                        relating to the Asset-Backed Certificates, Series
                        2004-BC3
                        --------------------------------------------------------

Gentlemen:

      Reference is made to the Initial Certification of Trustee relating to the
above-referenced series, with the schedule of exceptions attached thereto,
delivered by the undersigned, as Trustee, on the Closing Date in accordance with
Section 2.02 of the above-captioned Pooling and Servicing Agreement. The
undersigned hereby certifies that as to each Delay Delivery Mortgage Loan listed
on the Schedule A attached hereto (other than any Mortgage Loan paid in full or
listed on Schedule B attached hereto) the Trustee has received:

      (i)   the original Mortgage Note, endorsed by the Seller or the originator
            of such Mortgage Loan, without recourse in the following form: "Pay
            to the order of _______________ without recourse", with all
            intervening endorsements that show a complete chain of endorsement
            from the originator to the Seller, or, if the original Mortgage Note
            has been lost or destroyed and not replaced, an original lost note
            affidavit from the Seller, stating that the original Mortgage Note
            was lost or destroyed, together with a copy of the related Mortgage
            Note; and

      (ii)  in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
            a duly executed assignment of the Mortgage to "Asset-Backed
            Certificates, Series 2004-BC3, CWABS, Inc., by The Bank of New York,
            a New York banking corporation, as trustee under the Pooling and
            Servicing Agreement, dated as of July 1, 2004, without recourse",
            or, in the case of each Mortgage Loan with respect to property
            located in the State of California that is not a MERS Mortgage Loan,
            a duly executed assignment of the Mortgage in blank (each such
            assignment, when duly and validly completed, to be in recordable
            form and

                                     G-3-1
<PAGE>

            sufficient to effect the assignment of and transfer to the assignee
            thereof, under the Mortgage to which such assignment relates).

      Based on its review and examination and only as to the foregoing
documents, such documents appear regular on their face and related to such
Mortgage Loan.

      The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loan identified on the Mortgage Loan Schedule or (ii) the
collectibility, insurability, effectiveness or suitability of any such Mortgage
Loan.

      Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                    THE BANK OF NEW YORK,
                                    as Trustee

                                    By:______________________
                                    Name:
                                    Title:

                                     G-3-2
<PAGE>

                                   EXHIBIT G-4

                                   [RESERVED]

                                      G-4
<PAGE>

                                  EXHIBIT H

                    FORM OF FINAL CERTIFICATION OF TRUSTEE

                                    [Date]

[Depositor]

[Master Servicer]

[Seller]

Re:   Pooling and Servicing Agreement, dated as of July 1, 2004 (the "Pooling
      and Servicing Agreement"), among CWABS, Inc., as Depositor, Countrywide
      Home Loans, Inc., as Seller, Countrywide Home Loans Servicing LP, as
      Master Servicer and The Bank of New York, as Trustee, relating to the
      Asset-Backed Certificates, Series 2004-BC3

Gentlemen:

      In accordance with Section 2.02 of the above-captioned Pooling and
Servicing Agreement, the undersigned, as Trustee, hereby certifies that as to
each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage
Loan paid in full or listed on the attached Document Exception Report) the
Trustee has received:

      (i)   the  original  Mortgage  Note,  endorsed  by  the  Seller  or  the
            originator  of  such  Mortgage  Loan,   without  recourse  in  the
            following  form:  "Pay to the order of  _________________  without
            recourse",  with all intervening endorsements that show a complete
            chain of  endorsement  from the  originator to the Seller,  or, if
            the  original  Mortgage  Note has been lost or  destroyed  and not
            replaced,  an  original  lost  note  affidavit  from  the  Seller,
            stating that the  original  Mortgage  Note was lost or  destroyed,
            together with a copy of the related Mortgage Note;

      (ii)  in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
            the original recorded Mortgage, and in the case of each Mortgage
            Loan that is a MERS Mortgage Loan, the original Mortgage, noting
            thereon the presence of the MIN of the Mortgage Loan and language
            indicating that the Mortgage Loan is a MOM Loan if the Mortgage Loan
            is a MOM Loan, with evidence of recording indicated thereon, or a
            copy of the Mortgage certified by the public recording office in
            which such Mortgage has been recorded;

                                      H-1
<PAGE>

      (iii) in the case of each Mortgage Loan that is not a MERS Mortgage Loan,
            a duly executed assignment of the Mortgage to "Asset-Backed
            Certificates, Series 2004-BC3, CWABS, Inc., by The Bank of New York,
            a New York banking corporation, as trustee under the Pooling and
            Servicing Agreement, dated as of July 1, 2004, without recourse",
            or, in the case of each Mortgage Loan with respect to property
            located in the State of California that is not a MERS Mortgage Loan,
            a duly executed assignment of the Mortgage in blank (each such
            assignment, when duly and validly completed, to be in recordable
            form and sufficient to effect the assignment of and transfer to the
            assignee thereof, under the Mortgage to which such assignment
            relates);

      (iv)  the original recorded assignment or assignments of the Mortgage
            together with all interim recorded assignments of such Mortgage
            [(noting the presence of a MIN in the case of each MERS Mortgage
            Loan)];

      (v)   the original or copies of each assumption, modification, written
            assurance or substitution agreement, if any, with evidence of
            recording thereon if recordation thereof is permissible under
            applicable law; and

      (vi)  the original or duplicate original lender's title policy or a
            printout of the electronic equivalent and all riders thereto or any
            one of an original title binder, an original preliminary title
            report or an original title commitment, or a copy thereof certified
            by the title company.

      If the public recording office in which a Mortgage or assignment thereof
is recorded has retained the original of such Mortgage or assignment, the
Trustee has received, in lieu thereof, a copy of the original Mortgage or
assignment so retained, with evidence of recording thereon, certified to be true
and complete by such recording office.

      Based on its review and examination and only as to the foregoing
documents, (i) such documents appear regular on their face and related to such
Mortgage Loan, and (ii) the information set forth in items (i), (iv), (v), (vi),
(viii), (xiii) and (xiv) of the definition of the "Mortgage Loan Schedule" in
Section 1.01 of the Pooling and Servicing Agreement accurately reflects
information set forth in the Mortgage File.

      The Trustee has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the
above-referenced Pooling and Servicing Agreement. The Trustee makes no
representations as to: (i) the validity, legality, sufficiency, enforceability
or genuineness of any of the documents contained in each Mortgage File of any of
the Mortgage Loans identified on the Mortgage Loan Schedule or (ii) the
collectibility, insurability, effectiveness or suitability of any such Mortgage
Loan.

                                      H-2
<PAGE>

      Capitalized words and phrases used herein shall have the respective
meanings assigned to them in the above-captioned Pooling and Servicing
Agreement.

                                    The Bank of New York,
                                        as Trustee

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

                                      H-3
<PAGE>

                                    EXHIBIT I

                               TRANSFER AFFIDAVIT

STATE OF                      )
                              )  ss.:
COUNTY OF                     )

      The undersigned, being first duly sworn, deposes and says as follows:

      1. The undersigned is an officer of __________, the proposed transferee of
an Ownership Interest in a Class A-R Certificate (the "Certificate") issued
pursuant to the Pooling and Servicing Agreement, dated as of July 1, 2004 (the
"Agreement"), by and among CWABS, Inc., as depositor (the "Depositor"),
Countrywide Home Loans, Inc., as Seller, Countrywide Home Loans Servicing LP, as
Master Servicer and The Bank of New York, as Trustee. Capitalized terms used,
but not defined herein or in Exhibit 1 hereto, shall have the meanings ascribed
to such terms in the Agreement. The transferee has authorized the undersigned to
make this affidavit on behalf of the transferee.

      2. Either (a) the transferee is not an employee benefit plan that is
subject to Section 406 of ERISA or to section 4975 of the Internal Revenue Code
of 1986, nor is it acting on behalf of or with plan assets of any such plan, or
(b) the transferee has provided the opinion of counsel specified in Section
5.02(b) of the Agreement. The transferee is, as of the date hereof, and will be,
as of the date of the Transfer, a Permitted Transferee. The transferee is
acquiring its Ownership Interest in the Certificate for its own account.

      3. The transferee has been advised of, and understands that (i) a tax will
be imposed on Transfers of the Certificate to Persons that are not Permitted
Transferees; (ii) such tax will be imposed on the transferor, or, if such
Transfer is through an agent (which includes a broker, nominee or middleman) for
a Person that is not a Permitted Transferee, on the agent; and (iii) the Person
otherwise liable for the tax shall be relieved of liability for the tax if the
subsequent transferee furnished to such Person an affidavit that such subsequent
transferee is a Permitted Transferee and, at the time of Transfer, such Person
does not have actual knowledge that the affidavit is false.

      4. The transferee has been advised of, and understands that a tax will be
imposed on a "pass-through entity" holding the Certificate if at any time during
the taxable year of the pass-through entity a Person that is not a Permitted
Transferee is the record holder of an interest in such entity. The transferee
understands that such tax will not be imposed for any period with respect to
which the record holder furnishes to the pass-through entity an affidavit that
such record holder is a Permitted Transferee and the pass-through entity does
not have actual knowledge that such affidavit is false. (For this purpose, a
"pass-through entity" includes a

                                      I-1
<PAGE>

regulated investment company, a real estate investment trust or common trust
fund, a partnership, trust or estate, and certain cooperatives and, except as
may be provided in Treasury Regulations, persons holding interests in
pass-through entities as a nominee for another Person.)

      5. The transferee has reviewed the provisions of Section 5.02(c) of the
Agreement (attached hereto as Exhibit 2 and incorporated herein by reference)
and understands the legal consequences of the acquisition of an Ownership
Interest in the Certificate including, without limitation, the restrictions on
subsequent Transfers and the provisions regarding voiding the Transfer and
mandatory sales. The transferee expressly agrees to be bound by and to abide by
the provisions of Section 5.02(c) of the Agreement and the restrictions noted on
the face of the Certificate. The transferee understands and agrees that any
breach of any of the representations included herein shall render the Transfer
to the transferee contemplated hereby null and void.

      6. The transferee agrees to require a Transfer Affidavit from any Person
to whom the transferee attempts to Transfer its Ownership Interest in the
Certificate, and in connection with any Transfer by a Person for whom the
transferee is acting as nominee, trustee or agent, and the transferee will not
Transfer its Ownership Interest or cause any Ownership Interest to be
Transferred to any Person that the transferee knows is not a Permitted
Transferee. In connection with any such Transfer by the transferee, the
transferee agrees to deliver to the Trustee a certificate substantially in the
form set forth as Exhibit I to the Agreement (a "Transferor Certificate") to the
effect that such transferee has no actual knowledge that the Person to which the
Transfer is to be made is not a Permitted Transferee.

      7. The transferee does not have the intention to impede the assessment or
collection of any tax legally required to be paid with respect to the Class A-R
Certificates.

      8. The transferee's taxpayer identification number is __________________.

      9. The transferee is a U.S. Person as defined in Code section 7701(a)(30).

      10. The transferee is aware that the Class A-R Certificates may be
"noneconomic residual interests" within the meaning of proposed Treasury
regulations promulgated pursuant to the Code and that the transferor of a
noneconomic residual interest will remain liable for any taxes due with respect
to the income on such residual interest, unless no significant purpose of the
transfer was to impede the assessment or collection of tax. In addition, as the
holder of a noneconomic residual interest, the transferee may incur tax
liabilities in excess of any cash flows generated by the interest and the
transferee hereby represents that it intends to pay taxes associated with
holding the residual interest as they become due.

      11. The transferee has provided financial statements or other financial
information requested by the Transferor in connection with the transfer of the
Class A-R Certificates to permit the Transferor to assess the financial
capability of the transferee to pay such taxes.

                                 *      *      *

                                       I-2
<PAGE>

      IN WITNESS  WHEREOF,  the  transferee  has caused this  instrument to be
executed on its behalf,  pursuant to authority of its Board of  Directors,  by
its duly  authorized  officer and its corporate  seal to be hereunto  affixed,
duly attested, this __th day of _______, 20__.

                                    [NAME OF TRANSFEREE]

                                    By:____________________________
                                    Name:
                                    Title:

[Corporate Seal]

ATTEST:

_________________________
[Assistant] Secretary

      Personally appeared before me the above-named _____________, known or
proved to me to be the same person who executed the foregoing instrument and to
be the _____________________ of the transferee, and acknowledged that he
executed the same as his free act and deed and the free act and deed of the
transferee.

      Subscribed and sworn before me this __th day of _______, 20__.

                                       ------------------------------------
                                                NOTARY PUBLIC

                                       My Commission expires the ___ day of

                                                     , 20__.

                                      I-3
<PAGE>

                                                                       EXHIBIT 1

                             Certain Definitions

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

      "Permitted Transferee": Any person other than (i) the United States, any
State or political subdivision thereof, or any agency or instrumentality of any
of the foregoing, (ii) a foreign government, International Organization or any
agency or instrumentality of either of the foregoing, (iii) an organization
(except certain farmers' cooperatives described in 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
Class A-R Certificate, (iv) rural electric and telephone cooperatives described
in section 1381(a)(2)(C) of the Code, (v) an "electing large partnership" as
defined in Section 775 of the Code, (vi) a Person that is not a citizen or
resident of the United States, a corporation, partnership, 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, or 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 unless such Person has furnished the
transferor and the Trustee with a duly completed Internal Revenue Service Form
W-8ECI, and (vii) any other Person so designated by the Trustee based upon an
Opinion of Counsel that the Transfer of an Ownership Interest in a Class A-R
Certificate to such Person may cause the Trust Fund 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 the Federal Home Loan Mortgage
Corporation, a majority of its board of directors is not selected by such
government unit.

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

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

                                      I-4
<PAGE>

Section 5.02(c) of the Agreement

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

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

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

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

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

                                      I-5
<PAGE>

      at such subsequent time as it became other than a Permitted Transferee,
      all payments made on such Class A-R Certificate at and after either such
      time. Any such payments so recovered by the Trustee shall be paid and
      delivered by the Trustee to the last preceding Permitted Transferee of
      such Certificate.

      (v) The Depositor shall use its best efforts to make available, upon
receipt of written request from the Trustee, all information necessary to
compute any tax imposed under Section 860E(e) of the Code as a result of a
Transfer of an Ownership Interest in a Class A-R Certificate to any Holder who
is not a Permitted Transferee.

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

                                      I-6
<PAGE>

                                   EXHIBIT J-1

                       FORM OF TRANSFEROR CERTIFICATE FOR
                             CLASS A-R CERTIFICATES

                                                        Date:

CWABS, Inc.,
      as Depositor
4500 Park Granada
Calabasas, California 91302

The Bank of New York,
      as Trustee
101 Barclay Street
New York, New York 10286

            Re:   CWABS, Inc. Asset-Backed
                  Certificates, Series 2004-BC3
                  -----------------------------

Ladies and Gentlemen:

In connection with our disposition of the Class A-R Certificates, we certify
that we have no knowledge the Transferee is not a Permitted Transferee. All
capitalized terms used herein but not defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement, dated as of July 1,
2004, among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc., as Seller,
Countrywide Home Loans Servicing LP, as Master Servicer and The Bank of New
York, as Trustee.

                                    Very truly yours,

                                    ___________________________________
                                    Name of Transferor

                                    By: _______________________________
                                        Name:
                                        Title:

                                     J-1-1
<PAGE>

                                   EXHIBIT J-2

                       FORM OF TRANSFEROR CERTIFICATE FOR
                              PRIVATE CERTIFICATES

                                                        Date:

CWABS, Inc.,
      as Depositor
4500 Park Granada
Calabasas, California 91302

The Bank of New York,
      as Trustee
101 Barclay Street
New York, New York 10286

            Re:   CWABS, Inc. Asset-Backed Certificates,
                  Series 2004-BC3, Class [  ]
                  ---------------------------

Ladies and Gentlemen:

      In connection with our disposition of the above-captioned Certificates we
certify that (a) we understand that the Certificates have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are being disposed
by us in a transaction that is exempt from the registration requirements of the
Act, (b) we have not offered or sold any Certificates to, or solicited offers to
buy any Certificates from, any person, or otherwise approached or negotiated
with any person with respect thereto, in a manner that would be deemed, or taken
any other action which would result in, a violation of Section 5 of the Act. All
capitalized terms used herein but not defined herein shall have the meanings
assigned to them in the Pooling and Servicing Agreement, dated as of July 1,
2004, among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc., as Seller,
Countrywide Home Loans Servicing LP, as Master Servicer and The Bank of New
York, as Trustee.

                                    Very truly yours,

                                    ___________________________________
                                    Name of Transferor

                                    By: _______________________________
                                        Name:
                                        Title:

                                      J-2-1
<PAGE>

                                    EXHIBIT K

                    FORM OF INVESTMENT LETTER (NON-RULE 144A)

                                                         Date:

CWABS, Inc.,
      as Depositor
4500 Park Granada
Calabasas, California 91302

The Bank of New York,
      as Trustee
101 Barclay Street
New York, New York 10286

            Re:   CWABS, Inc. Asset-Backed Certificates,
                  Series 2004-BC3, Class [  ]
                  --------------------------

Ladies and Gentlemen:

      In connection with our acquisition of the above-captioned Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we are an
"accredited investor," as defined in Regulation D under the Act, and have such
knowledge and experience in financial and business matters that we are capable
of evaluating the merits and risks of investments in the Certificates, (c) we
have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) either (i) we are not an employee benefit plan
that is subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan or arrangement that is subject to Section 4975 of the
Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any
such plan or arrangement, nor are we using the assets of any such plan or
arrangement to effect such acquisition or (ii) the transferee has provided the
opinion of counsel specified in Section 5.02(b) of the Pooling and Servicing
Agreement, (e) we are acquiring the Certificates for investment for our own
account and not with a view to any distribution of such Certificates (but
without prejudice to our right at all times to sell or otherwise dispose of the
Certificates in accordance with clause (g) below), (f) we have not offered or
sold any Certificates to, or solicited offers to buy any Certificates from, any
person, or otherwise approached or negotiated with any person with respect
thereto, or taken any other action which would result in a violation of Section
5 of the Act, and (g) we will not sell, transfer or otherwise dispose of any
Certificates unless (1) such sale, transfer or other disposition is made
pursuant to an effective registration

                                      K-1
<PAGE>

statement under the Act or is exempt from such registration requirements, and if
requested, we will at our expense provide an opinion of counsel satisfactory to
the addressees of this Certificate that such sale, transfer or other disposition
may be made pursuant to an exemption from the Act, (2) the purchaser or
transferee of such Certificate has executed and delivered to you a certificate
to substantially the same effect as this certificate, and (3) the purchaser or
transferee has otherwise complied with any conditions for transfer set forth in
the Pooling and Servicing Agreement.

      All capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement dated as of
July 1, 2004, among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc., as
Seller, Countrywide Home Loans Servicing LP, as Master Servicer and The Bank of
New York, as Trustee.

                                    Very truly yours,

                                    ___________________________________
                                    Name of Transferee

                                    By: _______________________________
                                        Authorized Officer

                                      K-2
<PAGE>

                                    EXHIBIT L

                            FORM OF RULE 144A LETTER

                                                     Date:

CWABS, Inc.,
      as Depositor
4500 Park Granada
Calabasas, California 91302

The Bank of New York,
      as Trustee
101 Barclay Street
New York, New York 10286

            Re:   CWABS, Inc. Asset-Backed Certificates,
                  Series 2004-BC3, Class [  ]
                  ---------------------------

Ladies and Gentlemen:

      In connection with our acquisition of the above-captioned Certificates we
certify that (a) we understand that the Certificates are not being registered
under the Securities Act of 1933, as amended (the "Act"), or any state
securities laws and are being transferred to us in a transaction that is exempt
from the registration requirements of the Act and any such laws, (b) we have
such knowledge and experience in financial and business matters that we are
capable of evaluating the merits and risks of investments in the Certificates,
(c) we have had the opportunity to ask questions of and receive answers from the
Depositor concerning the purchase of the Certificates and all matters relating
thereto or any additional information deemed necessary to our decision to
purchase the Certificates, (d) either (i) we are not an employee benefit plan
that is subject to the Employee Retirement Income Security Act of 1974, as
amended, or a plan or arrangement that is subject to Section 4975 of the
Internal Revenue Code of 1986, as amended, nor are we acting on behalf of any
such plan or arrangement, nor are we using the assets of any such plan or
arrangement to effect such acquisition or (ii) the transferee has provided the
opinion of counsel specified in Section 5.02(b) of the Pooling and Servicing
Agreement, (e) of Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60"))
and the purchase and holding of such Certificates are covered under Sections I
and III of PTCE 95-60, (e) we have not, nor has anyone acting on our behalf
offered, transferred, pledged, sold or otherwise disposed of the Certificates,
any interest in the Certificates or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action, that would constitute a
distribution of the Certificates under the

                                      L-1
<PAGE>

Securities Act or that would render the disposition of the Certificates a
violation of Section 5 of the Securities Act or require registration pursuant
thereto, nor will act, nor has authorized or will authorize any person to act,
in such manner with respect to the Certificates, (f) we are a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act and have completed either of the forms of certification to that effect
attached hereto as Annex 1 or Annex 2. We are aware that the sale to us is being
made in reliance on Rule 144A. We are acquiring the Certificates for our own
account or for resale pursuant to Rule 144A and further, understand that such
Certificates may be resold, pledged or transferred only (i) to a person
reasonably believed to be a qualified institutional buyer that purchases for its
own account or for the account of a qualified institutional buyer to whom notice
is given that the resale, pledge or transfer is being made in reliance on Rule
144A, or (ii) pursuant to another exemption from registration under the
Securities Act.

      All capitalized terms used herein but not defined herein shall have the
meanings assigned to them in the Pooling and Servicing Agreement, dated as of
July 1, 2004, among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc., as
Seller, Countrywide Home Loans Servicing LP, as Master Servicer and The Bank of
New York, as Trustee.

                                      L-2
<PAGE>

                              ANNEX 1 TO EXHIBIT L

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

          [For Transferees Other Than Registered Investment Companies]

The undersigned (the "Buyer") hereby certifies as follows to the parties listed
in the Rule 144A Transferee Certificate to which this certification relates with
respect to the Certificates described therein:

            1. As indicated below, the undersigned is the President, Chief
Financial Officer, Senior Vice President or other executive officer of the
Buyer.

            2. In connection with purchases by the Buyer, the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis either at least $100,000 in securities
or, if Buyer is a dealer, Buyer must own and/or invest on a discretionary basis
at least $10,000,000 in securities (except for the excluded securities referred
to below) as of the end of the Buyer's most recent fiscal year (such amount
being calculated in accordance with Rule 144A and (ii) the Buyer satisfies the
criteria in the category marked below.

            ___   Corporation, etc. The Buyer is a corporation (other than a
                  bank, savings and loan association or similar institution),
                  Massachusetts or similar business trust, partnership, or
                  charitable organization described in Section 501(c)(3) of the
                  Internal Revenue Code of 1986, as amended.

            ___   Bank. The Buyer (a) is a national bank or banking institution
                  organized under the laws of any State, territory or the
                  District of Columbia, the business of which is substantially
                  confined to banking and is supervised by the State or
                  territorial banking commission or similar official or is a
                  foreign bank or equivalent institution, and (b) has an audited
                  net worth of at least $25,000,000 as demonstrated in its
                  latest annual financial statements, a copy of which is
                  attached hereto.

            ___   Savings and Loan. The Buyer (a) is a savings and loan
                  association, building and loan association, cooperative bank,
                  homestead association or similar institution, which is
                  supervised and examined by a State or Federal authority having
                  supervision over any such institutions or is a foreign savings
                  and loan association or equivalent institution and (b) has an
                  audited net worth of at least $25,000,000 as demonstrated in
                  its latest annual financial statements, a copy of which is
                  attached hereto.

                                      L-3
<PAGE>

            ___   Broker-dealer. The Buyer is a dealer registered pursuant to
                  Section 15 of the Securities Exchange Act of 1934.

            ___   Insurance Company. The Buyer is an insurance company whose
                  primary and predominant business activity is the writing of
                  insurance or the reinsuring of risks underwritten by insurance
                  companies and which is subject to supervision by the insurance
                  commissioner or a similar official or agency of a State,
                  territory or the District of Columbia.

            ___   State or Local Plan. The Buyer is a plan established and
                  maintained by a State, its political subdivisions, or any
                  agency or instrumentality of the State or its political
                  subdivisions, for the benefit of its employees.

            ___   ERISA Plan. The Buyer is an employee benefit plan within the
                  meaning of Title I of the Employee Retirement Income Security
                  Act of 1974.

            ___   Investment Advisor. The Buyer is an investment advisor
                  registered under the Investment Advisors Act of 1940.

            ___   Small Business Investment Company. Buyer is a small business
                  investment company licensed by the U.S. Small Business
                  Administration under Section 301(c) or (d) of the Small
                  Business Investment Act of 1958.

            ___   Business Development Company. Buyer is a business development
                  company as defined in Section 202(a)(22) of the Investment
                  Advisors Act of 1940.

                  3. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if the Buyer is
a dealer, (iii) securities issued or guaranteed by the U.S. or any
instrumentality thereof, (iv) bank deposit notes and certificates of deposit,
(v) loan participations, (vi) repurchase agreements, (vii) securities owned but
subject to a repurchase agreement and (viii) currency, interest rate and
commodity swaps.

                  4. For purposes of determining the aggregate amount of
securities owned and/or invested on a discretionary basis by the Buyer, the
Buyer used the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph, except (i) where the
Buyer reports its securities holdings in its financial statements on the basis
of their market value, and (ii) no current information with respect to the cost
of those securities has been published. If clause (ii) in the preceding sentence
applies, the securities may be valued at market. Further, in determining such
aggregate amount, the Buyer may have included securities owned by subsidiaries
of the Buyer, but only if such subsidiaries are consolidated with the Buyer in
its financial statements prepared in accordance with generally accepted
accounting principles and if the investments of such subsidiaries are managed
under the Buyer's direction.

                                      L-4
<PAGE>

However, such securities were not included if the Buyer is a majority-owned,
consolidated subsidiary of another enterprise and the Buyer is not itself a
reporting company under the Securities Exchange Act of 1934, as amended.

5. The Buyer acknowledges that it is familiar with Rule 144A and understands
that the seller to it and other parties related to the Certificates are relying
and will continue to rely on the statements made herein because one or more
sales to the Buyer may be in reliance on Rule 144A.

6. Until the date of purchase of the Rule 144A Securities, the Buyer will notify
each of the parties to which this certification is made of any changes in the
information and conclusions herein. Until such notice is given, the Buyer's
purchase of the Certificates will constitute a reaffirmation of this
certification as of the date of such purchase. In addition, if the Buyer is a
bank or savings and loan is provided above, the Buyer agrees that it will
furnish to such parties updated annual financial statements promptly after they
become available.

                                       _________________________________________
                                                   Print Name of Buyer

                                       By:______________________________________
                                       Name:
                                       Title:

                                       Date:____________________________________

                                      L-5
<PAGE>

                                                            ANNEX 2 TO EXHIBIT L

            QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A

           [For Transferees That are Registered Investment Companies]

The undersigned (the "Buyer") hereby certifies as follows to the parties listed
in the Rule 144A Transferee Certificate to which this certification relates with
respect to the Certificates described therein:

            1. As indicated below, the undersigned is the President, Chief
Financial Officer or Senior Vice President of the Buyer or, if the Buyer is a
"qualified institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A") because Buyer is part of a
Family of Investment Companies (as defined below), is such an officer of the
Adviser.

            2. In connection with purchases by Buyer, the Buyer is a "qualified
institutional buyer" as defined in SEC Rule 144A because (i) the Buyer is an
investment company registered under the Investment Company Act of 1940, as
amended and (ii) as marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities (other than the
excluded securities referred to below) as of the end of the Buyer's most recent
fiscal year. For purposes of determining the amount of securities owned by the
Buyer or the Buyer's Family of Investment Companies, the cost of such securities
was used, except (i) where the Buyer or the Buyer's Family of Investment
Companies reports its securities holdings in its financial statements on the
basis of their market value, and (ii) no current information with respect to the
cost of those securities has been published. If clause (ii) in the preceding
sentence applies, the securities may be valued at market.

            ___   The Buyer owned $ in securities (other than the excluded
                  securities referred to below) as of the end of the Buyer's
                  most recent fiscal year (such amount being calculated in
                  accordance with Rule 144A).

            ___   The Buyer is part of a Family of Investment Companies which
                  owned in the aggregate $ in securities (other than the
                  excluded securities referred to below) as of the end of the
                  Buyer's most recent fiscal year (such amount being calculated
                  in accordance with Rule 144A).

            3. The term "Family of Investment Companies" as used herein means
two or more registered investment companies (or series thereof) that have the
same investment adviser or investment advisers that are affiliated (by virtue of
being majority owned subsidiaries of the same parent or because one investment
adviser is a majority owned subsidiary of the other).

                                      L-6
<PAGE>

            4. The term "securities" as used herein does not include (i)
securities of issuers that are affiliated with the Buyer or are part of the
Buyer's Family of Investment Companies, (ii) securities issued or guaranteed by
the U.S. or any instrumentality thereof, (iii) bank deposit notes and
certificates of deposit, (iv) loan participations, (v) repurchase agreements,
(vi) securities owned but subject to a repurchase agreement and (vii) currency,
interest rate and commodity swaps.

            5. The Buyer is familiar with Rule 144A and under-stands that the
parties listed in the Rule 144A Transferee Certificate to which this
certification relates are relying and will continue to rely on the statements
made herein because one or more sales to the Buyer will be in reliance on Rule
144A. In addition, the Buyer will only purchase for the Buyer's own account.

            6. Until the date of purchase of the Certificates, the undersigned
will notify the parties listed in the Rule 144A Transferee Certificate to which
this certification relates of any changes in the information and conclusions
herein. Until such notice is given, the Buyer's purchase of the Certificates
will constitute a reaffirmation of this certification by the undersigned as of
the date of such purchase.

                                        ________________________________________
                                              Print Name of Buyer or Adviser

                                        By: ____________________________________

                                        Name:

                                        Title:

                                        IF AN ADVISER:

                                        ________________________________________
                                                 Print Name of Buyer

                                        Date: __________________________________

                                      L-7
<PAGE>

                                    EXHIBIT M

                               REQUEST FOR RELEASE

                                  (for Trustee)

Loan Information

      Name of Mortgagor:
                                           _____________________________________
      Master Servicer
      Loan No.:
                                           _____________________________________
Trustee
      Name:
                                           _____________________________________
      Address:
                                           _____________________________________
      Trustee
      Mortgage File No.:
                                           _____________________________________

      The undersigned Master Servicer hereby acknowledges that it has received
from _______________________________________, as Trustee for the Holders of
Asset-Backed Certificates, Series 2004-BC3, the documents referred to below (the
"Documents"). All capitalized terms not otherwise defined in this Request for
Release shall have the meanings given them in the Pooling and Servicing
Agreement, dated as of July 1, 2004 (the "Pooling and Servicing Agreement"),
among CWABS, Inc., as Depositor, Countrywide Home Loans, Inc., as Seller,
Countrywide Home Loans Servicing LP, as Master Servicer and the Trustee.

( )   Mortgage Note dated ___________, ____, in the original principal sum of
      $________, made by __________________, payable to, or endorsed to the
      order of, the Trustee.

( )   Mortgage recorded on _________________ as instrument no. ________________
      in the County Recorder's Office of the County of ________________, State
      of _______________ in book/reel/docket _______________ of official records
      at page/image _____________.

( )   Deed of Trust recorded on _________________ as instrument no.
      ________________ in the County Recorder's Office of the County of
      ________________, State of _______________ in book/reel/docket
      _______________ of official records at page/image _____________.

                                      M-1
<PAGE>

( )   Assignment of Mortgage or Deed of Trust to the Trustee, recorded on
      _________________ as instrument no. __________ in the County Recorder's
      Office of the County of __________, State of _______________ in
      book/reel/docket _______________ of official records at page/image
      _____________.

( ) Other documents, including any amendments, assignments or other
      assumptions of the Mortgage Note or Mortgage.

( )  ______________________________________________

( )  ______________________________________________

( )  ______________________________________________

( )  ______________________________________________

      The undersigned Master Servicer hereby acknowledges and agrees as follows:

            (1) The Master Servicer shall hold and retain possession of the
      Documents in trust for the benefit of the Trust Fund, solely for the
      purposes provided in the Agreement.

            (2) The Master Servicer shall not cause or knowingly permit the
      Documents to become subject to, or encumbered by, any claim, liens,
      security interest, charges, writs of attachment or other impositions nor
      shall the Master Servicer assert or seek to assert any claims or rights of
      setoff to or against the Documents or any proceeds thereof.

            (3) The Master Servicer shall return each and every Document
      previously requested from the Mortgage File to the Trustee when the need
      therefor no longer exists, unless the Mortgage Loan relating to the
      Documents has been liquidated and the proceeds thereof have been remitted
      to the Certificate Account and except as expressly provided in the
      Agreement.

            (4) The Documents and any proceeds thereof, including any proceeds
      of proceeds, coming into the possession or control of the Master Servicer
      shall at all times be earmarked for the account of the Trust Fund, and the
      Master Servicer shall keep the Documents and any proceeds separate and
      distinct from all other property in the Master Servicer's possession,
      custody or control.

                                    [Master Servicer]

                                    By  _______________________________

                                    Its ________________________________

Date: _________________, ____

                                      M-2
<PAGE>

                                    EXHIBIT N

                               REQUEST FOR RELEASE
             [Mortgage Loans Paid in Full, Repurchased or Replaced]

                     OFFICER'S CERTIFICATE AND TRUST RECEIPT
                           ASSET-BACKED CERTIFICATES,
                                 Series 2004-BC3

__________________________________________ HEREBY CERTIFIES THAT HE/SHE IS AN
OFFICER OF THE MASTER SERVICER, HOLDING THE OFFICE SET FORTH BENEATH HIS/HER
SIGNATURE, AND HEREBY FURTHER CERTIFIES AS FOLLOWS:

WITH RESPECT TO THE MORTGAGE LOANS, AS THE TERM IS DEFINED IN THE POOLING AND
SERVICING AGREEMENT DESCRIBED IN THE ATTACHED SCHEDULE:

[ALL PAYMENTS OF PRINCIPAL AND INTEREST HAVE BEEN MADE.] [THE [PURCHASE PRICE]
[MORTGAGE LOAN REPURCHASE PRICE] FOR SUCH MORTGAGE LOANS HAS BEEN PAID.] [THE
MORTGAGE LOANS HAVE BEEN LIQUIDATED AND THE RELATED [INSURANCE PROCEEDS]
[LIQUIDATION PROCEEDS] HAVE BEEN DEPOSITED PURSUANT TO SECTION 3.13 OF THE
POOLING AND SERVICING AGREEMENT.] [A REPLACEMENT MORTGAGE LOAN HAS BEEN
DELIVERED TO THE TRUSTEE IN THE MANNER AND OTHERWISE IN ACCORDANCE WITH THE
CONDITIONS SET FORTH IN SECTIONS 2.02 AND 2.03 OF THE POOLING AND SERVICING
AGREEMENT.]

LOAN NUMBER:_______________         BORROWER'S NAME:_____________

COUNTY:____________________

[For Substitution or Repurchase Only: The Master Servicer certifies that [an]
[no] opinion is required by Section 2.05 [and is attached hereto].]

I HEREBY CERTIFY THAT ALL AMOUNTS RECEIVED IN CONNECTION WITH SUCH PAYMENTS,
THAT ARE REQUIRED TO BE DEPOSITED IN THE CERTIFICATE ACCOUNT PURSUANT TO SECTION
3.05 OF THE POOLING AND SERVICING AGREEMENT, HAVE BEEN OR WILL BE CREDITED.

____________      _____________________         DATED:____________

/ /   VICE PRESIDENT

                                      N-1
<PAGE>

/ /   ASSISTANT VICE PRESIDENT

                                      N-2
<PAGE>

                                                                       Exhibit O

                            Exhibit O is a photocopy
                           of the Depository Agreement
                                  as delivered.

                [see appropriate documents delivered at closing]

                                      O-1
<PAGE>

                                    EXHIBIT P

                       FORM OF MORTGAGE NOTE AND MORTGAGE

                             [Provide Upon Request]

                                      P-1
<PAGE>

                                    EXHIBIT Q

                                   [RESERVED]

                                      Q-1
<PAGE>

                                    EXHIBIT R

                              FORM OF CAP CONTRACT

DATE:                   [_________], 2004

TO:                     Countrywide Home Loans, Inc.

ATTENTION:        Mr. Jeff Staub/Kevin Doyle
TELEPHONE:        818-225-3279
FACSIMILE:        818-225-4099

FROM:             Derivatives Documentation
TELEPHONE:        212-272-2711
FACSIMILE:        212-272-9857

SUBJECT:          Fixed Income Derivatives Confirmation and Agreement

REFERENCE NUMBER: [________]

The purpose of this letter agreement ("Agreement") is to confirm the terms and
conditions of the Transaction entered into on the Trade Date specified below
(the "Transaction") between Bear Stearns Financial Products Inc. ("BSFP") and
Countrywide Home Loans, Inc., ("Counterparty"). This Agreement, which evidences
a complete and binding agreement between you and us to enter into the
Transaction on the terms set forth below, constitutes a "Confirmation" as
referred to in the "ISDA Form Master Agreement" (as defined below), as well as a
"Schedule" as referred to in the ISDA Form Master Agreement.

1.    This Agreement is subject to the 2000 ISDA DEFINITIONS (the
      "Definitions"), as published by the International Swaps and Derivatives
      Association, Inc. ("ISDA"). You and we have agreed to enter into this
      Agreement in lieu of negotiating a Schedule to the 1992 ISDA Master
      Agreement (Multicurrency--Cross Border) form (the "ISDA Form Master
      Agreement") but, rather, an ISDA Form Master Agreement shall be deemed to
      have been executed by you and us on the date we entered into the
      Transaction. In the event of any inconsistency between the provisions of
      this Agreement and the Definitions or the ISDA Form Master Agreement, this
      Agreement shall prevail for purposes of the Transaction.

2.    The terms of the particular Transaction to which this Confirmation relates
      are as follows:

      Type of Transaction:     Rate Cap

                                      R-1
<PAGE>

      Notional Amount:         [____________]

      Trade Date:              [_________], 2004

      Effective Date:          [_________], 2004

      Termination Date:        [_______________],   subject  to  adjustment  in
                               accordance with the Business Day Convention.

FIXED AMOUNT (PREMIUM):

      Fixed Rate Payer:        Counterparty

      Fixed Rate Payer

      Payment Date:  [_________], 2004

      Fixed Amount:  [_________]

FLOATING AMOUNTS:

      Floating Rate Payer:      BSFP

      Cap Rate:                 Shall equal;

                                (i) [_____]% for each Calculation Period from
                                and including the Effective Date to but
                                excluding [____], 2005; and (ii) [_____]% for
                                each Calculation Period from and including
                                [____], 2005 to but excluding the Termination
                                Date.

      Floating Rate Payer
      Period End Dates          The 25th calendar day of each month during the
                                Term of this Transaction, commencing
                                [_______________] and ending on the Termination
                                Date, subject to adjustment in accordance with
                                the Business Day Convention.

      Floating Rate Payer
      Payment Dates:            Early Payment shall be applicable. One Business
                                Day preceding each Floating Rate Payer Period
                                End Date.

      Floating Rate Option:     USD-LIBOR-BBA, provided, however, that if the
                                Floating Rate Option (i) for any Calculation
                                Period from and including the Effective Date to
                                but excluding

                                      R-2
<PAGE>

                                [__________], is greater than [_____]% then the
                                Floating Rate Option for such Calculation Period
                                shall be deemed to be [_____]%; and (ii) for any
                                Calculation Period from and including
                                [__________] to but excluding the Termination
                                Date, is greater than [_____]% then the Floating
                                Rate Option for such Calculation Period shall be
                                deemed to be [_____]%.

      Designated Maturity:      One month

      Floating Rate Day

      Count Fraction:           Actual/360

      Reset Dates:              The first day of each Calculation Period.

      Compounding:              Inapplicable

      Business Days:            New York and London

      Business Day Convention:  Modified Following

      Calculation Agent:        BSFP

3.   Additional Provisions:     1) Each party hereto is hereby advised and
                                acknowledges that the other party has engaged in
                                (or refrained from engaging in) substantial
                                financial transactions and has taken (or
                                refrained from taking) other material actions in
                                reliance upon the entry by the parties into the
                                Transaction being entered into on the terms and
                                conditions set forth herein and in the
                                Confirmation relating to such Transaction, as
                                applicable. This paragraph (1) shall be deemed
                                repeated on the trade date of each Transaction.

4.    Provisions Deemed Incorporated in a Schedule to the Master Agreement:

      1) The parties agree that subparagraph (ii) of Section 2(c) of the ISDA
Form Master Agreement will apply to any Transaction.

      2) TERMINATION PROVISIONS. For purposes of the Master Agreement:

      (a) "Specified Entity" is not applicable to BSFP or Counterparty for any
purpose.

      (b) "Specified Transaction" is not applicable to BSFP or Counterparty for
any purpose, and, accordingly, Section 5(a)(v) shall not apply to BSFP or
Counterparty.

                                      R-3
<PAGE>

      (c) The "Cross Default" provisions of Section 5(a)(vi) will not apply to
BSFP or to Counterparty.

      (d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will not
apply to BSFP or Counterparty.

      (e) The "Automatic Early Termination" provision of Section 6(a) will not
apply to BSFP or to Counterparty.

      (f) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement:

            (i) Market Quotation will apply.

            (ii) The Second Method will apply.

      (g) "Termination Currency" means United States Dollars.

      3) Tax Representations. Not applicable

                                      R-4
<PAGE>

      4) LIMITATION ON EVENTS OF DEFAULT. Notwithstanding the terms of Sections
5 and 6 of this Agreement, if at any time and so long as the Counterparty has
satisfied in full all its payment obligations under Section 2(a)(i) of this
Agreement and has at the time no future payment obligations, whether absolute or
contingent, under such Section, then unless BSFP is required pursuant to
appropriate proceedings to return to the Counterparty or otherwise returns to
the Counterparty upon demand of the Counterparty any portion of any such
payment, (a) the occurrence of an event described in Section 5(a) of this
Agreement with respect to the Counterparty shall not constitute an Event of
Default or Potential Event of Default with respect to the Counterparty as
Defaulting Party and (b) BSFP shall be entitled to designate an Early
Termination Date pursuant to Section 6 of this Agreement only as a result of the
occurrence of a Termination Event set forth in either Section 5(b)(i) or
5(b)(ii) of this Agreement with respect to BSFP as the Affected Party or Section
5(b)(iii) with respect to BSFP as the Burdened Party.

      5) DOCUMENTS TO BE DELIVERED. For the purpose of Section 4(a):

      (1) Tax forms, documents, or certificates to be delivered are:

<TABLE>
<CAPTION>
PARTY REQUIRED TO DELIVER      FORM/DOCUMENT/               DATE BY WHICH TO
DOCUMENT                       CERTIFICATE                  BE DELIVERED
<S>                            <C>                          <C>
BSFP and                       Any document required or     Promptly after the earlier of (i)
the Counterparty               reasonably requested to      reasonable demand by either party or
                               allow the other party to     (ii) learning that such form or
                               make payments under this     document is required
                               Agreement without any
                               deduction or withholding
                               for or on the account of
                               any Tax or with such
                               deduction or withholding
                               at a reduced rate
</TABLE>

(2) Other documents to be delivered are:

<TABLE>
<CAPTION>
PARTY REQUIRED TO    FORM/DOCUMENT/            DATE BY WHICH TO         COVERED BY SECTION 3(D)
DELIVER DOCUMENT     CERTIFICATE               BE DELIVERED             REPRESENTATION
<S>                  <C>                       <C>                      <C>
BSFP and             Any documents             Upon the execution       Yes
the Counterparty     required by the           and delivery of this
                     receiving party to        Agreement and such
                     evidence the              Confirmation
                     authority of the
                     delivering party or
                     its Credit Support
                     Provider, if any, for
                     it
</TABLE>

                                       R-5
<PAGE>

<TABLE>
<CAPTION>
PARTY REQUIRED TO    FORM/DOCUMENT/            DATE BY WHICH TO         COVERED BY SECTION 3(D)
DELIVER DOCUMENT     CERTIFICATE               BE DELIVERED             REPRESENTATION
<S>                  <C>                       <C>                      <C>
                     to execute and
                     deliver this
                     Agreement, any
                     Confirmation , and
                     any Credit Support
                     Documents to which it
                     is a party, and to
                     evidence the
                     authority of the
                     delivering party or
                     its Credit Support
                     Provider to perform
                     its obligations under
                     this Agreement, such
                     Confirmation and/or
                     Credit Support
                     Document, as the case
                     may be

BSFP and             A certificate of an       Upon the execution       Yes
the Counterparty     authorized officer of     and delivery of this
                     the party, as to the      Agreement and such
                     incumbency and            Confirmation
                     authority of the
                     respective officers of
                     the party signing this
                     Agreement, any relevant
                     Credit Support
                     Document, or any
                     Confirmation, as the
                     case may be
</TABLE>

6) MISCELLANEOUS. Miscellaneous

(a)   Address for Notices: For the purposes of Section 12(a) of this Agreement:

      Address for notices or communications to BSFP:

            Address:    383 Madison Avenue, New York, New York  10179
            Attention:  DPC Manager - Suite 2700
            Facsimile:  (212) 272-5823

      with a copy to:

                                       R-6
<PAGE>

            Address:    One Metrotech Center North, Brooklyn, New York 11201
            Attention:  Derivative Operations - 7th Floor
            Facsimile:  (212) 272-1634

            (For all purposes)

      Address for notices or communications to the Counterparty:

            Address:    4500 Park Granada
                        Mail Stop CH-143
                        Calabasas, CA 91302
            Attention:  Mr. Jeff Staab
            Facsimile:  818-225-3898
            Phone:      818-225-3279

(b) Process Agent. For the purpose of Section 13(c):

                  BSFP appoints as its
                  Process Agent:          Not Applicable

                  The Counterparty appoints as its
                  Process Agent:          Not Applicable

(c)   Offices. The provisions of Section 10(a) will not apply to this Agreement;
      neither BSFP nor the Counterparty have any Offices other than as set forth
      in the Notices Section and BSFP agrees that, for purposes of Section 6(b)
      of this Agreement, it shall not in future have any Office other than one
      in the United States.

(d)   Multibranch Party. For the purpose of Section 10(c) of this Agreement:

      BSFP is not a Multibranch Party.

      The Counterparty is not a Multibranch Party.

(e) Calculation Agent. The Calculation Agent is BSFP.

(f) Credit Support Document. Not applicable for either BSFP or the Counterparty.

(g) Credit Support Provider.

      BSFP: Not Applicable

                                      R-7
<PAGE>

      The Counterparty: Not Applicable

(h)   Governing Law. The parties to this Agreement hereby agree that the law of
      the State of New York shall govern their rights and duties in whole.

(i)   Severability. If any term, provision, covenant, or condition of this
      Agreement, or the application thereof to any party or circumstance, shall
      be held to be invalid or unenforceable (in whole or in part) for any
      reason, the remaining terms, provisions, covenants, and conditions hereof
      shall continue in full force and effect as if this Agreement had been
      executed with the invalid or unenforceable portion eliminated, so long as
      this Agreement as so modified continues to express, without material
      change, the original intentions of the parties as to the subject matter of
      this Agreement and the deletion of such portion of this Agreement will not
      substantially impair the respective benefits or expectations of the
      parties.

The parties shall endeavor to engage in good faith negotiations to replace any
invalid or unenforceable term, provision, covenant or condition with a valid or
enforceable term, provision, covenant or condition, the economic effect of which
comes as close as possible to that of the invalid or unenforceable term,
provision, covenant or condition.

(j) Consent to Recording. Each party hereto consents to the monitoring or
recording, at any time and from time to time, by the other party of any and all
communications between officers or employees of the parties, waives any further
notice of such monitoring or recording, and agrees to notify its officers and
employees of such monitoring or recording.

(k) Waiver of Jury Trial. Each party waives any right it may have to a trial by
jury in respect of any Proceedings relating to this Agreement or any Credit
Support Document.

(l) BSFP will not unreasonably withhold or delay its consent to an assignment of
this Agreement to any other third party.

7) "Affiliate" will have the meaning specified in Section 14 of the ISDA Form
Master Agreement, provided that BSFP shall not be deemed to have any Affiliates
for purposes of this Agreement, including for purposes of Section 6(b)(ii).

8) Section 3 of the ISDA Form Master Agreement is hereby amended by adding at
the end thereof the following subsection (g):

      "(g) Relationship Between Parties.

                  Each party represents to the other party on each date when it
                  enters into a Transaction that:--

                                      R-8
<PAGE>

            (1) Nonreliance. It is not relying on any statement or
representation of the other party regarding the Transaction (whether written or
oral), other than the representations expressly made in this Agreement or the
Confirmation in respect of that Transaction.

            (2) Evaluation and Understanding.

            (i) It has the capacity to evaluate (internally or through
independent professional advice) the Transaction and has made its own decision
to enter into the Transaction; and

            (ii) It understands the terms, conditions and risks of the
Transaction and is willing and able to accept those terms and conditions and to
assume those risks, financially and otherwise.

            (3) Purpose. It is entering into the Transaction for the purposes of
managing its borrowings or investments, hedging its underlying assets or
liabilities or in connection with a line of business.

Principal. It is entering into the Transaction as principal, and not as agent or
in any other capacity, fiduciary or otherwise.

       NEITHER THE BEAR STEARNS COMPANIES INC. NOR ANY SUBSIDIARY OR AFFILIATE
       OF THE BEAR STEARNS COMPANIES INC. OTHER THAN BSFP IS AN OBLIGOR OR A
       CREDIT SUPPORT PROVIDER ON THIS AGREEMENT.

5.   Account Details and
     Settlement Information:      PAYMENTS TO BSFP:
                                  Citibank, N.A., New York
                                  ABA Number: 021-0000-89, for the account of
                                  Bear, Stearns Securities Corp.
                                  Account Number: 0925-3186, for further credit
                                  to Bear Stearns Financial Products Inc.
                                  Sub-account  Number: 102-04654-1-3
                                  Attention: Derivatives Department

                                  PAYMENTS TO COUNTERPARTY:
                                  Please provide

This Agreement may be executed in several counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.

Counterparty hereby agrees to check this Confirmation and to confirm that the
foregoing correctly sets forth the terms of the Transaction by signing in the
space provided below and returning to

                                      R-9
<PAGE>

BSFP a facsimile of the fully-executed Confirmation to 212-272-9857. For
inquiries regarding U.S. Transactions, please contact SUSAN DONLON by telephone
at 212-272-2364. For all other inquiries please contact ORLAITH O'DEA by
telephone at 353-1-402-6220 Originals will be provided for your execution upon
your request.

We are very pleased to have executed this Transaction with you and we look
forward to completing other transactions with you in the near future.

Very truly yours,

BEAR STEARNS FINANCIAL PRODUCTS INC.

By:  _______________________________
     Name:
     Title:

Counterparty, acting through its duly authorized signatory, hereby agrees to,
accepts and confirms the terms of the foregoing as of the Trade Date.

COUNTRYWIDE HOME LOANS, INC.

By:  _______________________________
     As authorized agent or officer for Countrywide Home Loans, Inc.
     Name:
     Title:

                                      R-10
<PAGE>

                                    EXHIBIT S

                    FORM OF CAP CONTRACT ASSIGNMENT AGREEMENT

                              ASSIGNMENT AGREEMENT

      ASSIGNMENT AGREEMENT, dated as of ________________ (the "Assignment
Effective Date"), among _______________________ ("Assignor"),
____________________________________ ("Assignee") by ___________________, not in
its individual capacity but as trustee for Assignee, and Bear Stearns Financial
Products Inc. ("Remaining Party") (the "Assignment Agreement").

                             W I T N E S S E T H:

      WHEREAS, Assignor desires and Remaining Party have executed and delivered
that certain confirmation and agreement dated __________________, the reference
number of which is __________ (the "Confirmation and Agreement"), a copy of
which is attached hereto as Exhibit I;

      WHEREAS, Assignor desires to assign to Assignee all of its rights, and
delegate to Assignee all of its duties and obligation, under that Confirmation
and Agreement (the "Assigned Transaction");

      WHEREAS, Assignee desires to obtain the written consent of Remaining Party
to such assignment, delegation, and assumption of the Remaining Party desires to
grant such consent in accordance with the terms hereof;

      NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties agree as follows:

      1.    Assignment and Assumption. Assignor hereby assigns to Assignee all
            of its rights, and delegates to Assignee all of its duties and
            obligations, under the Assigned Transaction arising on or after
            ____________ (the "Effective Date"), and Assignee hereby assumes all
            such rights, duties, and obligations.

      2.    Assignee Swap Agreement. The Assignee and Remaining Party hereby
            agree that the Assigned Transaction will supplement, form a part of,
            and be subject to an agreement in the form of the 1992 ISDA Master
            Agreement (Multicurrency-Cross Border)("Master Agreement") between
            the Assignee and the Remaining Party as if the parties had executed
            an agreement in such form (but without any Schedule except for (i)
            the election of the items specified in section 4 of the Confirmation
            and Agreement and (ii) the items specified below) on ______________.
            In the event of any inconsistency between the provisions of the
            Master Agreement and

                                      S-1
<PAGE>

            the Assigned Transaction as modified herein, the Assigned
            Transaction as modified herein will prevail.

      3.    Release. Effective as of and from the Effective Date, Remaining
            Party hereby releases Assignor from all duties and obligations owed
            to Remaining Party under and in respect of the Assigned Transaction.
            Upon the assumption by Assignee, Assignor shall have no rights under
            and in respect of the Assigned Transaction or the Remaining Party .

      4.    Limitation on Liability. Assignor and Remaining Party agree to the
            following: (a) the sole recourse in respect of the obligations of
            Assignee hereunder and under the Assigned Transaction shall be to
            the Trust Fund (as defined in the Pooling and Servicing Agreement);
            (b) __________________ is entering into this Assignment Agreement
            solely in its capacity as trustee and not in its individual capacity
            under the Pooling and Servicing Agreement; and (c) in no case shall
            _____ (or any person acting as successor trustee under the Pooling
            and Servicing Agreement) be personally liable for or on account of
            any of the statements, representations, warranties, covenants or
            obligations stated to be those of Assignor or Assignee under the
            terms of the Assigned Transaction, all such liability, if any, being
            expressly waived by Assignor and Remaining Party and any person
            claiming by, through or under either such party.

      5.    Consent and Acknowledgment of Remaining Party. Remaining Party
            hereby consents to the assignment and delegation by Assignor to
            Assignee of all of Assignor`s rights, duties, and obligations under
            the Assigned Transaction pursuant to this Assignment Agreement. In
            addition, Remaining Party hereby acknowledges that the
            responsibilities of Assignee under the Assigned Transaction will be
            performed on its behalf by Countrywide Home Loans Servicing LP, as
            master servicer under the Pooling and Servicing Agreement.

      6.    Representations. Each party hereby represents and warrants to the
            other parties as follows:

      (a) It is duly organized, validly existing and in good standing under the
      laws of its organization or incorporation;

      (b) It has the power to execute and deliver this Assignment Agreement; and

      (c) Its obligations under this Assignment Agreement constitute its legal,
      valid and binding obligations, enforceable in accordance with their
      respective terms.

      Each of Assignor and Remaining Party represents that no event or condition
has occurred that constitutes an Event of Default, a Potential Event of Default
or, to the party's knowledge, a Termination Event (as such terms are defined in
the Confirmation and Agreement), with respect to the party, and no such event
would occur as a result of the party's entering into or performing its
obligations under this Assignment Agreement.

                                      S-2
<PAGE>

      7.    Indemnity. Each of Assignor and Remaining Party hereby agrees to
            indemnify and hold harmless Assignee with respect to any and all
            claims arising under the Assigned Transaction prior to the Effective
            Date. Each of Assignee (subject to the limitations set forth in
            paragraph 3 above) and Remaining Party hereby agrees to indemnify
            and hold harmless Assignor with respect to any and all claims
            arising under the Assigned Transaction on or after the Effective
            Date.

      8.    Governing Law. This Assignment Agreement shall be governed by and
            construed in accordance with the laws of the State of New York.

      9.    Notices For the purposes of this Assignment Agreement and Section
            12(a) of the Assigned Transaction, the addresses for notices or
            communications are as follows: (i) in the case of Assignor,
            Countrywide Home Loans, Inc., 4500 Park Granada, Calabasas,
            California 91302, Attention: _______, with a copy to the same
            address, Attention: Legal Department, or such other address as may
            be hereafter furnished in writing to Assignee and Remaining Party;
            (ii) in the case of Assignee, ________________________, CWABS, Inc.
            Series 2004-BC[_], or such other address as may be hereafter
            furnished in writing to Assignor and Remaining Party; and (iii) in
            the case of Remaining Party, 383 Madison Avenue, New York, NY 10179,
            Attention: DPC Manager - Suite 2700, facsimile (212) 272-5823, with
            a copy to, One Metrotech Center North, Brooklyn, NY 11201,
            Attention: Derivative Operations - 7th Floor, facsimile (212)
            272-1634, or such other address as may be hereafter furnished in
            writing to Assignor and Assignee.

      10.   Payments. Each party hereby agrees that the Assignee or the
            Remaining Party, as the case may be, shall be responsible for all
            payments accruing from the Calculation Period that begins on
            _________________ and the Assignor or the Remaining Party, as the
            case may be, shall be responsible for all payments accruing prior to
            such Calculation Period. All payments remitted by Remaining Party
            under the Assigned Transaction shall be made by wire transfer
            according to the following instructions:

                        _________________________
                        _________________________
                        ABA # ___________________
                        GLA # ___________________
                        For Further Credit: _____
                        Attn:    ________________

      11.   Counterparts. This Assignment Agreement may be executed and
            delivered in counterparts (including by facsimile transmission or
            electronically sent via the Internet using such encoding and
            security procedures as may be specified by the parties by subsequent
            agreement), each of which when executed shall be deemed to be an
            original but all of which taken together shall constitute one and
            the same instrument.

      12.   Amendments to Confirmation and Agreement

                                      S-3
<PAGE>

      (a) Section 4, paragraph 2 of the Confirmation and Agreement is amended by
adding at the end thereof the following subsection:

"(h) Substitution Event. If at any time the unsecured, unsubordinated long-term
obligations, or equivalent, of BSFP, shall be rated A+ or below by S&P or A1 or
below by Moody's, and within ten (10) business days following the issuance of
such a rating, BSFP, using its good faith efforts, fails to find a person
acceptable to the Counterparty, which acceptance shall not be unreasonably
withheld, to whom all of BSFP's interests and obligations under this Agreement
shall be assigned at no cost to the Counterparty, and following which BSFP shall
be released from all further obligations under this Agreement, then,
notwithstanding paragraph (i) below, such failure shall constitute an Additional
Termination Event with BSFP as the Affected Party."

(i) The "Additional Termination Event" provisions of Section 5(b)(v) of the
Master Agreement will not apply to Remaining Party or Assignee."

      (b) Section 4, paragraph 6 of the Confirmation and Agreement is amended by
adding at the end thereof the following subsections:

"(m) Non-Petition. BSFP hereby irrevocably and unconditionally agrees that it
will not institute against, or join any other person in instituting against, the
Assignee, any bankruptcy, reorganization, arrangement, insolvency, or similar
proceeding under the laws of the United States, the Cayman Islands or any other
jurisdiction for the non-payment of any amount due hereunder or any other reason
until the payment in full of the Notes (as defined in the Indenture) and the
expiration of a period of one year plus ten days (or, if longer, the applicable
preference period) following such payment.

(n) Additional Provisions. Notwithstanding the terms of Sections 5 and 6 of the
ISDA Form Master Agreement, the provisions of Sections 5(a)(ii), 5(a)(iii) and
5(a)(iv) shall not apply to BSFP or the Counterparty.

(o) Amendment; Consent. Section 9(b) of the ISDA Form Master Agreement is
amended and modified by adding the following at the end of such Section:

No amendment, modification or waiver in respect of this Master Agreement will be
effective unless the Rating Agency Condition, as defined below, is satisfied.

(p) No Set-off. Notwithstanding any provision of this Agreement or any other
existing or future agreement, each party irrevocably waives any and all rights
it may have to set off, net, recoup or otherwise withhold or suspend or
condition payment or performance of any obligation between it and the other
party hereunder against any obligation between it and the other party under any
other agreements. The provisions for Set-off set forth in Section 6(e) of the
Agreement shall not apply for purposes of this Transaction.

(q) Additional Definitional Provisions.

                                      S-4
<PAGE>

As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context clearly requires otherwise:

      "Fitch" means, Fitch Ratings, or any successor thereto.

      "Moody's" means Moody's Investor Service, Inc., or any successor
      thereto.

      "Rating Agency Condition" means, with respect to any particular proposed
      act or omission to act hereunder that the party acting or failing to act
      having consulted with any of the Rating Agencies then providing a rating
      of the Relevant Certificates and having received from the Rating Agencies,
      a written confirmation that the proposed action or inaction would not
      cause a downgrading or withdrawal of the then-current rating of the
      Relevant Certificates.

      "Rating Agencies" means each of Moody's and S&P.

      "Relevant Certificates" means the Offered Certificates (as defined in the
      Pooling and Servicing Agreement).

      "S&P" means Standard & Poor's Ratings Group, or any successor thereto.

      (c) Section 8 of the Confirmation and Agreement is amended by adding "(4)"
before "Principal." and by adding at the end thereof the following subsection:

      (5) Eligible Contract Participant. Each party constitutes an "eligible
contract participant" as such term is defined in Section 1(a)12 of the
Commodity Exchange Act, as amended."

                                      S-5
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement as of the date first above written.

                              [NAME]

                              By:     ______________________
                              Name:   ______________________
                              Title:  ______________________

                              [NAME]

                              By:     ______________________
                              Name:   ______________________
                              Title:  ______________________

                              [NAME]

                              By:     ______________________
                              Name:   ______________________
                              Title:  ______________________

                                      S-6
<PAGE>

                                    EXHIBIT T

                OFFICER'S CERTIFICATE WITH RESPECT TO PREPAYMENTS

                           ASSET-BACKED CERTIFICATES,
                                 Series 2004-BC3

                                         [Date]

Via Facsimile

The Bank of New York,
      as Trustee
101 Barclay St., 8W
New York, New York  10286

Dear Sir or Madam:

            Reference is made to the Pooling and Servicing Agreement, dated as
of July 1, 2004, (the "Pooling and Servicing Agreement") among CWABS, Inc., as
Depositor, Countrywide Home Loans, Inc., as Seller, Countrywide Home Loans
Servicing LP, as Master Servicer and The Bank of New York, as Trustee.
Capitalized terms used herein shall have the meanings ascribed to such terms in
the Pooling and Servicing Agreement.

            __________________ hereby certifies that he/she is a Servicing
Officer, holding the office set forth beneath his/her name and hereby further
certifies as follows:

            With respect to the Distribution Date in _________ 20[ ] and each
Mortgage Loan set forth in the attached schedule:

            1. A Principal Prepayment in full or in part was received during the
related Prepayment Period;

            2. Any Prepayment Charge due under the terms of the Mortgage Note
with respect to such Principal Prepayment was or was not, as indicated on the
attached schedule using "Yes" or "No", received from the Mortgagor and deposited
in the Certificate Account;

            3. As to each Mortgage Loan set forth on the attached schedule for
which all or part of the Prepayment Charge required in connection with the
Principal Prepayment was waived by the Master Servicer, such waiver was, as
indicated on the attached schedule, based upon:

                  (i) the Master Servicer's determination that such waiver would
      maximize recovery of Liquidation Proceeds for such Mortgage Loan, taking
      into account the value of such Prepayment Charge, or

                                      T-1
<PAGE>

                  (ii)(A) the enforceability thereof is limited (1) by
      bankruptcy, insolvency, moratorium, receivership, or other similar law
      relating to creditors' rights generally or (2) due to acceleration in
      connection with a foreclosure or other involuntary payment, or (B) the
      enforceability is otherwise limited or prohibited by applicable law; and

            4. We certify that all amounts due in connection with the waiver of
a Prepayment Charge inconsistent with clause 3 above which are required to be
deposited by the Servicer pursuant to Section 3.20 of the Pooling and Servicing
Agreement, have been or will be so deposited.

                                       COUNTRYWIDE HOME LOANS
                                         SERVICING LP,
                                         as Master Servicer

                                       By:  COUNTRYWIDE GP, INC.

                                       By:___________________________________
                                         Name:
                                         Title:

                                      T-2
<PAGE>

  SCHEDULE OF MORTGAGE LOANS FOR WHICH A PREPAYMENT WAS RECEIVED DURING THE
                          RELATED PREPAYMENT PERIOD

--------------------------------------------------------------------------------
LOAN NUMBER                 CLAUSE 2:  YES/NO          CLAUSE 3:  (I) OR (II)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                                      T-3
<PAGE>

         APPENDIX U: Standard & Poor's Predatory Lending Categorization

         APPENDIX E: Standard & Poor's Predatory Lending Categorization

      Standard & Poor's has categorized loans governed by anti-predatory lending
laws in the Jurisdictions listed below into three categories based upon a
combination of factors that include (a) the risk exposure associated with the
assignee liability and (b) the tests and thresholds set forth in those laws.
Note that certain loans classified by the relevant statute as Covered are
included in Standard & Poor's High Cost Loan Category because they included
thresholds and tests that are typical of what is generally considered High Cost
by the industry.

--------------------------------------------------------------------------------
                 STANDARD & POOR'S HIGH-COST LOAN CATEGORIZATION

--------------------------------------------------------------------------------
STATE/JURISDICTION                   CATEGORY UNDER APPLICABLE ANTI-PREDATORY
                                     LENDING LAW
--------------------------------------------------------------------------------
Arkansas                             High Cost Home Loan
--------------------------------------------------------------------------------
Cleveland Heights, Ohio              Covered Loan
--------------------------------------------------------------------------------
Colorado                             Covered Loan
--------------------------------------------------------------------------------
Connecticut                          High Cost Home Loan
--------------------------------------------------------------------------------
District of Columbia                 Covered Loan
--------------------------------------------------------------------------------
Florida                              High Cost Home Loan
--------------------------------------------------------------------------------
Georgia (Oct. 1, 2002 - March 6,     High Cost Home Loan
2003)
--------------------------------------------------------------------------------
Georgia as amended (March 7, 2003 -  High Cost Home Loan
current)
--------------------------------------------------------------------------------
HOEPA Section 32                     High Cost Loan
--------------------------------------------------------------------------------
Illinois                             High Risk Home Loan
--------------------------------------------------------------------------------
Kansas                               High Loan-to-Value Consumer Loans and High
                                     APR Consumer Loans
--------------------------------------------------------------------------------
Kentucky                             High Cost Home Loan
--------------------------------------------------------------------------------
Los Angeles, Calif.                  High Cost Refinance Home Loan
--------------------------------------------------------------------------------
Maine                                High Rate High Fee Mortgage
--------------------------------------------------------------------------------
Massachusetts                        High Cost Home Loan
--------------------------------------------------------------------------------
Nevada                               Home Loan
--------------------------------------------------------------------------------
New Jersey                           High Cost Home Loan
--------------------------------------------------------------------------------
New York                             High Cost Home Loan
--------------------------------------------------------------------------------
New Mexico                           High Cost Home Loan
--------------------------------------------------------------------------------
North Carolina                       High Cost Home Loan
--------------------------------------------------------------------------------
Oakland, Calif.                      High Cost Home Loan
--------------------------------------------------------------------------------
Ohio                                 Covered Loan
--------------------------------------------------------------------------------
Oklahoma                             Subsection 10 Mortgage
--------------------------------------------------------------------------------
South Carolina                       High Cost Home Loan
--------------------------------------------------------------------------------
West Virginia                        West Virginia Mortgage Loan Act Loan
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                  STANDARD & POOR'S COVERED LOAN CATEGORIZATION

--------------------------------------------------------------------------------
STATE/JURISDICTION                   CATEGORY UNDER APPLICABLE ANTI-PREDATORY
                                     LENDING LAW
--------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003) Covered Loan

                                      T-4
<PAGE>

--------------------------------------------------------------------------------
New Jersey                           Covered Home Loan
--------------------------------------------------------------------------------
                    STANDARD & POOR'S HOME LOAN CATEGORIZATION
--------------------------------------------------------------------------------
                                     CATEGORY UNDER APPLICABLE ANTI-PREDATORY
STATE/JURISDICTION                   LENDING LAW
--------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003) Home Loan
--------------------------------------------------------------------------------
New Jersey                           Home Loan
--------------------------------------------------------------------------------
New Mexico                           Home Loan
--------------------------------------------------------------------------------
North Carolina                       Consumer Home Loan
--------------------------------------------------------------------------------
Oakland, Calif.                      Home Loan
--------------------------------------------------------------------------------
South Carolina                       Consumer Home Loan
--------------------------------------------------------------------------------

                                      T-5EXHIBIT 1

                 STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.,
                                    DEPOSITOR

                         U.S. BANK NATIONAL ASSOCIATION,
                                     TRUSTEE

                     WELLS FARGO BANK, NATIONAL ASSOCIATION,
                  MASTER SERVICER AND SECURITIES ADMINISTRATOR

                                       and

                            EMC MORTGAGE CORPORATION
                               SELLER AND COMPANY

                         POOLING AND SERVICING AGREEMENT

                            Dated as of July 1, 2004

                  Structured Asset Mortgage Investments II Inc.
            Prime Mortgage Trust, Mortgage Pass-Through Certificates

                                  Series 2004-1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          Page
<S>                                                                                                       <C>
ARTICLE I
Definitions..................................................................................................2
Section 1.01     Calculation of LIBOR.......................................................................37
ARTICLE II
Conveyance of Mortgage Loans; Original Issuance of Certificates.............................................38
Section 2.01     Conveyance of Mortgage Loans to Trustee....................................................38
Section 2.02     Acceptance of Mortgage Loans by Trustee....................................................41
Section 2.03     Assignment of Interest in the Mortgage Loan Purchase Agreement.............................43
Section 2.04     Substitution of Mortgage Loans.............................................................44
Section 2.05     Issuance of Certificates...................................................................45
Section 2.06     Representations and Warranties Concerning the Depositor....................................46
ARTICLE III
Administration and Servicing of Mortgage Loans..............................................................48
Section 3.01     Master Servicer............................................................................48
Section 3.02     REMIC-Related Covenants....................................................................49
Section 3.03     Monitoring of Servicers....................................................................49
Section 3.04     Fidelity Bond..............................................................................50
Section 3.05     Power to Act; Procedures...................................................................50
Section 3.06     Due-on-Sale Clauses; Assumption Agreements.................................................51
Section 3.07     Release of Mortgage Files..................................................................51
Section 3.08     Documents, Records and Funds in Possession of Master Servicer To Be Held for Trustee.......52
Section 3.09     Standard Hazard Insurance and Flood Insurance Policies.....................................53
Section 3.10     Presentment of Claims and Collection of Proceeds...........................................54
Section 3.11     Maintenance of the Primary Mortgage Insurance Policies.....................................54
Section 3.12     Trustee to Retain Possession of Certain Insurance Policies and Documents...................54
Section 3.13     Realization Upon Defaulted Mortgage Loans..................................................55
Section 3.14     Compensation for the Master Servicer.......................................................55
Section 3.15     REO Property...............................................................................55
Section 3.16     Annual Officer's Certificate as to Compliance..............................................56
Section 3.17     Annual Independent Accountant's Servicing Report...........................................56
Section 3.18     Reports Filed with Securities and Exchange Commission......................................57
Section 3.19     The Company................................................................................58
Section 3.20     UCC........................................................................................58
Section 3.21     Optional Purchase of Defaulted Mortgage Loans..............................................58
ARTICLE IV
Accounts....................................................................................................59
Section 4.01     Protected Accounts.........................................................................59
Section 4.02     Master Servicer Collection Account.........................................................60
Section 4.03     Permitted Withdrawals and Transfers from the Master Servicer Collection Account............61
Section 4.04     Distribution Account.......................................................................62
Section 4.05     Permitted Withdrawals and Transfers from the Distribution Account..........................63
</TABLE>

                                      -i-
<PAGE>

<TABLE>
<S>                                                                                                       <C>
ARTICLE V
Certificates................................................................................................65
Section 5.01     Certificates...............................................................................65
Section 5.02     Registration of Transfer and Exchange of Certificates......................................72
Section 5.03     Mutilated, Destroyed, Lost or Stolen Certificates..........................................75
Section 5.04     Persons Deemed Owners......................................................................75
Section 5.05     Transfer Restrictions on Residual Certificates.............................................76
Section 5.06     Restrictions on Transferability of Certificates............................................77
Section 5.07     ERISA Restrictions.........................................................................77
Section 5.08     Rule 144A Information......................................................................79
ARTICLE VI
Payments to Certificateholders..............................................................................80
Section 6.01     Distributions on the Certificates..........................................................80
Section 6.02     Allocation of Losses.......................................................................85
Section 6.03     Payments...................................................................................87
Section 6.04     Statements to Certificateholders...........................................................88
Section 6.05     Monthly Advances...........................................................................91
Section 6.06     Compensating Interest Payments.............................................................91
Section 6.07     Policy Matters.............................................................................91
Section 6.08     Reserve Fund...............................................................................94
Section 6.09     Rounding Account...........................................................................94
Section 6.10     Principal Distributions on the Insured Certificates........................................95
ARTICLE VII
The Master Servicer........................................................................................100
Section 7.01     Liabilities of the Master Servicer........................................................100
Section 7.02     Merger or Consolidation of the Master Servicer............................................100
Section 7.03     Indemnification of the Trustee, the Master Servicer and the Securities Administrator......100
Section 7.04     Limitations on Liability of the Master Servicer and Others................................101
Section 7.05     Master Servicer Not to Resign.............................................................102
Section 7.06     Successor Master Servicer.................................................................102
Section 7.07     Sale and Assignment of Master Servicing...................................................102
ARTICLE VIII
Default....................................................................................................104
Section 8.01     Events of Default.........................................................................104
Section 8.02     Trustee to Act; Appointment of Successor..................................................106
Section 8.03     Notification to Certificateholders........................................................107
Section 8.04     Waiver of Defaults........................................................................107
Section 8.05     List of Certificateholders................................................................107
ARTICLE IX
Concerning the Trustee and the Securities Administrator....................................................108
Section 9.01     Duties of Trustee.........................................................................108
Section 9.02     Certain Matters Affecting the Trustee and the Securities Administrator....................110
Section 9.03     Trustee and Securities Administrator Not Liable for Certificates or Mortgage Loans........112
Section 9.04     Trustee and Securities Administrator May Own Certificates.................................112
</TABLE>

                                      -ii-
<PAGE>

<TABLE>
<S>                                                                                                       <C>
Section 9.05     Trustee's and Securities Administrator's Fees and Expenses................................112
Section 9.06     Eligibility Requirements for Trustee and Securities Administrator.........................113
Section 9.07     Insurance.................................................................................113
Section 9.08     Resignation and Removal of the Trustee and Securities Administrator.......................114
Section 9.09     Successor Trustee and Successor Securities Administrator..................................115
Section 9.10     Merger or Consolidation of Trustee or Securities Administrator............................115
Section 9.11     Appointment of Co-Trustee or Separate Trustee.............................................115
Section 9.12     Federal Information Returns and Reports to Certificateholders; REMIC Administration.......117
ARTICLE X
Termination................................................................................................119
Section 10.01    Termination Upon Repurchase by the Depositor or its Designee or Liquidation of the
                 Mortgage Loans............................................................................119
Section 10.02    Additional Termination Requirements.......................................................121
ARTICLE XI
Miscellaneous Provisions...................................................................................123
Section 11.01    Intent of Parties.........................................................................123
Section 11.02    Amendment.................................................................................123
Section 11.03    Recordation of Agreement..................................................................124
Section 11.04    Limitation on Rights of Certificateholders................................................124
Section 11.05    Acts of Certificateholders................................................................125
Section 11.06    Governing Law.............................................................................126
Section 11.07    Notices...................................................................................126
Section 11.08    Severability of Provisions................................................................127
Section 11.09    Successors and Assigns....................................................................127
Section 11.10    Article and Section Headings..............................................................127
Section 11.11    Counterparts..............................................................................127
Section 11.12    Notice to Rating Agencies.................................................................127
Section 11.13    Radian Rights.............................................................................128
</TABLE>

                                    EXHIBITS

Exhibit A-1           -    Form of Class A Certificates
Exhibit A-2           -    Form of Class B Certificates
Exhibit A-3           -    Form of Class PO Certificates
Exhibit A-4           -    Form of Class II-X-1 Certificates
Exhibit A-5           -    Form of Class R Certificates
Exhibit B             -    Mortgage Loan Schedule
Exhibit C             -    [Reserved]
Exhibit D             -    Request for Release of Documents
Exhibit E             -    Form of Affidavit pursuant to Section 860E(e)(4)
Exhibit F-1           -    Form of Investment Letter
Exhibit F-2           -    Form of Rule 144A and Related Matters Certificate
Exhibit G             -    Form of Custodial Agreement
Exhibit H-1 to H-5    -    Servicing Agreements
Exhibit I             -    Assignment Agreements
Exhibit J             -    Mortgage Loan Purchase Agreement
Exhibit K             -    Certificate Guaranty Insurance Policy

                                     -iii-
<PAGE>

                         POOLING AND SERVICING AGREEMENT

      Pooling and Servicing Agreement dated as of July 1, 2004, among Structured
Asset Mortgage  Investments II Inc., a Delaware  corporation,  as depositor (the
"Depositor"),  U.S. Bank National  Association,  a national banking association,
not in its  individual  capacity  but solely as trustee (the  "Trustee"),  Wells
Fargo Bank,  National  Association,  as master  servicer (in such capacity,  the
"Master  Servicer")  and as  securities  administrator  (in such  capacity,  the
"Securities  Administrator"),  and EMC Mortgage Corporation,  as seller (in such
capacity, the "Seller") and as company (in such capacity, the "Company").

                              PRELIMINARY STATEMENT

      On or prior to the Closing Date, the Depositor acquired the Mortgage Loans
from the Seller. On the Closing Date, the Depositor will sell the Mortgage Loans
and  certain  other  property  to the Trust Fund and  receive  in  consideration
therefor Certificates evidencing the entire beneficial ownership interest in the
Trust Fund.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting  REMIC I to be treated for federal  income tax purposes as a REMIC.
On the Startup Day, the REMIC I Regular  Interests  will be designated  "regular
interests" in such REMIC and the Class R-I  Certificate  will be designated  the
"residual interest" in such REMIC.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting  REMIC II to be treated for federal income tax purposes as a REMIC.
On the Startup Day, the REMIC II Regular  Interests will be designated  "regular
interests" in such REMIC and the Class R-II  Certificate  will be designated the
"residual interest" in such REMIC.

      The Trustee on behalf of the Trust  shall make an election  for the assets
constituting REMIC III to be treated for federal income tax purposes as a REMIC.
On the  Startup  Day,  the REMIC III  Regular  Certificates  will be  designated
"regular  interests"  in such  REMIC and the  Class  R-III  Certificate  will be
designated the "residual interest" in such REMIC.

      The Mortgage  Loans will have an Outstanding  Principal  Balance as of the
Cut-off  Date,  after  deducting  all  Scheduled  Principal due on or before the
Cut-off Date, of approximately $294,347,747. The initial principal amount of the
Certificates will not exceed such Outstanding Principal Balance.

      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:

<PAGE>

                                    ARTICLE I
                                   Definitions

      Whenever used in this Agreement,  the following words and phrases,  unless
otherwise  expressly  provided or unless the context otherwise  requires,  shall
have the meanings specified in this Article.

      ACCEPTED MASTER SERVICING PRACTICES: With respect to any Mortgage Loan, as
applicable,  either (x) 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 a Servicer),  or (y) as
provided in the applicable Servicing Agreement,  to the extent applicable to any
Servicer, but in no event below the standard set forth in clause (x).

      ACCOUNT:  The Master Servicer Collection Account and the Protected Account
as the context may require.

      ACCRUED  CERTIFICATE  INTEREST:  For any Certificate for any  Distribution
Date,  the interest  accrued during the related  Interest  Accrual Period at the
applicable Pass-Through Rate on the Current Principal Amount, or Notional Amount
in the case of any Interest Only  Certificate,  of such Certificate  immediately
prior to such  Distribution  Date, on the basis of a 360-day year  consisting of
twelve  30-day  months,  less  (i) in the  case of a  Senior  Certificate,  such
Certificate's  share of any Net  Interest  Shortfall  from the related  Mortgage
Loans and,  after the  Cross-Over  Date,  the  interest  portion of any Realized
Losses on the  related  Mortgage  Loans  allocated  thereto in  accordance  with
Section  6.02(i)  and  (ii)  in the  case  of a  Subordinate  Certificate,  such
Certificate's  share of any Net  Interest  Shortfall  from the related  Mortgage
Loans and the interest  portion of any Realized  Losses on the related  Mortgage
Loans allocated thereto in accordance with Section 6.02(i).

      ADJUSTABLE RATE CERTIFICATES: The Class I-A-7 Certificates and Class I-A-8
Certificates.

      ADJUSTMENT  AMOUNT:  The amount,  if any, by which the Special Hazard Loss
Amount (without giving effect to the deduction of the Adjustment Amount for such
anniversary) exceeds the lesser of (A) an amount calculated by the Depositor and
approved by the Rating  Agencies,  which amount shall not be less than $500,000,
and (B) the greater of (x) 1.0% (or if greater than 1.0%, the highest percentage
of Mortgage Loans by principal  balance  secured by Mortgaged  Properties in any
California zip code) of the  outstanding  principal  balance of all the Mortgage
Loans on the Distribution  Date  immediately  preceding such anniversary and (y)
twice the  outstanding  principal  balance  of the  Mortgage  Loan which has the
largest  outstanding  principal  balance on the  Distribution  Date  immediately
preceding such anniversary.

      AFFILIATE:  As to any Person, any other Person controlling,  controlled by
or under common  control with such Person.  "Control"  means the power to direct
the management and policies of a Person, directly or indirectly, whether through
ownership  of voting  securities,  by contract or  otherwise.  "Controlled"  and
"Controlling" have meanings correlative to the foregoing. The

                                      -2-
<PAGE>

Trustee may  conclusively  presume  that a Person is not an Affiliate of another
Person unless a Responsible  Officer of the Trustee has actual  knowledge to the
contrary.

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

      ALLOCABLE SHARE: With respect to each Class of Subordinate Certificates:

      (a) as to any  Distribution  Date and  amounts  distributable  pursuant to
clauses (i) and (iv) of the definition of Subordinate  Optimal  Principal Amount
for each  Subgroup,  the fraction,  expressed as a percentage,  the numerator of
which is the Current Principal Amount of such Class and the denominator of which
is the  aggregate  Current  Principal  Amount of all Classes of the  Subordinate
Certificates; and

      (b) as to any  Distribution  Date and  amounts  distributable  pursuant to
clauses (ii), (iii) and (v) of the definition of Subordinate  Optimal  Principal
Amount, and as to each Class of Subordinate  Certificates  (other than the Class
of Subordinate  Certificates having the lowest numerical designation as to which
the Class Prepayment Distribution Trigger shall not be applicable) for which (x)
the related Class  Prepayment  Distribution  Trigger has been  satisfied on such
Distribution  Date,  the fraction,  expressed as a percentage,  the numerator of
which is the Current Principal Amount of such Class and the denominator of which
is the aggregate  Current  Principal  Amount of all such Classes of  Subordinate
Certificates and (y) the related Class Prepayment  Distribution  Trigger has not
been satisfied on such Distribution Date, 0%; provided that if on a Distribution
Date, the Current Principal Amount of any Class of Subordinate  Certificates for
which the related Class  Prepayment  Distribution  Trigger was satisfied on such
Distribution Date is reduced to zero, any amounts  distributed  pursuant to this
clause (b), to the extent of such Class's  remaining  Allocable Share,  shall be
distributed to the remaining Classes of Subordinate  Certificates  which satisfy
the  related  Class  Prepayment   Distribution  Trigger  and  to  the  Class  of
Subordinate  Certificates  having  the lowest  numerical  Class  designation  in
reduction of their respective  Current  Principal  Amounts in the order of their
numerical Class designations.

      APPLICABLE CREDIT RATING: For any long-term deposit or security,  a credit
rating of AAA in the case of each of S&P and Fitch Ratings or Aaa in the case of
Moody's. For any short-term deposit or security, or a rating of A-l+ in the case
of each of S&P and Fitch Ratings or P-1 in the case of Moody's.

      APPLICABLE  STATE LAW: For  purposes of Section  9.12(d),  the  Applicable
State Law shall be (a) the law of the State of New York and (b) such other state
law  whose  applicability  shall  have  been  brought  to the  attention  of the
Securities  Administrator,  Radian  and the  Trustee by either (i) an Opinion of
Counsel  reasonably  acceptable to the Securities  Administrator and the Trustee
delivered to it by the Master Servicer or the Depositor,  or (ii) written notice
from the appropriate taxing authority as to the applicability of such state law.

      APPRAISED  VALUE:  For any Mortgaged  Property related to a Mortgage Loan,
the amount set forth as the  appraised  value of such  Mortgaged  Property in an
appraisal made for the mortgage originator in connection with its origination of
the related Mortgage Loan.

                                      -3-
<PAGE>

      ASSIGNMENT  AGREEMENTS:  The  agreements  attached  hereto as  Exhibit  I,
whereby the Servicing Agreements were assigned to the Trustee for the benefit of
the Certificateholders.

      ASSIGNMENT OF PROPRIETARY  LEASE:  With respect to a Cooperative Loan, the
assignment of the related Cooperative Lease from the Mortgagor to the originator
of the Cooperative Loan.

      ASSUMED FINAL  DISTRIBUTION DATE: August 25, 2034, or if such day is not a
Business Day, the next succeeding Business Day.

      AVAILABLE FUNDS: With respect to any Distribution Date, an amount equal to
the aggregate of the following  amounts with respect to the Mortgage Loans:  (a)
all  previously  undistributed  payments on account of principal  (including the
principal portion of Scheduled Payments, Principal Prepayments and the principal
portion of Net Liquidation Proceeds) and all previously  undistributed  payments
on account of interest  received  after the Cut-off  Date and on or prior to the
related  Determination Date, (b) any Monthly Advances and Compensating  Interest
Payments  by  the  Servicers  or  the  Master  Servicer  with  respect  to  such
Distribution  Date and (c) any  reimbursed  amount in connection  with losses on
investments of deposits in an account, except:

            (i) all payments that were due on or before the Cut-off Date;

            (ii) all Principal  Prepayments  and Liquidation  Proceeds  received
after the applicable Prepayment Period;

            (iii) all payments, other than Principal Prepayments, that represent
early  receipt of Scheduled  Payments due on a date or dates  subsequent  to the
related Due Date;

            (iv) amounts received on particular  Mortgage Loans as late payments
of principal or interest and respecting which, and to the extent that, there are
any unreimbursed Monthly Advances;

            (v)  amounts   representing   Monthly  Advances   determined  to  be
Nonrecoverable Advances;

            (vi) any  investment  earnings  on  amounts on deposit in the Master
Servicer  Collection Account and the Distribution  Account and amounts permitted
to be withdrawn from the Master Servicer Collection Account and the Distribution
Account pursuant to this Agreement;

            (vii) amounts  needed to pay the Servicing  Fees or to reimburse any
Servicer or the Master  Servicer for amounts due under the applicable  Servicing
Agreement  and this  Agreement to the extent such amounts have not been retained
by, or paid previously to, such Servicer or the Master Servicer;

            (viii)   amounts  needed  to  pay  any  fees  with  respect  to  any
lender-paid primary mortgage insurance policy; and

            (ix) any expenses or other amounts  reimbursable to the Trustee, the
Securities  Administrator  and the  Custodian  pursuant  to  Section  7.04(c) or
Section 9.05.

                                      -4-
<PAGE>

      AVERAGE LOSS SEVERITY  PERCENTAGE:  With respect to any Distribution Date,
the  percentage  equivalent of a fraction,  the numerator of which is the sum of
the Loss Severity  Percentages  for each Mortgage Loan which had a Realized Loss
and the  denominator of which is the number of Mortgage Loans which had Realized
Losses.

      BANKRUPTCY CODE: The United States Bankruptcy Code, as amended as codified
in 11 U.S.C.ss.ss.101-1330.

      BANKRUPTCY COVERAGE TERMINATION DATE: The Distribution Date upon which the
Bankruptcy  Loss  Amount has been  reduced to zero or a negative  number (or the
Cross-Over Date, if earlier).

      BANKRUPTCY LOSS AMOUNT: On each  Distribution  Date,  $100,000,  minus the
aggregate amount of previous Bankruptcy Losses.

      BANKRUPTCY  LOSS:  With  respect  to  any  Mortgage  Loan,  any  Deficient
Valuation or Debt Service Reduction related to such Mortgage Loan as reported by
the applicable Servicer to the Master Servicer.

      BOOK-ENTRY CERTIFICATES: Initially, all Classes of Certificates other than
the Private Certificates and the Residual Certificates.

      BUSINESS DAY: Any day other than (i) a Saturday or a Sunday, or (ii) a day
on which the New York Stock  Exchange  or Federal  Reserve is closed or on which
banking  institutions  in the  jurisdiction  in which the Trustee,  Radian,  the
Master  Servicer,  any Servicer or the Securities  Administrator  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 mortgage pass-through certificate evidencing a beneficial
ownership  interest in the Trust Fund signed and countersigned by the Trustee in
substantially  the forms  annexed  hereto as Exhibits A-1, A-2, A-3, A-4 and A-5
with the blanks therein appropriately completed.

      CERTIFICATE OWNER: Any Person who is the beneficial owner of a Certificate
registered in the name of the Depository or its nominee.

      CERTIFICATE REGISTER: The register maintained pursuant to Section 5.02.

      CERTIFICATEHOLDER: A Holder of a Certificate.

      CLASS:  With respect to the  Certificates,  I-A-1,  I-A-2,  I-A-3,  I-A-4,
I-A-5, I-A-6, I-A-7, I-A-8, I-PO, II-A-1,  II-A-2,  II-A-3,  II-PO, II-X-1, R-I,
R-II, R-III, B-1, B-2, B-3, B-4, B-5 and B-6.

      CLASS I-PO CERTIFICATE CASH SHORTFALL: As defined in Section 6.01(a)(vi).

                                      -5-
<PAGE>

      CLASS   II-PO   CERTIFICATE   CASH   SHORTFALL:   As  defined  in  Section
6.01(a)(vii).

      CLASS I-PO  CERTIFICATE  DEFERRED  AMOUNT:  As to each  Distribution  Date
through the  Cross-Over  Date,  the  aggregate of all amounts  allocable on such
dates to the Class I-PO  Certificates  in respect  of the  principal  portion of
Realized  Losses in respect of Discount  Mortgage  Loans in Subgroup I-1 and the
Class I-PO  Certificate Cash Shortfall and all amounts  previously  allocated in
respect of such losses and such shortfalls to the Class I-PO  Certificates,  and
not distributed on prior Distribution Dates.

      CLASS II-PO  CERTIFICATE  DEFERRED AMOUNT:  As to each  Distribution  Date
through the  Cross-Over  Date,  the  aggregate of all amounts  allocable on such
dates to the Class II-PO  Certificates  in respect of the  principal  portion of
Realized  Losses in respect of Discount  Mortgage Loans in Subgroup II-1 and the
Class II-PO Certificate Cash Shortfall and all amounts  previously  allocated in
respect of such losses and such shortfalls to the Class II-PO Certificates,  and
not distributed on prior Distribution Dates.

      CLASS  PO  CERTIFICATE   CASH  CERTIFICATE   SHORTFALL:   The  Class  I-PO
Certificate  Cash Shortfall or the Class II-PO  Certificate  Cash Shortfall,  as
applicable.

      CLASS  PO  CERTIFICATE  PRINCIPAL  DISTRIBUTION  AMOUNT:  The  Class  I-PO
Certificates and the Class II-PO Certificates shall be entitled to distributions
from Subgroup I-1 and Subgroup II-2, respectively.  For each Class of Class I-PO
Certificates  or  II-PO  Certificates,  as  applicable,  with  respect  to  each
Distribution Date will be an amount equal to the sum of:

            (i) the  applicable  PO  Percentage  of all  scheduled  payments  of
      principal  due on each Discount  Mortgage Loan in the related  Subgroup on
      the related Due Date as specified in the amortization schedule at the time
      applicable  thereto (after adjustment for previous  principal  prepayments
      but before any adjustment to such  amortization  schedule by reason of any
      bankruptcy or similar  proceeding or any  moratorium or similar  waiver or
      grace period);

            (ii) the applicable PO Percentage of the Scheduled Principal Balance
      of each Discount  Mortgage Loan in related  Subgroup which was the subject
      of a  prepayment  in full  received  by the  Master  Servicer  during  the
      applicable Prepayment Period;

            (iii) the  applicable PO Percentage  of all partial  prepayments  of
      principal of each Discount  Mortgage Loan in the related Subgroup received
      during the applicable Prepayment Period;

            (iv) the lesser of (a) the  applicable  PO  Percentage of the sum of
      (A) all Net Liquidation  Proceeds  allocable to principal on each Discount
      Mortgage Loan in the related  Subgroup which became a Liquidated  Mortgage
      Loan during the related  Prepayment Period (other than a Discount Mortgage
      Loan described in clause (B)) and (B) the Scheduled  Principal  Balance of
      each such Discount  Mortgage Loan in the related Subgroup  purchased by an
      insurer from the Trustee during the related  Prepayment Period pursuant to
      the related Primary Mortgage  Insurance Policy, if any, or otherwise;  and
      (b) the applicable PO Percentage of the sum of (A) the Scheduled Principal
      Balance of each

                                      -6-
<PAGE>

      Discount  Mortgage Loan in the related  Subgroup which became a Liquidated
      Mortgage Loan during the related  Prepayment Period (other than a Discount
      Mortgage  Loan  described in clause (B)) and (B) the  Scheduled  Principal
      Balance  of each  such  Mortgage  Loan in the  related  Subgroup  that was
      purchased  by an insurer  from the Trustee  during the related  Prepayment
      Period pursuant to the related Primary Mortgage  Insurance Policy, if any,
      or otherwise; and

            (v) the  applicable  PO  Percentage  of the sum of (a) the Scheduled
      Principal  Balance of each Discount  Mortgage Loan in the related Subgroup
      which was repurchased by the Seller in connection  with such  Distribution
      Date and (b) the  difference,  if any,  between  the  Scheduled  Principal
      Balance of a Discount  Mortgage Loan in the related Subgroup that has been
      replaced by the Seller with a substitute  Discount  Mortgage Loan pursuant
      to this  Agreement  in  connection  with  such  Distribution  Date and the
      Scheduled Principal Balance of such substitute Discount Mortgage Loan.

      CLASS  PREPAYMENT   DISTRIBUTION  TRIGGER:  For  a  Class  of  Subordinate
Certificates  for any  Distribution  Date,  the  Class  Prepayment  Distribution
Trigger is satisfied if the fraction (expressed as a percentage),  the numerator
of which is the aggregate  Current Principal Amount of such Class and each Class
of Subordinate  Certificates subordinate thereto, if any, and the denominator of
which is the Scheduled  Principal Balance of all of the Mortgage Loans as of the
related Due Date, equals or exceeds such percentage calculated as of the Closing
Date.

      CLASS  R  CERTIFICATES:   The  Class  R-I,  Class  R-II  and  Class  R-III
Certificates.

      CLOSING DATE: July 30, 2004.

      CODE: The Internal Revenue Code of 1986, as amended.

      COMPENSATING INTEREST PAYMENT: As defined in Section 6.06.

      COOPERATIVE:  A private,  cooperative  housing  corporation  which owns or
leases land and all or part of a building or  buildings,  including  apartments,
spaces used for commercial  purposes and common areas therein and whose board of
directors authorizes, among other things, the sale of Cooperative Stock.

      COOPERATIVE APARTMENT: A dwelling unit in a multi-dwelling  building owned
or leased by a Cooperative,  which unit the Mortgagor has an exclusive  right to
occupy pursuant to the terms of a proprietary lease or occupancy agreement.

      COOPERATIVE  LEASE:  With respect to a Cooperative  Loan, the  proprietary
lease or occupancy agreement with respect to the Cooperative  Apartment occupied
by the Mortgagor and relating to the related  Cooperative  Stock, which lease or
agreement  confers an exclusive right to the holder of such Cooperative Stock to
occupy such apartment.

      COOPERATIVE  LOAN:  Any  of  the  Mortgage  Loans  made  in  respect  of a
Cooperative  Apartment,  evidenced  by a  Mortgage  Note  and  secured  by (i) a
Security  Agreement,  (ii) the related  Cooperative Stock Certificate,  (iii) an
assignment of the Cooperative  Lease, (iv) financing  statements and (v) a stock
power (or other similar instrument), and ancillary thereto, a

                                      -7-
<PAGE>

recognition  agreement  between  the  Cooperative  and  the  originator  of  the
Cooperative  Loan,  each of which was  transferred  and  assigned to the Trustee
pursuant  to  Section  2.01 and are from  time to time held as part of the Trust
Fund.

      COOPERATIVE  STOCK:  With  respect  to  a  Cooperative  Loan,  the  single
outstanding class of stock,  partnership  interest or other ownership instrument
in the related Cooperative.

      COOPERATIVE  STOCK  CERTIFICATE:  With respect to a Cooperative  Loan, the
stock certificate or other instrument evidencing the related Cooperative Stock.

      CORRESPONDING  CERTIFICATES:   With  respect  to  each  REMIC  II  Regular
Interest, the Class with the same designation.

      CORPORATE  TRUST  OFFICE:  The  office  of the  Trustee  at  which  at any
particular time its corporate trust business is 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/PRIME  2004-1. For purposes of registration
and transfer and exchange only,  the Corporate  Trust Office shall be located at
U.S. Bank National  Association,  60 Livingston  Avenue,  Bond Drop Window,  St.
Paul, Minnesota 55107.

      CROSS-OVER  DATE:  The  first  Distribution  Date on which  the  aggregate
Current  Principal  Amount of the Subordinate  Certificates  has been reduced to
zero (giving effect to all distributions on such Distribution Date).

      CURRENT PRINCIPAL AMOUNT:  With respect to any Certificate  (other than an
Interest Only  Certificate) as of any Distribution  Date, the initial  principal
amount of such  Certificate,  and  reduced  by (i) all  amounts  distributed  on
previous Distribution Dates on such Certificate with respect to principal,  (ii)
the  principal   portion  of  all  Realized  Losses   allocated  prior  to  such
Distribution  Date to such  Certificate,  taking account of the Loss  Allocation
Limitation   and  (iii)  in  the  case  of  a  Subordinate   Certificate,   such
Certificate's pro rata share, if any, of the applicable Subordinate  Certificate
Writedown Amount for previous  Distribution  Dates. With respect to any Class of
Certificates  (other than an Interest Only  Certificate),  the Current Principal
Amount  thereof  will  equal the sum of the  Current  Principal  Amounts  of all
Certificates in such Class.  Notwithstanding the foregoing,  solely for purposes
of giving consents,  directions,  waivers, approvals,  requests and notices, the
Class R-I, Class R-II and Class R-III  Certificates  after the Distribution Date
on  which  they  each  receive  the  distribution  of the last  dollar  of their
respective  original  principal amount shall be deemed to have Current Principal
Amounts  equal  to  their  respective  Current  Principal  Amounts  on  the  day
immediately  preceding such  Distribution  Date.  Exclusively for the purpose of
determining any subrogation  rights of Radian arising under Section 6.07 hereof,
the  Current  Principal  Amount of the  Class  I-A-5  Certificates  shall not be
reduced by the amount of any payments  made by Radian in respect of principal on
such Certificates under the Policy, except to the extent such payment shall have
been reimbursed to Radian pursuant to the provisions of this Agreement.

      CUSTODIAL AGREEMENT: An agreement,  dated as of the Closing Date among the
Depositor,  the Master Servicer,  the Trustee and the Custodian in substantially
the form of Exhibit G hereto.

                                      -8-
<PAGE>

      CUSTODIAN:  Wells  Fargo  Bank,  National  Association,  or any  successor
custodian  appointed  pursuant  to the  provisions  hereof and of the  Custodial
Agreement.

      CUT-OFF DATE: July 1, 2004.

      Cut-off Date Balance: approximately $294,347,747.

      DEBT SERVICE  REDUCTION:  Any reduction of the Scheduled  Payments which a
Mortgagor is obligated to pay with respect to a Mortgage Loan as a result of any
proceeding  under the  Bankruptcy  Code or any other  similar state law or other
proceeding.

      DECEASED HOLDER: A Certificate  Owner of an Insured  Certificate who was a
natural  person  living  at the  time  such  interest  was  acquired  and  whose
authorized personal representative,  surviving tenant by the entirety, surviving
joint tenant or surviving  tenant in common or other person  empowered to act on
behalf of a deceased  Certificate Owner causes to be furnished to the Depository
Participant evidence of death satisfactory to the Depository Participant and any
tax waivers requested by the Depository Participant.

      DEFICIENCY AMOUNT: As of any Distribution Date, an amount equal to the sum
of:

            (a)  any   interest   shortfall   allocated   to  the  Class   I-A-5
            Certificates,  except for any Net Interest  Shortfalls  allocated to
            the Class I-A-5 Certificates;

            (b) the principal  portion of any Realized  Losses  allocated to the
            Class I-A-5 Certificates; and

            (c) the Current Principal Amount of the Class I-A-5  Certificates to
            the extent  unpaid on the  Assumed  Final  Distribution  Date (after
            taking into account all distributions on that date).

      DEFICIENT VALUATION: With respect to any Mortgage Loan, a valuation of the
Mortgaged  Property by a court of competent  jurisdiction in an amount less than
the then  outstanding  indebtedness  under the Mortgage  Loan,  which  valuation
results  from a  proceeding  initiated  under the  Bankruptcy  Code or any other
similar state law or other proceeding.

      DEPOSITOR:  Structured  Asset  Mortgage  Investments  II Inc.,  a Delaware
corporation, or its successors in interest.

      DEPOSITORY:  The Depository Trust Company,  the nominee of which is Cede &
Co., or any successor thereto.

      DEPOSITORY AGREEMENT: The meaning specified in Subsection 5.01(a) hereof.

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

                                      -9-
<PAGE>

      DESIGNATED DEPOSITORY  INSTITUTION:  A depository institution  (commercial
bank, federal savings bank, mutual savings bank or savings and loan association)
or trust  company  (which may include the  Trustee),  the  deposits of which are
fully insured by the FDIC to the extent provided by law.

      DETERMINATION  DATE: With respect to each Mortgage Loan, the Determination
Date as defined in the related Servicing Agreement.

      DISCOUNT MORTGAGE LOAN: Any Group I Mortgage Loan with a Net Mortgage Rate
less than  5.2500% per annum and any Group II Mortgage  Loan with a Net Mortgage
Rate less than 4.5000% per annum.

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

      DISTRIBUTION ACCOUNT: The trust account or accounts created and maintained
pursuant  to Section  4.04,  which  shall be  denominated  "U.S.  Bank  National
Association,  as Trustee f/b/o holders of Structured Asset Mortgage  Investments
II Inc., Prime Mortgage Trust, Mortgage Pass-Through Certificates, Series 2004-1
- Distribution Account." The Distribution Account shall be an Eligible Account.

      DISTRIBUTION  ACCOUNT  DEPOSIT  DATE:  The  Business  Day  prior  to  each
Distribution Date.

      DISTRIBUTION  DATE:  The 25th day of any month,  beginning in August 2004,
or,  if such  25th day is not a  Business  Day,  the  Business  Day  immediately
following.

      DTC  CUSTODIAN:  U.S.  Bank  National  Association,  or its  successors in
interest as custodian for the Depository.

      DUE DATE:  With respect to each Mortgage  Loan,  the date in each month on
which its Scheduled  Payment is due if such due date is the first day of a month
and otherwise is deemed to

                                      -10-
<PAGE>

be the first day of the  following  month or such  other date  specified  in the
related Servicing Agreement.

      DUE PERIOD:  With respect to any Distribution Date and each Mortgage Loan,
the period  commencing  on the second  day of the month  preceding  the month in
which the  Distribution  Date  occurs and ending at the close of business on the
first day of the month in which the Distribution Date occurs.

      ELIGIBLE  ACCOUNT:  Any  of (i) a  segregated  account  maintained  with a
federal or state chartered depository institution (A) the short-term obligations
of which are rated A-1 or better by S&P, F-1 by Fitch Ratings and P-1 by Moody's
at the time of any  deposit  therein  or (B)  insured by the FDIC (to the limits
established  by such the FDIC),  the  uninsured  deposits  in which  account are
otherwise  secured such that, as evidenced by an Opinion of Counsel (obtained by
the Person  requesting  that the  account be held  pursuant  to this clause (i))
delivered  to the  Trustee  prior  to the  establishment  of such  account,  the
Certificateholders  will have a claim with  respect to the funds in such account
and a perfected first priority  security  interest against any collateral (which
shall be limited to Permitted Investments,  each of which shall mature not later
than the Business Day immediately preceding the Distribution Date next following
the date of  investment  in such  collateral  or the  Distribution  Date if such
Permitted  Investment  is an obligation of the  institution  that  maintains the
Distribution  Account)  securing  such funds that is  superior  to claims of any
other depositors or general  creditors of the depository  institution with which
such  account  is  maintained,  (ii) a  segregated  trust  account  or  accounts
maintained  with a federal or state  chartered  depository  institution or trust
company with trust powers acting in its fiduciary capacity or (iii) a segregated
account  or  accounts  of a  depository  institution  acceptable  to the  Rating
Agencies (as  evidenced in writing by the Rating  Agencies  that use of any such
account  as the  Distribution  Account  will not have an  adverse  effect on the
then-current  ratings assigned to the Classes of Certificates  then rated by the
Rating Agencies determined without regard to the Policy).  Eligible Accounts may
bear interest.

      EMC: EMC Mortgage Corporation.

      EMC  SERVICING  AGREEMENT:  With respect to Mortgage  Loans  originated by
Wachovia,  the  Servicing  Agreement  dated  as of July  1,  2004,  between  the
Depositor and EMC, as attached  hereto as Exhibit H-1 as modified by the related
Assignment Agreement.

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

      EVENT OF DEFAULT: An event of default described in Section 8.01.

      EXCESS  BANKRUPTCY  LOSS:  Any  Bankruptcy  Loss,  or portion  thereof (i)
occurring after the Bankruptcy Coverage  Termination Date or (ii) if on or prior
to such date, in excess of the then-applicable Bankruptcy Loss Amount.

      EXCESS FRAUD LOSS: Any Fraud Loss or portion  thereof (i) occurring  after
the Fraud Coverage  Termination Date with respect thereto or (ii) if on or prior
to such date, in excess of the then-applicable Fraud Loss Amount.

                                      -11-
<PAGE>

      EXCESS LOSS: Any Excess Fraud Loss, Excess Bankruptcy Loss, Excess Special
Hazard Loss or Extraordinary Loss.

      EXCESS  LIQUIDATION  PROCEEDS:  To the  extent  that  such  amount  is not
required by law to be paid to the  related  Mortgagor,  the  amount,  if any, by
which Liquidation Proceeds with respect to a Liquidated Mortgage Loan exceed the
sum of (i) the Outstanding  Principal  Balance of such Mortgage Loan and accrued
but unpaid interest at the related  Mortgage  Interest Rate through the last day
of the month in which the related  Liquidation  Date  occurs,  plus (ii) related
Liquidation Expenses.

      EXCESS SPECIAL  HAZARD LOSS:  Any Special Hazard Loss occurring  after the
Special Hazard Termination Date.

      EXTRAORDINARY  LOSS  :  Any  Realized  Loss  resulting  from  damage  to a
mortgaged  property that was  occasioned  by war,  civil  insurrection,  certain
governmental actions, nuclear reaction and certain other risks.

      FANNIE  MAE:  Federal  National  Mortgage  Association  or  any  successor
thereto.

      FITCH RATINGS: Fitch, Inc.

      FDIC: Federal Deposit Insurance Corporation or any successor thereto.

      FINAL  CERTIFICATION:  The  certification  substantially  in the  form  of
Exhibit Three to the Custodial Agreement.

      FRACTIONAL UNDIVIDED INTEREST:  With respect to any Class of Certificates,
the fractional undivided interest evidenced by any Certificate of such Class the
numerator of which is the Current  Principal  Amount,  or Notional Amount in the
case of the Interest Only Certificates,  of such Certificate and the denominator
of which is the Current  Principal Amount, or Notional Amount in the case of the
Interest Only  Certificates,  of such Class. With respect to the Certificates in
the aggregate,  the fractional undivided interest evidenced by (i) each class of
Residual Certificates will be deemed to equal 0.25%, (ii) each Class of Interest
Only  Certificates  will be deemed to equal 1.0%  multiplied by a fraction,  the
numerator  of  which  is  the  Notional  Amount  of  such  Certificate  and  the
denominator of which is the aggregate  Notional  Amount of its respective  Class
and (iii) a  Certificate  of any  other  Class  will be  deemed to equal  97.25%
multiplied by a fraction, the numerator of which is the Current Principal Amount
of such  Certificate  and the  denominator  of  which is the  aggregate  Current
Principal Amount of all the Certificates;  provided,  however, the percentage in
clause (iii) above shall be increased by 1.0% upon the  retirement of each Class
of Interest Only Certificates.

      FRAUD  COVERAGE  TERMINATION  DATE: The  Distribution  Date upon which the
Fraud  Loss  Amount  has  been  reduced  to zero or a  negative  number  (or the
Cross-Over Date, if earlier).

      FRAUD LOSS: Any Realized Loss  attributable to fraud in the origination of
the related Mortgage Loan, as reported by the applicable  Servicer to the Master
Servicer.

                                      -12-
<PAGE>

      FRAUD LOSS AMOUNT: Upon the initial issuance of the Certificates, 1.00% of
the aggregate  Scheduled  Principal  Balances of the Mortgage  Loans.  As of any
Distribution  Date during the first three  years  after the  Cut-off  Date,  the
initial Fraud Loss Amount minus the aggregate  amount of Fraud Losses that would
have been allocated to the  Subordinate  Certificates in the absence of the Loss
Allocation  Limit since the Cut-off Date. As of any  Distribution  Date from the
fourth and fifth year  following  the  Cut-off  Date,  (1) the lesser of (a) the
applicable  Fraud Loss Amount as of the most recent year  following  the Cut-off
Date  and (b)  0.50%  of the  aggregate  outstanding  principal  balance  of all
Mortgage  Loans as of the most recent year  following the Cut-off Date minus (2)
the Fraud Losses that would have been allocated to the Subordinate  Certificates
in the absence of the Loss Allocation Limit since the most recent year following
the Cut-off Date.  After the fifth year  following  the Cut-off Date,  the Fraud
Loss Amount shall be zero.

      FREDDIE  MAC:  Freddie  Mac,  formerly  the  Federal  Home  Loan  Mortgage
Corporation, or any successor thereto.

      GMAC: GMAC Mortgage Company.

      GMAC  SERVICING  AGREEMENT:  The Servicing  Agreement,  dated as of May 1,
2001,  between the Seller and GMAC,  attached hereto as Exhibit H-2, as modified
by the related Assignment Agreement.

      GLOBAL CERTIFICATE:  Any Private Certificate registered in the name of the
Depository  or its nominee,  beneficial  interests in which are reflected on the
books of the Depository or on the books of a Person  maintaining an account with
such Depository  (directly or as an indirect  participant in accordance with the
rules of such depository).

      GROUP I MORTGAGE LOAN: The Mortgage Loans with respect to the Class I-A-1,
Class I-A-2,  Class I-A-3,  Class I-A-4,  Class I-A-5, Class I-A-6, Class I-A-7,
Class I-A-8, Class I-PO, Clas R-I, Class R-II and Class R-III Certificates.

      GROUP II  MORTGAGE  LOAN:  The  Mortgage  Loans with  respect to the Class
II-A-1, Class II-A-2, Class II-A-3, Class II-PO and Class II-X-1 Certificates.

      HOLDER:  The  Person in whose  name a  Certificate  is  registered  in the
Certificate Register, except that, subject to Subsections 11.02(b) and 11.05(e),
solely for the purpose of giving any consent  pursuant  to this  Agreement,  any
Certificate registered in the name of the Depositor,  the Master Servicer or the
Trustee or any Affiliate  thereof shall be deemed not to be outstanding  and the
Fractional  Undivided Interest evidenced thereby shall not be taken into account
in  determining  whether  the  requisite   percentage  of  Fractional  Undivided
Interests  necessary to effect any such consent has been obtained.  With respect
to  the  Class  I-A-5   Certificates,   Radian  to  the  extent  of  any  Radian
Reimbursement Amount.

      INDEMNIFIED PERSONS:  The Trustee, the Master Servicer,  the Custodian 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.

                                      -13-
<PAGE>

      INDEPENDENT:  When used with respect to any  specified  Person,  this term
means that such Person (a) is in fact independent of the Depositor or the Master
Servicer and of any Affiliate of the Depositor or the Master Servicer,  (b) does
not have any  direct  financial  interest  or any  material  indirect  financial
interest  in the  Depositor  or the  Master  Servicer  or any  Affiliate  of the
Depositor or the Master  Servicer and (c) is not connected with the Depositor or
the  Master  Servicer  or  any  Affiliate  as an  officer,  employee,  promoter,
underwriter, trustee, partner, director or person performing similar functions.

      INDIVIDUAL CERTIFICATE:  Any Private Certificate registered in the name of
the Holder other than the Depository or its nominee.

      INDIVIDUAL  INSURED  CERTIFICATE:  An Insured  Certificate  that evidences
$1,000 initial Current Principal Amount.

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

      INSTITUTIONAL  ACCREDITED INVESTOR: Any Person meeting the requirements of
Rule 501(a)(l),  (2), (3) or (7) of Regulation D under the Securities Act or any
entity all of the equity holders in which come within such paragraphs.

      INDEMNIFICATION  AGREEMENT: The Indemnification Agreement dated as of July
30, 2004, among the Insurer,  the Depositor,  the Seller and Bear, Stearns & Co.
Inc.

      INSURANCE  POLICY:  With respect to any Mortgage Loan, any standard hazard
insurance policy, flood insurance policy or title insurance policy.

      INSURANCE PROCEEDS: Amounts paid by the insurer under any Insurance Policy
covering any Mortgage Loan or Mortgaged  Property other than amounts required to
be paid over to the  Mortgagor  pursuant to law or the related  Mortgage Note or
Security  Instrument  and other  than  amounts  used to repair  or  restore  the
Mortgaged Property or to reimburse insured expenses.

      INSURED CERTIFICATES: The Class I-A-5 Certificates.

      INSURED PAYMENT:  (a) As of any Distribution  Date, any Deficiency  Amount
and (b) any Preference Amount.

      INSURER: Radian Asset Assurance Inc.

      INTEREST ACCRUAL PERIOD:  With respect to each Distribution Date, for each
Class of  Certificates,  the one-month  period preceding the month in which such
Distribution  Date  occurs,  except for the Class I-A-7  Certificates  and Class
I-A-8  Certificates  which have an interest accrual period beginning on the 25th
day of the month preceding the month in which the  Distribution  Date occurs and
ending on the 24th day of the month in which the  Distribution  Date occurs,  in
each case commencing in August 2004.

      INTEREST  DETERMINATION  DATE: With respect to each Distribution Date, the
second LIBOR Business Day immediately  preceding the commencement of the related
Interest Accrual Period.

                                      -14-
<PAGE>

      INTEREST ONLY CERTIFICATES:  The Class I-A-8 Certificates and Class II-X-1
Certificates.

      INTEREST  SHORTFALL:  With  respect  to any  Distribution  Date  and  each
Mortgage  Loan that  during the related  Prepayment  Period was the subject of a
Principal  Prepayment  or  constitutes  a Relief Act  Mortgage  Loan,  an amount
determined as follows:

      (a) With  respect to partial  principal  prepayments  received  during the
relevant  Prepayment  Period: the difference between (i) one month's interest at
the applicable  Net Mortgage Rate on the amount of such  prepayment and (ii) the
amount of interest for the calendar  month of such  prepayment  (adjusted to the
applicable Net Mortgage Rate) received at the time of such prepayment;

      (b) With  respect to principal  prepayments  in full  received  during the
relevant  Prepayment  Period: the difference between (i) one month's interest at
the  applicable  Net Mortgage  Rate on the Scheduled  Principal  Balance of such
Mortgage  Loan  immediately  prior to such  prepayment  and (ii) the  amount  of
interest for the calendar month of such  prepayment  (adjusted to the applicable
Net Mortgage Rate) received at the time of such prepayment; and

      (c) With respect to Relief Act Mortgage Loans:  the excess of (i) 30 days'
interest  (or, in the case of a principal  prepayment  in full,  interest to the
date of prepayment) on the Scheduled  Principal Balance thereof (or, in the case
of a partial principal prepayment,  on the amount so prepaid) at the related Net
Mortgage  Rate  over  (ii) 30 days'  interest  (or,  in the case of a  principal
prepayment  in full,  interest  to the  date of  prepayment)  on such  Scheduled
Principal Balance (or, in the case of a partial principal prepayment in part, on
the amount so  prepaid)  at the Net  Mortgage  Rate  required  to be paid by the
Mortgagor as limited by application of the Relief Act.

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

      INVESTMENT  LETTER:  The  letter  to be  furnished  by each  Institutional
Accredited  Investor  which  purchases  any  of  the  Private   Certificates  in
connection  with such purchase,  substantially  in the form set forth as Exhibit
F-1 hereto.

      ISSUER: Prime Mortgage Trust 2004-1.

      LENDER-PAID  PMI RATE:  With  respect to each  Mortgage  Loan covered by a
lender-paid primary mortgage insurance policy, the amount payable to the related
insurer, as stated in the Mortgage Loan Schedule.

      LIBOR:  With respect to any Distribution  Date, the arithmetic mean of the
London  interbank  offered rate quotations for one-month U.S.  Dollar  deposits,
expressed on a per annum basis, determined in accordance with Section 1.02.

      LIBOR  BUSINESS DAY: Any day other than (i) a Saturday or Sunday or (ii) a
day on which  banking  institutions  in  London,  England  and New York City are
required or authorized by law to be closed.

                                      -15-
<PAGE>

      LIQUIDATED  MORTGAGE  LOAN:  Any  defaulted  Mortgage Loan as to which the
related  Servicer  or the Master  Servicer  has  determined  that all amounts it
expects to recover from or on account of such Mortgage Loan have been recovered.

      LIQUIDATION  DATE: With respect to any Liquidated  Mortgage Loan, the date
on which the Master  Servicer or the related  Servicer has  certified  that such
Mortgage Loan has become a Liquidated Mortgage Loan.

      LIQUIDATION  EXPENSES:  With  respect to a Mortgage  Loan in  liquidation,
unreimbursed  expenses  paid or  incurred  by or for the  account  of the Master
Servicer or the related  Servicers in connection  with the  liquidation  of such
Mortgage Loan and the related Mortgaged  Property,  such expenses  including (a)
property protection expenses,  (b) property sales expenses,  (c) foreclosure and
sale  costs,  including  court costs and  reasonable  attorneys'  fees,  and (d)
similar expenses reasonably paid or incurred in connection with liquidation.

      LIQUIDATION PROCEEDS:  Cash received in connection with the liquidation of
a defaulted  Mortgage Loan,  whether through  trustee's sale,  foreclosure sale,
Insurance Proceeds, condemnation proceeds or otherwise.

      LIVING OWNER: A Certificate  Owner of an Insured  Certificate other than a
Deceased Holder.

      LOAN-TO-VALUE  RATIO:  With respect to any Mortgage  Loan,  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
Original Value of the related Mortgaged Property.

      LOCKOUT CERTIFICATES: The Class I-A-6 Certificates.

      LOCKOUT PERCENTAGE:  On any Distribution Date occurring during the periods
set forth below will be as follows:

Period (dates inclusive)                         Lockout Prepayment Percentage

      August 25, 2004 - July 25, 2009                        0%
      August 25, 2009 - July 25, 2010                        30%
      August 25, 2010 - July 25, 2011                        40%
      August 25, 2011 - July 25, 2012                        60%
      August 25, 2012 - July 25, 2013                        80%
      August 25, 2013 and thereafter                         100%

      LOCKOUT  PRINCIPAL AMOUNT:  For any Distribution  Date, an amount equal to
the Lockout  Percentage  multiplied  by the Lockout Pro Rata  Optimal  Principal
Amount.

      LOCKOUT  PRO  RATA  OPTIMAL   PRINCIPAL   AMOUNT:   With  respect  to  any
Distribution  Date,  shall be an amount equal to the product of (x) the Subgroup
I-1 Principal  Distribution Amount for such Distribution Date (without regard to
the  Subgroup  I-1 Senior  Percentage  or the  Subgroup  I-1  Senior  Prepayment
Percentage) multiplied by (y) a fraction, the numerator of

                                      -16-
<PAGE>

which is the sum of the Current Principal Amount of the Class I-A-6 Certificates
immediately  prior to such distribution date and the denominator of which is the
sum  of the  Non-PO  Percentages  of the  Scheduled  Principal  Balances  of the
Mortgage Loans in Subgroup I-1.

      LOSS ALLOCATION LIMIT: The meaning specified in Section 6.02(e) hereof.

      LOSS  SEVERITY  PERCENTAGE:  With respect to any  Distribution  Date,  the
percentage  equivalent  of a fraction,  the  numerator of which is the amount of
Realized  Losses incurred on a Mortgage Loan and the denominator of which is the
Scheduled  Principal  Balance of such  Mortgage  Loan  immediately  prior to the
liquidation of such Mortgage Loan.

      LOST NOTES: The original  Mortgage Notes that have been lost, as indicated
on the Mortgage Loan Schedule.

      MASTER  SERVICER:  As of the Closing  Date,  Wells  Fargo  Bank,  National
Association and, thereafter,  its respective successors in interest who meet the
qualifications of the Servicing Agreements and this Agreement.

      MASTER SERVICER CERTIFICATION:  A written certification covering servicing
of the Mortgage  Loans by 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  and the  Depositor  following a  negotiation  in good faith to
determine how to comply with any such new requirements.

      MASTER SERVICER COLLECTION ACCOUNT:  The trust account or accounts created
and maintained  pursuant to Section 4.02, which shall be denominated  "U.S. Bank
National  Association,  as Trustee f/b/o holders of  Structured  Asset  Mortgage
Investments II Inc., Prime Mortgage Trust, Mortgage  Pass-Through  Certificates,
Series  2004-1  - Master  Servicer  Collection  Account."  The  Master  Servicer
Collection Account shall be an Eligible Account.

      MASTER SERVICING COMPENSATION: The meaning specified in Section 3.14.

      MATERIAL DEFECT: The meaning specified in Section 2.02(a).

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

                                      -17-
<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.

      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, or as nominee
for any  subsequent  assignee of the  originator  pursuant to an  assignment  of
mortgage to MERS.

      MONTHLY ADVANCE:  An advance of principal or interest  required to be made
by the applicable  Servicer pursuant to the related  Servicing  Agreement or the
Master Servicer pursuant to Section 6.05.

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

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

      MORTGAGE  INTEREST RATE:  The annual rate at which  interest  accrues from
time to time on any Mortgage Loan pursuant to the related  Mortgage Note,  which
rate is initially  equal to the "Mortgage  Interest Rate" set forth with respect
thereto on the Mortgage Loan Schedule.

      MORTGAGE  LOAN: A mortgage  loan  transferred  and assigned to the Trustee
pursuant to Section  2.01 or Section  2.04 and held as a part of the Trust Fund,
as  identified  in the Mortgage  Loan  Schedule  (which shall  include,  without
limitation,  (i) with respect to each  Cooperative  Loan,  the related  Mortgage
Note,  Security  Agreement,  Assignment of Proprietary Lease,  Cooperative Stock
Certificate,  Cooperative  Lease and Mortgage  File and all rights  appertaining
thereto,  and (ii) with respect to each  Mortgage  Loan other than a Cooperative
Loan,  each related  Mortgage  Note,  Mortgage and Mortgage  File and all rights
appertaining thereto), including a Mortgage Loan the property securing which has
become an REO Property.

      MORTGAGE LOAN  PURCHASE  AGREEMENT:  The Mortgage Loan Purchase  Agreement
dated as of July 30, 2004,  between EMC  Mortgage  Corporation,  as seller,  and
Structured Asset Mortgage Investments II Inc., as purchaser,  and all amendments
thereof and supplements thereto, attached as Exhibit J.

      MORTGAGE LOAN SCHEDULE:  The schedule,  attached  hereto as Exhibit B with
respect to the  Mortgage  Loans and as amended  from time to time to reflect the
repurchase or substitution of Mortgage Loans pursuant to this Agreement.

      MORTGAGE  NOTE:  The  originally  executed  note or other  evidence of the
indebtedness of a Mortgagor under the related Mortgage Loan.

                                      -18-
<PAGE>

      MORTGAGED PROPERTY:  Land and improvements  securing the indebtedness of a
Mortgagor under the related Mortgage Loan or, in the case of REO Property,  such
REO Property,  or, in the case of a Cooperative  Loan,  the related  Cooperative
Lease and Cooperative Stock.

      MORTGAGOR: The obligor on a Mortgage Note.

      NATIONAL CITY: National City Mortgage Company.

      NATIONAL CITY SERVICING AGREEMENT: The Purchase,  Warranties and Servicing
Agreement,  dated as of October 1, 2001,  between the Seller and National  City,
attached hereto as Exhibit H-4, as modified by the related Assignment Agreement.

      NET  INTEREST  SHORTFALL:  With  respect  to any  Distribution  Date,  the
Interest  Shortfall,  if any,  for such  Distribution  Date net of  Compensating
Interest Payments made with respect to such Distribution Date.

      NET LIQUIDATION PROCEEDS: As to any Liquidated Mortgage Loan,  Liquidation
Proceeds  net of (i)  Liquidation  Expenses  which are payable  therefrom to the
related Servicer or the Master Servicer in accordance with the related Servicing
Agreement  or this  Agreement  and (ii)  unreimbursed  advances  by the  related
Servicer or the Master Servicer and Monthly Advances.

      NET  MORTGAGE  RATE:  With  respect to each  Mortgage  Loan,  the Mortgage
Interest Rate in effect from time to time less the Servicing Fee.

      NEXSTAR: Nexstar Financial Corporation, or its successor in interest.

      NEXSTAR SERVICING AGREEMENT: With respect to the Mortgage Loans originated
by Nexstar, the Purchase,  Warranties and Servicing Agreement dated as of May 1,
2002 between the Seller and Nexstar,  attached hereto as Exhibit H-3 as modified
by the related Assignment Agreement.

      NON-DISCOUNT  MORTGAGE  LOAN:  Any Mortgage  Loan with a Net Mortgage Rate
higher than 5.500% per annum.

      NON-OFFERED SUBORDINATE  CERTIFICATES:  The Class B-4, Class B-5 and Class
B-6 Certificates.

      NON-PO  PERCENTAGE:  With respect to any Group I Mortgage  Loan with a Net
Mortgage  Rate  less  than  5.2500%  per  annum,  a  fraction,  expressed  as  a
percentage,  equal to (x) the Net Mortgage  Rate thereof  divided by (y) 5.2500%
per annum.  With respect to any Group II Mortgage  Loan with a Net Mortgage Rate
less than 4.5000% per annum, a fraction, expressed as a percentage, equal to (x)
the Net Mortgage Rate thereof divided by (y) 4.5000% per annum.

      NONRECOVERABLE  ADVANCE:  Any  advance  or Monthly  Advance  (i) which was
previously  made or is proposed to be made by the Master  Servicer,  the Trustee
(as successor Master Servicer) or the applicable Servicer and (ii) which, in the
good  faith  judgment  of the Master  Servicer,  the  Trustee or the  applicable
Servicer,  will not or, in the case of a proposed  advance  or Monthly  Advance,
would not, be ultimately  recoverable  by the Master  Servicer,  the Trustee (as
successor Master Servicer) or the applicable Servicer from Liquidation Proceeds,
Insurance

                                      -19-
<PAGE>

Proceeds  or future  payments  on the  Mortgage  Loan for which such  advance or
Monthly Advance was made or is proposed to be made.

      NOTIONAL AMOUNT: With respect to (1) the Class I-A-8  Certificates,  as of
any date of determination, is equal to the Current Principal Amount of the Class
I-A-7  Certificates  and (2) the Class  II-X-1  Certificates,  as of any date of
determination,  is equal to the  aggregate  Scheduled  Principal  Balance of the
group II Mortgage Loans with a Net Mortgage Rate greater than 5.2500%. Reference
to  the  Notional  Amount  of the  Interest  Only  Certificates  is  solely  for
convenience  in  calculations  and does not  represent  the right to receive any
distributions  allocable to  principal.  For federal  income tax  purposes,  the
equivalent of clause (1) shall be equal to the Uncertificated  Principal Balance
of REMIC II Regular  Interest A-7. For federal  income tax  purposes,  the Class
II-X-1  Certificates  will not have a Notional  Amount,  but will be entitled to
100% of amounts distributed on REMIC II Regular Interest II-X-1.

      OFFERED  CERTIFICATES:  The Senior  Certificates  and Offered  Subordinate
Certificates.

      OFFERED SUBORDINATE  CERTIFICATES:  The Class B-l, Class B-2 and Class B-3
Certificates.

      OFFICER'S CERTIFICATE:  A certificate signed by the Chairman of the Board,
the Vice Chairman of the Board,  the President or a Vice  President or Assistant
Vice  President  or other  authorized  officer  of the  Master  Servicer  or the
Depositor,  as  applicable,  and  delivered to the Trustee,  as required by this
Agreement.

      OPINION OF COUNSEL:  A written opinion of counsel who is or are acceptable
to the Trustee or Radian or the Master Servicer, as applicable,  and who, unless
required  to be  Independent  (an  "Opinion  of  Independent  Counsel"),  may be
internal counsel for the Company, the Master Servicer or the Depositor.

      ORIGINAL  SUBORDINATE  PRINCIPAL BALANCE: The sum of the aggregate Current
Principal  Amounts of each Class of Subordinate  Certificates  as of the Closing
Date.

      ORIGINAL  VALUE:  The value of a Mortgaged  Property based, in the case of
the  purchase of the  Mortgaged  Property,  on the lower of an  appraisal or the
sales price of such Mortgaged  Property or, in the case of a refinancing,  on an
appraisal.

      OUTSTANDING  MORTGAGE LOAN:  With respect to any Due Date, a Mortgage Loan
which, prior to such Due Date, was not the subject of a Principal  Prepayment in
full,  did not  become  a  Liquidated  Mortgage  Loan and was not  purchased  or
replaced.

      OUTSTANDING  PRINCIPAL BALANCE:  As of the time of any determination,  the
principal balance of a Mortgage Loan remaining to be paid by the Mortgagor,  or,
in the case of an REO Property,  the principal  balance of the related  Mortgage
Loan  remaining  to be paid by the  Mortgagor  at the  time  such  property  was
acquired  by the  Trust  Fund less any Net  Liquidation  Proceeds  with  respect
thereto to the extent applied to principal.

      PASS-THROUGH  RATE: As to each Class of Certificates,  the REMIC I Regular
Interests and the REMIC II Regular Interests, the rate of interest determined as
provided with respect thereto,

                                      -20-
<PAGE>

in Section 5.01(c).  Any monthly  calculation of interest at a stated rate shall
be based upon annual interest at such rate divided by twelve.

      PERMITTED  INVESTMENTS:  Any one or more of the following  obligations  or
securities   held  in  the  name  of  the   Trustee   for  the  benefit  of  the
Certificateholders:

            (i) direct  obligations  of, and  obligations  the timely payment of
which are fully  guaranteed  by the  United  States of  America or any agency or
instrumentality  of the United  States of America the  obligations  of which are
backed by the full faith and credit of the United States of America;

            (ii)  (a)  demand  or  time  deposits,  federal  funds  or  bankers'
acceptances issued by any depository  institution or trust company  incorporated
under the laws of the United States of America or any state  thereof  (including
the Trustee or the Master  Servicer or its  Affiliates  acting in its commercial
banking  capacity) and subject to supervision  and examination by federal and/or
state  banking  authorities,  provided  that the  commercial  paper  and/or  the
short-term debt rating and/or the long-term  unsecured debt  obligations of such
depository  institution  or  trust  company  at the time of such  investment  or
contractual  commitment providing for such investment have the Applicable Credit
Rating  or better  from  each  Rating  Agency  and (b) any other  demand or time
deposit or certificate of deposit that is fully insured by the FDIC;

            (iii)  repurchase  obligations  with  respect  to (a)  any  security
described in clause (i) above or (b) any other security  issued or guaranteed by
an agency or instrumentality of the United States of America, the obligations of
which are backed by the full faith and credit of the United  States of  America,
in either case  entered  into with a  depository  institution  or trust  company
(acting as principal)  described in clause (ii)(a) above where the Trustee holds
the security therefor;

            (iv) securities bearing interest or sold at a discount issued by any
corporation  (including  the Trustee or the Master  Servicer or its  Affiliates)
incorporated under the laws of the United States of America or any state thereof
that have the Applicable  Credit Rating or better from each Rating Agency at the
time of such investment or contractual commitment providing for such investment;
provided, however, that securities issued by any particular corporation will not
be Permitted  Investments to the extent that investments  therein will cause the
then outstanding  principal amount of securities  issued by such corporation and
held as part of the Trust to exceed 10% of the aggregate  Outstanding  Principal
Balances of all the Mortgage Loans and Permitted Investments held as part of the
Trust;

            (v) commercial paper (including both  non-interest-bearing  discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more  than one year  after the date of  issuance  thereof)  having  the
Applicable  Credit  Rating or better from each Rating Agency at the time of such
investment;

            (vi) a Reinvestment  Agreement issued by any bank, insurance company
or other corporation or entity;

                                      -21-
<PAGE>

            (vii) any other demand,  money market or time  deposit,  obligation,
security or  investment  as may be acceptable to each Rating Agency as evidenced
in writing by each Rating Agency to the Trustee; and

            (viii) any money market or common  trust fund having the  Applicable
Credit  Rating or better from each Rating  Agency,  including  any such fund for
which the Trustee or Master  Servicer or any  affiliate of the Trustee or Master
Servicer acts as a manager or an advisor; provided,  however, that no instrument
or  security  shall be a Permitted  Investment  if such  instrument  or security
evidences  a right  to  receive  only  interest  payments  with  respect  to the
obligations  underlying such instrument or if such security provides for payment
of both principal and interest with a yield to maturity in excess of 120% of the
yield to maturity at par or if such  instrument  or security is  purchased  at a
price greater than par.

      PERMITTED TRANSFEREE: Any Person other than a Disqualified Organization or
an "electing large partnership" (as defined by Section 775 of the Code).

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

      PHYSICAL   CERTIFICATES:   The  Residual   Certificates  and  the  Private
Certificates.

      POLICY:   The  irrevocable   Financial   Guaranty  Insurance  Policy,  No.
FANI-0527-04212-NY,  including any endorsements  thereto,  issued by Radian with
respect to the Class I-A-5 Certificates,  in the form attached hereto as Exhibit
K.

      PO  PERCENTAGE:  With  respect  to any  Group I  Mortgage  Loan with a Net
Mortgage  Rate less than  5.2500%  per annum,  5.2500%  per annum  minus the Net
Mortgage Rate thereof divided by 5.2500% per annum. With respect to any Group II
Mortgage Loan with a Net Mortgage Rate less than 4.5000% per annum,  4.5000% per
annum minus the Net Mortgage Rate thereof divided by 4.5000% per annum.

      PREFERENCE  AMOUNT:  Any amount  previously  distributed to Holders of the
Class I-A-5  Certificates  that is  recoverable  and sought to be recovered as a
voidable  preference  by a trustee in  bankruptcy  pursuant to the United States
Bankruptcy Code (11 U.S.C.),  as amended from time to time, in accordance with a
final nonappealable order of a court having competent jurisdiction.

      PREPAYMENT  CHARGE:  With  respect to any  Mortgage  Loan,  the charges or
premiums,  if any, due in connection  with a full or partial  prepayment of such
Mortgage Loan in accordance with the terms thereof.

      PREPAYMENT INTEREST SHORTFALL:  With respect to any Distribution Date, the
aggregate shortfall, if any, in collections of interest (adjusted to the related
Net Mortgage  Rates) on Mortgage Loans  resulting  from (a)  prepayments in full
received during the related  Prepayment  Period and (b) the partial  prepayments
received during the related Prepayment Period to the extent applied prior to the
Due Date in the month of the Distribution Date.

                                      -22-
<PAGE>

      PREPAYMENT  PERIOD:  With respect to any  Distribution  Date is 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 in the case of the Mortgage Loans for which EMC is the
servicer and such period as is provided in the related Servicing  Agreement with
respect to the other Servicers.

      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  Interest  Accrual  Period for such Class
relating to a Distribution Date.

      PRINCIPAL  PREPAYMENT:  Any payment or other  recovery of  principal  on a
Mortgage  Loan which is  received  in advance of its  scheduled  Due Date to the
extent  that it 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,  including Insurance Proceeds and Repurchase  Proceeds,
but excluding the principal portion of Net Liquidation  Proceeds received at the
time a Mortgage Loan becomes a Liquidated Mortgage Loan.

      PRIVATE CERTIFICATES: The Class B-4, Class B-5 and Class B-6 Certificates.

      PROTECTED ACCOUNT:  An account  established and maintained for the benefit
of  Certificateholders  by each  Servicer  with respect to the related  Mortgage
Loans and with  respect to REO  Property  pursuant to the  respective  Servicing
Agreements.

      QIB: A Qualified  Institutional  Buyer as defined in Rule 144A promulgated
under the Securities Act.

      QUALIFIED INSURER:  Any insurance company duly qualified as such under the
laws of the state or states in which the related Mortgaged Property or Mortgaged
Properties  is or are  located,  duly  authorized  and licensed in such state or
states to  transact  the type of  insurance  business in which it is engaged and
approved  as an  insurer by the Master  Servicer,  so long as the claims  paying
ability  of  which  is  acceptable  to  the  Rating  Agencies  for  pass-through
certificates  having  the same  rating as the  Certificates  rated by the Rating
Agencies as of the Closing Date.

      RADIAN:  Radian Asset  Assurance,  an indirect wholly owned  subsidiary of
Radian  Group Inc.,  organized  and  created  under the laws of the State of New
York, or any successor thereto.

      RADIAN CONTACT  PERSON:  The officer  designated by the Master Servicer to
provide information to Radian pursuant to Section 6.07(i).

      RADIAN DEFAULT: As defined in Section 6.07(l).

      RADIAN  REIMBURSEMENT  AMOUNT:  Shall  mean  the sum of (a) the  aggregate
unreimbursed  amount of any payments  made by Radian under the Policy,  together
with  interest on such  amount from the date of payment by Radian  until paid in
full,  (b) all costs and  expenses  of Radian  in  connection  with any  action,
proceeding  or  investigation   affecting  the  Trust  Fund  or  the  rights  or
obligations  of Radian under this  Agreement or under the Policy,  including any
judgment or

                                      -23-
<PAGE>

settlement  entered into affecting Radian or Radian's  interests,  together with
interest  thereon and (c) any other amounts owed to Radian under this  Agreement
or the Indemnification Agreement, together with interest thereon.

      RANDOM LOT: With respect to any Distribution Date, the method by which the
Depository will determine  which Insured  Certificates  will be paid,  using its
established random lot procedures or, if the Insured  Certificates are no longer
represented by a Book-Entry Certificate, using the Trustee's procedures.

      RATING AGENCIES: S&P and Fitch Ratings.

      REALIZED LOSS: With respect to a Mortgage Loan is (i) a Bankruptcy Loss or
(ii) as to any Liquidated  Mortgage Loan, the unpaid  principal  balance thereof
plus accrued and unpaid interest  thereon at the Mortgage  Interest Rate through
the last day of the month of liquidation less the Net Liquidation  Proceeds with
respect to such Mortgage Loan and the related Mortgaged  Property.  In addition,
to the extent the Master Servicer receives Subsequent Recoveries with respect to
any Mortgage Loan, the amount of the Realized Loss with respect to that Mortgage
Loan will be reduced to the extent  such  recoveries  are  applied to reduce the
Current Principal Amount of any class of Certificates on any Distribution Date.

      RECORD DATE:  With  respect to any  Distribution  Date,  for each Class of
Certificates,  will be the close of  business  on the last  Business  Day of the
month preceding the month in which such Distribution Date occurs, except for the
Class I-A-7  Certificates and Class I-A-8  Certificates which have a record date
of the Business Day prior to the Distribution Date.

      REINVESTMENT AGREEMENTS:  One or more reinvestment agreements,  acceptable
to the Rating Agencies,  from a bank,  insurance company or other corporation or
entity (including the Trustee).

      RELIEF ACT: The Servicemembers Civil Relief Act or similar state law.

      RELIEF ACT  MORTGAGE  LOAN:  Any Mortgage  Loan as to which the  Scheduled
Payment thereof has been reduced due to the application of the Relief Act.

      REMIC: A real estate mortgage investment conduit, as defined in the Code.

      REMIC I: That group of assets  contained in the Trust Fund designated as a
REMIC consisting of (i) the Mortgage Loans, (ii) the Master Servicer  Collection
Account,  (iii) any REO Property relating to the Mortgage Loans, (iv) the rights
with respect to any related Servicing Agreement,  (v) the rights with respect to
any related Assignment Agreement and (vi) any proceeds of the foregoing.

      REMIC I  INTERESTS:  The  REMIC I  Regular  Interests  and the  Class  R-I
Certificates.

      REMIC I REGULAR  INTERESTS:  REMIC I  Regular  Interests  I-1-A,  I-1-ZZZ,
I-2-A, I-2-ZZZ, I-PO, II-1-A,  II-1-ZZZ,  II-2-A,  II-2-ZZZ,  II-3-A,  II-3-ZZZ,
II-PO, II-IO

                                      -24-
<PAGE>

      REMIC I  SUBORDINATED  BALANCE RATIO:  The ratio among the  Uncertificated
Principal  Balances  of each of the REMIC I Regular  Interests  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 Scheduled Principal Balance of
the Mortgage Loans in the related Subgroup over (y) the Current Principal Amount
of the Senior Certificates in the related Subgroup.

      REMIC II: That group of assets contained in the Trust Fund designated as a
REMIC consisting of the REMIC I Regular Interests.

      REMIC II  INTERESTS:  The REMIC II  Regular  Interests  and the Class R-II
Certificates.

      REMIC II REGULAR  INTERESTS:  REMIC II  Regular  Interests  I-A-1,  I-A-2,
I-A-3, I-A-4, I-A-5, I-A-6, I-A-7, I-PO, II-A-1,  II-A-2,  II-A-3, II-PO, II-IO,
R-III, B-1, B-2, B-3, B-4, B-5 and B-6.

      REMIC III: That group of assets  contained in the Trust Fund designated as
a REMIC consisting of the REMIC II Regular Interests.

      REMIC III  INTERESTS:  The REMIC III  Regular  Certificates  and the Class
R-III Certificates.

      REMIC III REGULAR CERTIFICATES: The Class I-A-1, Class I-A-2, Class I-A-3,
Class I-A-4 , Class I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class I-PO,
Class  B-1,  Class  B-2,  Class  B-3 ,  Class  B-4,  Class  B-5  and  Class  B-6
Certificates.

      REMIC OPINION:  An Opinion of Independent  Counsel, to the effect that the
proposed action  described  therein would not, under the REMIC  Provisions,  (i)
cause any REMIC to fail to qualify as a REMIC while any regular interest in such
REMIC is  outstanding,  (ii)  result in a tax on  prohibited  transactions  with
respect to any REMIC or (iii)  constitute  a taxable  contribution  to any REMIC
after the Startup Day.

      REMIC PROVISIONS: The provisions of the federal income tax law relating to
the REMIC,  which appear at Sections 860A through 860G of the Code,  and related
provisions and regulations  promulgated  thereunder,  as the foregoing may be in
effect from time to time.

      REO PROPERTY:  A Mortgaged  Property  acquired in the name of the Trustee,
for the  benefit  of  Certificateholders,  by  foreclosure  or  deed-in-lieu  of
foreclosure in connection with a defaulted Mortgage Loan.

      REPURCHASE  PRICE:  With  respect to any  Mortgage  Loan (or any  property
acquired with respect thereto) required to be repurchased by the Seller pursuant
to the Mortgage  Loan  Purchase  Agreement or Article II of this  Agreement,  an
amount equal to the sum of (i)(a) 100% of the Outstanding  Principal  Balance of
such  Mortgage Loan as of the date of  repurchase  (or if the related  Mortgaged
Property was acquired with respect  thereto,  100% of the Outstanding  Principal
Balance at the date of the acquisition), plus (b) accrued but unpaid interest on
the Outstanding Principal Balance at the related Mortgage Interest Rate, through
and including the last day of the month of repurchase, plus (c) any unreimbursed
Monthly Advances and servicing  advances payable to the Servicer of the Mortgage
Loan or to the Master Servicer and (ii) any

                                      -25-
<PAGE>

costs  and  damages  (if  any)  incurred  by the  Trust in  connection  with any
violation of such Mortgage Loan of any predatory lending laws.

      REPURCHASE   PROCEEDS:   The  Repurchase  Price  in  connection  with  any
repurchase  of a Mortgage  Loan by the Seller and any cash deposit in connection
with the substitution of a Mortgage Loan.

      REQUEST FOR RELEASE:  A request for release in the form attached hereto as
Exhibit D.

      REQUIRED  INSURANCE  POLICY:  With  respect  to  any  Mortgage  Loan,  any
insurance policy which is required to be maintained from time to time under this
Agreement with respect to such Mortgage Loan.

      RESERVE  FUND:  A fund  established  at the  time of the  issuance  of the
Certificates  solely  for the  benefit  of the Class  I-A-5  Certificates  by an
initial deposit into the Reserve Fund of $20,000 by Bear, Stearns & Co. Inc.

      RESIDUAL CERTIFICATES: Any of the Class R Certificates.

      RESPONSIBLE  OFFICER:  Any officer  assigned to the Corporate Trust Office
(or any  successor  thereto),  including  any  Vice  President,  Assistant  Vice
President,  Trust  Officer,  any Assistant  Secretary,  any trust officer or any
other officer of the Trustee customarily  performing  functions similar to those
performed  by  any  of  the  above   designated   officers  and  having   direct
responsibility for the  administration of this Agreement,  and any other officer
of the Trustee to whom a matter arising hereunder may be referred.

      ROUNDING ACCOUNT:  With respect to the Insured  Certificates,  the account
created and maintained for such Insured Certificates pursuant to Section 6.09.

      ROUNDING  AMOUNT:  With  respect to the  Rounding  Account,  the amount of
funds,  if any,  needed  to be  withdrawn  and used to round  the  amount of any
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates upward to the next higher integral multiple of $1,000.

      RULE 144A  CERTIFICATE:  The certificate to be furnished by each purchaser
of a Private  Certificate  (which  is also a  Physical  Certificate)  which is a
Qualified  Institutional  Buyer as defined under Rule 144A promulgated under the
Securities Act, substantially in the form set forth as Exhibit F-2 hereto.

      S&P: Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and
its successors in interest.

      SCHEDULED  PAYMENT:  With respect to any Mortgage Loan and any month,  the
scheduled payment or payments of principal and interest due during such month on
such  Mortgage  Loan which  either is payable by a Mortgagor in such month under
the related Mortgage Note or, in the case of REO Property,  would otherwise have
been payable under the related Mortgage Note.

      SCHEDULED PRINCIPAL: The principal portion of any Scheduled Payment.

                                      -26-
<PAGE>

      SCHEDULED  PRINCIPAL  BALANCE:  With respect to any  Mortgage  Loan on any
Distribution  Date, (i) the unpaid principal balance of such Mortgage Loan as of
the close of  business on the  related  Due Date  (i.e.,  taking  account of the
principal  payment  to be  made  on  such  Due  Date  and  irrespective  of  any
delinquency in its payment),  as specified in the  amortization  schedule at the
time relating  thereto (before any adjustment to such  amortization  schedule by
reason of any bankruptcy or similar proceeding  occurring after the Cut-off Date
(other than a Deficient  Valuation) or any moratorium or similar waiver or grace
period) and less (ii) any Principal Prepayments (including the principal portion
of Net Liquidation  Proceeds) received during or prior to the related Prepayment
Period;  provided that the Scheduled  Principal Balance of a Liquidated Mortgage
Loan is zero.

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

      SECURITIES ADMINISTRATOR:  Wells Fargo Bank, National Association,  or its
successor in interest,  or any successor securities  administrator  appointed as
herein provided.

      SECURITIES  LEGEND:  "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 POOLING AND  SERVICING  AGREEMENT AND (B) THE RECEIPT BY THE TRUSTEE OF SUCH
OTHER EVIDENCE  ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER,  RESALE,  PLEDGE OR
TRANSFER IS IN COMPLIANCE  WITH THE SECURITIES ACT AND OTHER  APPLICABLE LAWS OR
IN EACH CASE IN ACCORDANCE  WITH ALL  APPLICABLE  SECURITIES  LAWS OF THE UNITED
STATES  AND ANY  OTHER  APPLICABLE  JURISDICTION.  THIS  CERTIFICATE  MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR
OTHER  RETIREMENT  ARRANGEMENT  WHICH  IS  SUBJECT  TO  TITLE I OF THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED,  OR SECTION  4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED [in the case of a Residual Certificate
or a Private Certificate] UNLESS THE OPINION OF COUNSEL REQUIRED BY

                                      -27-
<PAGE>

SECTION 5.07 OF THE POOLING AND SERVICING  AGREEMENT IS PROVIDED [in the case of
the Class B-4,  Class B-5 and Class B-6  Certificates]:,  UNLESS THE  TRANSFEREE
CERTIFIES OR REPRESENTS THAT THE PROPOSED  TRANSFER AND HOLDING OF A CERTIFICATE
AND THE  SERVICING,  MANAGEMENT  AND OPERATION OF THE TRUST AND ITS ASSETS:  (I)
WILL NOT RESULT IN ANY  PROHIBITED  TRANSACTION  WHICH IS NOT  COVERED  UNDER AN
INDIVIDUAL OR CLASS PROHIBITED TRANSACTION EXEMPTION, INCLUDING, BUT NOT LIMITED
TO,  PROHIBITED  TRANSACTION  EXEMPTION  ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE
95-60 OR PTE  96-23  AND (II)  WILL NOT GIVE  RISE TO ANY  ADDITIONAL  FIDUCIARY
DUTIES ON THE PART OF THE DEPOSITOR,  THE SECURITIES  ADMINISTRATOR,  THE MASTER
SERVICER,  ANY SERVICER OR THE TRUSTEE,  WHICH WILL BE DEEMED  REPRESENTED BY AN
OWNER OF A BOOK-ENTRY  CERTIFICATE OR A GLOBAL CERTIFICATE AND WILL BE EVIDENCED
BY A  REPRESENTATION  OR AN OPINION OF COUNSEL TO SUCH EFFECT BY OR ON BEHALF OF
AN INSTITUTIONAL ACCREDITED INVESTOR."

      SECURITY  AGREEMENT:  With respect to a  Cooperative  Loan,  the agreement
creating  a  security  interest  in  favor  of the  originator  in  the  related
Cooperative Stock.

      SECURITY INSTRUMENT: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage,  deed of trust,  deed to secure debt or security  deed,  including any
riders or addenda thereto.

      SELLER:  EMC  Mortgage  Corporation,  as Mortgage  Loan  seller  under the
Mortgage Loan Purchase Agreement.

      SENIOR  CERTIFICATES:  The Class I-A-1,  Class I-A-2,  Class I-A-3,  Class
I-A-4,  Class I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class I-PO, Class
II-A-1,  Class II-A-2, Class II-A-3, Class II-PO, Class II-X-1, Class R-I, Class
R-II and Class R-III Certificates.

      SERVICER:  With respect to each Mortgage Loan,  EMC, GMAC,  National City,
WFBNA or Nexstar.

      SERVICER REMITTANCE DATE: With respect to each Mortgage Loan, the date set
forth in the related Servicing Agreement.

      SERVICING  AGREEMENTS:  The EMC  Servicing  Agreement,  Nexstar  Servicing
Agreement, National City Servicing Agreement, WFBNA Servicing Agreement and GMAC
Servicing Agreement.

      SERVICING  FEE: As to any Mortgage Loan and  Distribution  Date, an amount
equal to the product of (i) the  Scheduled  Principal  Balance of such  Mortgage
Loan as of the Due Date in the preceding  calendar month and (ii) the applicable
Servicing Fee Rate.

      SERVICING FEE RATE: As to any Mortgage Loan, a per annum rate as set forth
in the Mortgage Loan Schedule.

                                      -28-
<PAGE>

      SERVICING OFFICER:  Any officer of the related Servicer or Master Servicer
involved  in or  responsible  for the  administration  and  servicing  or master
servicing,  as applicable,  of the Mortgage Loans as to which officer  evidence,
reasonably  acceptable to the Trustee,  of due authorization of such officer, by
such  Servicer or Master  Servicer has been  furnished  from time to time to the
Trustee and Radian.

      SPECIAL  HAZARD LOSS: A Realized Loss  attributable  to damage or a direct
physical loss suffered by a Mortgaged Property  (including any Realized Loss due
to the presence or suspected  presence of hazardous  wastes or  substances  on a
Mortgaged  Property)  other  than any such  damage or loss  covered  by a hazard
policy or a flood insurance  policy required to be maintained in respect of such
Mortgaged  Property under this Agreement or any loss due to normal wear and tear
or certain other causes.

      SPECIAL HAZARD LOSS AMOUNT: Upon the initial issuance of the Certificates,
$2,943,477.  As of any  Distribution  Date,  the Special Hazard Loss Amount will
equal the initial Special Hazard Loss Amount, minus the sum of (i) the aggregate
amount of Special Hazard Losses that would have been previously allocated to the
Subordinate  Certificates in the absence of the Loss  Allocation  Limit and (ii)
the Adjustment Amount.

      SPECIAL  HAZARD  TERMINATION  DATE: The  Distribution  Date upon which the
Special Hazard Loss Amount has been reduced to zero or a negative number (or the
Cross-Over Date, if earlier).

      STARTUP DAY: July 30, 2004.

      SUBGROUP:  Any of Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2
and Subgroup II-3.

      SUBGROUP  I-1: All of the Group I Mortgage  Loans with a Net Mortgage Rate
of less than or equal to 5.2500% per annum,  plus the  Subgroup  I-1 Fraction of
the  principal  balance of any group I Mortgage  Loan with a Net  Mortgage  Rate
greater than 5.2500% per annum and less than 8.0000% per annum.

      SUBGROUP  I-1  CERTIFICATES:  The Class I-A-1,  Class I-A-2,  Class I-A-3,
Class  I-A-4,  Class  I-A-5,  Class I-A-6,  Class R-I,  Class R-II,  Class R-III
Certificates.

      SUBGROUP I-1  FRACTION:  With respect to any Group I Mortgage  Loan with a
Net  Mortgage  Rate of greater  than 5.2500% per annum and less than 8.0000% per
annum, a fraction,  (x) the numerator of which is equal to 8.0000% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 2.750%.

      SUBGROUP  I-2: The Subgroup I-2 Fraction of the  principal  balance of any
Group I Mortgage Loan with a Net Mortgage Rate of greater than 5.2500% per annum
and less  than  8.0000%  per  annum  and any  Group I  Mortgage  Loan with a Net
Mortgage Rate of 8.0000% per annum.

      SUBGROUP I-2 CERTIFICATES: The Class I-A-7 Certificates.

                                      -29-
<PAGE>

      SUBGROUP I-2  FRACTION:  With respect to any Group I Mortgage  Loan with a
Net  Mortgage  Rate of greater  than 5.2500% per annum and less than 8.0000% per
annum, a fraction,  (x) the numerator of which is equal to the Net Mortgage Rate
of such Mortgage Loan minus 5.2500%,  and (y) the  denominator of which is equal
to 2.750%.

      SUBGROUP II-1: All of the Group II Mortgage Loans with a Net Mortgage Rate
of less than or equal to 4.5000% per annum plus the  Subgroup  II-1  Fraction of
the principal  balance of any Group II Mortgage Loan with a Net Mortgage Rate of
greater than 4.5000% per annum and less than 5.0000% per annum.

      SUBGROUP II-1 CERTIFICATES: The Class II-A-1 Certificates.

      SUBGROUP II-1 FRACTION:  With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 4.5000% per annum and less than 5.0000% per
annum, a fraction,  (x) the numerator of which is equal to 5.0000% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 0.5000%.

      SUBGROUP II-2: All of the Group II Mortgage Loans with a Net Mortgage Rate
of 5.0000% per annum plus the Subgroup II-2A  Fraction of the principal  balance
of any Group II Mortgage  Loan with a Net Mortgage  Rate of greater than 4.5000%
per annum and less than 5.0000% per annum and the Subgroup II-2B Fraction of the
principal balance of any Group II Mortgage Loan with a Net Mortgage Rate greater
than 5.0000% per annum and less than 5.2500% per annum.

      SUBGROUP II-2 CERTIFICATES: The Class II-A-2 Certificates.

      SUBGROUP II-2A FRACTION: With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 4.5000% per annum and less than 5.0000% per
annum,  a fraction,  (x) the numerator of which is equal to Net Mortgage Rate of
such Mortgage Loan minus 4.5000%,  and (y) the  denominator of which is equal to
0.50000%.

      SUBGROUP II-2B FRACTION: With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 5.0000% per annum and less than 5.2500% per
annum, a fraction,  (x) the numerator of which is equal to 5.2500% minus the Net
Mortgage Rate of such Mortgage Loan,  and (y) the  denominator of which is equal
to 0.250%.

      SUBGROUP II-3: All of the Group II Mortgage Loans with a Net Mortgage Rate
of greater than or equal to 5.250% per annum, plus the Subgroup II-3 Fraction of
the principal balance of any Mortgage Loan with a Net Mortgage Rate greater than
5.0000% per annum and less than 5.2500% per annum.

      SUBGROUP II-3 CERTIFICATES: The Class II-A-3 Certificates.

      SUBGROUP II-3 FRACTION:  With respect to any Group II Mortgage Loan with a
Net  Mortgage  Rate of greater  than 5.0000% per annum and less than 5.2500% per
annum, a fraction,

                                      -30-
<PAGE>

(x) the  numerator of which is equal to the Net Mortgage  Rate of such  Mortgage
Loan minus 5.0000%, and (y) the denominator of which is equal to 0.250%.

      SUBGROUP PRINCIPAL  DISTRIBUTION AMOUNT: With respect to each Distribution
Date and each of Subgroup I-1,  Subgroup I-2,  Subgroup II-1,  Subgroup II-2 and
Subgroup II-3 Certificates,  an amount equal to the sum, without duplication, of
the  following  (but in no event greater than the  aggregate  Current  Principal
Amounts of each the Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2 and
Subgroup  II-3   Certificates,   as  applicable,   immediately   prior  to  such
Distribution Date):

            (1)  the  applicable   Subgroup  Senior  Percentage  of  the  Non-PO
      Percentage of the principal portion of all Scheduled  Payments due on each
      Outstanding  Mortgage Loan in the related Subgroup on the related Due Date
      as specified in the amortization  schedule at the time applicable  thereto
      (after  adjustments  for  previous  Principal  Prepayments  but before any
      adjustment to such  amortization  schedule by reason of any  bankruptcy or
      similar proceeding or any moratorium or similar waiver or grace period);

            (2) the  applicable  Subgroup  Senior  Prepayment  Percentage of the
      Non-PO Percentage of the Scheduled Principal Balance of each Mortgage Loan
      in the related Subgroup which was the subject of a Principal Prepayment in
      full received by the Master Servicer during the related Prepayment Period;

            (3) the  applicable  Subgroup  Senior  Prepayment  Percentage of the
      Non-PO  Percentage  of all Principal  Prepayments  in part received by the
      Master Servicer during the related  Prepayment Period with respect to each
      Mortgage Loan in the related Subgroup;

            (4) the  lesser of (a) the  applicable  Subgroup  Senior  Prepayment
      Percentage of the Non-PO  Percentage of the sum of (A) all Net Liquidation
      Proceeds  allocable to principal received in respect of each Mortgage Loan
      in the related Subgroup which became a Liquidated Mortgage Loan during the
      related  Prepayment  Period  (other than Mortgage  Loans  described in the
      immediately  following clause (B)) and all Subsequent  Recoveries received
      in respect of each Liquidated Mortgage Loan in the related Subgroup during
      the related  Due Period and (B) the  Scheduled  Principal  Balance of each
      such  Mortgage Loan in the related  Subgroup  purchased by an insurer from
      the Trustee during the related  Prepayment  Period pursuant to the related
      Primary  Mortgage  Insurance  Policy,  if any, or  otherwise;  and (b) the
      applicable  Subgroup Senior Percentage of the Non-PO Percentage of the sum
      of (A)  the  Scheduled  Principal  Balance  of each  Mortgage  Loan in the
      related  Subgroup  which  became a  Liquidated  Mortgage  Loan  during the
      related  Prepayment Period (other than the Mortgage Loans described in the
      immediately  following clause (B)) and all Subsequent  Recoveries received
      in respect of each Liquidated Mortgage Loan in the related Subgroup during
      the related  Due Period and (B) the  Scheduled  Principal  Balance of each
      such  Mortgage  Loan in the  related  Subgroup  that was  purchased  by an
      insurer from the Trust during the related  Prepayment  Period  pursuant to
      the related Primary Mortgage Insurance Policy, if any or otherwise; and

                                      -31-
<PAGE>

            (5) the applicable Subgroup Senior Prepayment  Percentage of the sum
      of (a)  the  Scheduled  Principal  Balance  of each  Mortgage  Loan in the
      related  Subgroup which was  repurchased by the Seller in connection  with
      such  Distribution  Date  and (b) the  excess,  if any,  of the  Scheduled
      Principal Balance of a Mortgage Loan in the related Subgroup that has been
      replaced by the Seller with a  substitute  Mortgage  Loan  pursuant to the
      Mortgage Loan Purchase Agreement in connection with such Distribution Date
      over the Scheduled Principal Balance of such substitute Mortgage Loan.

      SUBGROUP SENIOR PERCENTAGE:  With respect to each Subgroup,  the lesser of
(a) 100% and (b) the  percentage  (carried to six places rounded up) obtained by
dividing  the  Current  Principal  Amount  of the  Senior  Certificates  of such
Subgroup (other than any Principal Only Certificates), immediately prior to such
Distribution Date, by the aggregate  Scheduled Principal Balance of the Mortgage
Loans in the related Subgroup (other than the PO Percentage thereof with respect
to the related  Discount  Mortgage Loans) as of the beginning of the related Due
Period.   The  initial  Subgroup  Senior  Percentage  for  the  Group  I  Senior
Certificates  will  be  approximately   98.20%,   and  initial  Subgroup  Senior
Percentage for the Group II Senior Certificates will be approximately 98.19%.

      SUBGROUP SENIOR  PREPAYMENT  PERCENTAGE:  The Subgroup  Senior  Prepayment
Percentage for the Subgroup I-1, Subgroup I-2, Subgroup II-1,  Subgroup II-2 and
Subgroup  II-3  Certificates,  on any  Distribution  Date  occurring  during the
periods set forth below will be as follows:

Period (dates inclusive)                Subgroup Senior Prepayment Percentage

August 25, 2004 - July 25, 2009         100%

August  25, 2009 - July 25, 2010        Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 70%
                                        of the related Subordinate Percentage.

August 25, 2010 - July 25, 2011         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 60%
                                        of the related Subordinate Percentage.

August 25, 2012 - July 25, 2012         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 40%
                                        of the related Subordinate Percentage.

August 25, 2013 - July 25, 2013         Subgroup   Senior   Percentage  for  the
                                        related Subgroup  Certificates  plus 20%
                                        of the related Subordinate Percentage.

August 25, 2012 and thereafter          Subgroup   Senior   Percentage  for  the
                                        related Subgroup Certificates.

                                      -32-
<PAGE>

      Any scheduled  reduction to the Subgroup Senior Prepayment  Percentage for
the Subgroup I-1, Subgroup I-2,  Subgroup II-1,  Subgroup II-2 and Subgroup II-3
Certificates  shall not be made as of any  Distribution  Date unless,  as of the
last  day of the  month  preceding  such  Distribution  Date  (1) the  aggregate
Scheduled  Principal  Balance of the Mortgage  Loans  delinquent 60 days or more
(including  for this purpose any such  Mortgage  Loans in  foreclosure  and such
Mortgage  Loans with  respect to which the related  Mortgaged  Property has been
acquired by the trust) averaged over the last six months, as a percentage of the
aggregate  Current  Principal  Amount of the Subordinate  Certificates  does not
exceed  50% and (2)  cumulative  Realized  Losses on the  Mortgage  Loans do not
exceed  (a)  30% of the  aggregate  Current  Principal  Amount  of the  Original
Subordinate  Principal  Balance if such  Distribution  Date  occurs  between and
including  August  2009  and  July  2010,  (b) 35% of the  Original  Subordinate
Principal  Balance if such Distribution Date occurs between and including August
2010 and July 2011,  (c) 40% of the Original  Subordinate  Principal  Balance if
such  Distribution  Date occurs between and including August 2011 and July 2012,
(d) 45% of the Original Subordinate  Principal Balance if such Distribution Date
occurs  between  and  including  August  2012 and July 2013,  and (e) 50% of the
Original  Subordinate  Principal Balance if such Distribution Date occurs during
or after August 2013.

      Notwithstanding   the  foregoing,   if  on  any  Distribution   Date,  the
percentage,  the numerator of which is the aggregate Current Principal Amount of
the Senior  Certificates  immediately  preceding such Distribution Date, and the
denominator  of which is the Scheduled  Principal  Balance of the Mortgage Loans
(other than the PO  Percentage  thereof with  respect to the  Discount  Mortgage
Loans) as of the beginning of the related Due Period, exceeds such percentage as
of the Cut-off Date, then the Subgroup Senior Prepayment Percentage with respect
to the Senior  Certificates  of each  Subgroup for such  Distribution  Date will
equal 100%.

      SUBORDINATE CERTIFICATES:  The Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates.

      SUBORDINATE CERTIFICATE WRITEDOWN AMOUNT: As to any Distribution Date, the
amount  by  which  (a)  the  sum of the  Current  Principal  Amounts  of all the
Certificates  (after  giving  effect to the  distribution  of principal  and the
allocation of applicable  Realized Losses in reduction of the Current  Principal
Amounts of the Certificates on such Distribution Date) exceeds (b) the aggregate
Scheduled  Principal  Balances of the Mortgage  Loans on the Due Date related to
such Distribution Date.

      SUBORDINATE  OPTIMAL  PRINCIPAL  AMOUNT:  As to any Distribution  Date, an
amount  equal  to the sum,  without  duplication,  of the  following  from  each
Subgroup (but in no event greater than the aggregate Current Principal Amount of
the Subordinate Certificates immediately prior to such Distribution Date):

            (i) the applicable  Subordinate  Percentage of the Non-PO Percentage
      of the principal portion of all Scheduled Payments due on each Outstanding
      Mortgage Loan in the related Subgroup on the related Due Date as specified
      in  the  amortization  schedule  at the  time  applicable  thereto  (after
      adjustment for previous Principal Prepayments but before any adjustment to
      such amortization schedule

                                      -33-
<PAGE>

      by reason of any  bankruptcy or similar  proceeding  or any  moratorium or
      similar waiver or grace period);

            (ii) the applicable  Subordinate Prepayment Percentage of the Non-PO
      Percentage of the Scheduled Principal Balance of each Mortgage Loan in the
      related  Subgroup  that was the subject of a Principal  Prepayment in full
      received by the Master Servicer during the related Prepayment Period;

            (iii) the applicable Subordinate Prepayment Percentage of the Non-PO
      Percentage  of each  Principal  Prepayment  in part  received  during  the
      related  Prepayment  Period  with  respect  to each  Mortgage  Loan in the
      related Subgroup;

            (iv)  the  excess,  if  any,  of (a) all  Net  Liquidation  Proceeds
      allocable to principal  received during the related  Prepayment  Period in
      respect of each Liquidated  Mortgage Loan in the related Subgroup over (b)
      the   sum  of  the   amounts   distributable   to   the   related   Senior
      Certificateholders  pursuant to clause (4) of the  definition  of Subgroup
      Principal   Distribution   Amount  and  Class  PO  Certificate   Principal
      Distribution Amount on such Distribution Date;

            (v) the applicable  Subordinate  Prepayment Percentage of the Non-PO
      Percentage  of the  sum of (a) the  Scheduled  Principal  Balance  of each
      Mortgage Loan in the related  Subgroup which was repurchased by the Seller
      in  connection  with  respect  to  such  Distribution  Date  and  (b)  the
      difference,  if any, between the Scheduled Principal Balance of a Mortgage
      Loan in the related  Subgroup  that has been replaced by the Seller with a
      Substitute  Mortgage Loan pursuant to the Mortgage Loan Purchase Agreement
      in connection  with such  Distribution  Date over the Scheduled  Principal
      Balance of such Substitute Mortgage Loan; and

            (vi) on the Distribution Date on which the Current Principal Amounts
      of  the  related  Senior   Certificates  (other  than  the  Interest  Only
      Certificates  and Class PO  Certificates),  have all been reduced to zero,
      100% of the related  Subgroup  Principal  Distribution  Amount.  After the
      aggregate  Current  Principal  Amount of the Subordinate  Certificates has
      been reduced to zero, the Subordinate  Optimal  Principal  Amount shall be
      zero.

      SUBORDINATE  PERCENTAGE:  As of any Distribution  Date and with respect to
any Subgroup,  100% minus the related Subgroup Senior  Percentage for the Senior
Certificates  related to such Subgroup.  The initial Subordinate  Percentage for
each of Subgroup  I-1 and  Subgroup  I-2 will be  approximately  1.80%,  and the
initial  Subordinate  Percentage  for each of Subgroup  II-1,  Subgroup II-2 and
Subgroup II-3 will be approximately 1.81%.

      SUBORDINATE  PREPAYMENT  PERCENTAGE:  As of any Distribution Date and with
respect to any  Subgroup,  100% minus the  related  Subgroup  Senior  Prepayment
Percentage for such  Subgroup,  except that on any  Distribution  Date after the
Current  Principal  Amount of each class of Senior  Certificates  have each been
reduced to zero,  the  Subordinate  Prepayment  Percentage  for the  Subordinate
Certificates with respect to such Subgroup will equal 100%.

                                      -34-
<PAGE>

      SUBSEQUENT  RECOVERIES:  Any amount  recovered by a Servicer or the Master
Servicer (net of reimburseable  expenses) with respect to a Liquidated  Mortgage
Loan with respect to which a Realized Loss was incurred after the liquidation or
disposition of such Mortgage Loan.

      SUBSTITUTE MORTGAGE LOAN: A mortgage loan tendered to the Trustee pursuant
to the related  Servicing  Agreement,  the Mortgage Loan  Purchase  Agreement or
Section 2.04 of this  Agreement,  as applicable,  in each case, (i) which has an
Outstanding  Principal Balance not greater nor materially less than the Mortgage
Loan for which it is to be substituted;  (ii) which has a Mortgage Interest Rate
and Net Mortgage  Rate not less than,  and not  materially  greater  than,  such
Mortgage Loan;  (iii) which has a maturity date not materially  earlier or later
than such  Mortgage  Loan and not later  than the  latest  maturity  date of any
Mortgage  Loan;  (iv) which is of the same property  type and occupancy  type as
such Mortgage  Loan;  (v) which has a  Loan-to-Value  Ratio not greater than the
Loan-to-Value  Ratio of such Mortgage Loan;  (vi) which is current in payment of
principal and interest as of the date of substitution; and (vii) as to which the
payment terms do not vary in any material  respect from the payment terms of the
Mortgage Loan for which it is to be substituted.

      TAX ADMINISTRATION AND TAX MATTERS PERSON: The Securities Administrator or
any  successor  thereto or assignee  thereof  shall  serve as tax  administrator
hereunder and as agent for the Tax Matters  Person.  The Holder of each Class of
Residual  Certificates shall be the Tax Matters Person for the related REMIC, as
more particularly set forth in Section 9.12 hereof.

      TERMINATION 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.

      TRUST FUND OR TRUST:  The corpus of the trust  created by this  Agreement,
consisting  of the  Mortgage  Loans and the other  assets  described  in Section
2.01(a).

      TRUSTEE: U.S. Bank National Association,  or its successor in interest, or
any successor trustee appointed as herein provided.

      UNCERTIFICATED  PRINCIPAL  BALANCE:  With  respect  to any REMIC I Regular
Interest or REMIC II Regular Interest (other than REMIC I Regular Interest II-IO
and REMIC II Regular  Interest II-IO) as of any  Distribution  Date, the initial
principal  amount  of  such  Regular  Interest,   reduced  by  (i)  all  amounts
distributed on previous Distribution Dates on such Regular Interest with respect
to principal,  and (ii) the principal  portion of all Realized Losses  allocated
prior to such Distribution Date to such Regular Interest,  taking account of the
Loss Allocation Limit.

      UNDERLYING SELLER:  With respect to each Mortgage Loan, EMC, National City
or GMAC, as indicated on the Mortgage Loan Schedule.

      UNINSURED  CAUSE:  Any cause of damage to a Mortgaged  Property or related
REO Property such that the complete  restoration of such  Mortgaged  Property or
related REO Property is not fully  reimbursable by the hazard insurance policies
required to be  maintained  pursuant the related  Servicing  Agreement,  without
regard to whether or not such policy is maintained.

      UNITED  STATES  PERSON:  A citizen or  resident  of the United  States,  a
corporation  or  partnership  (including an entity  treated as a corporation  or
partnership for federal income tax

                                      -35-
<PAGE>

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, for purposes
solely of the Class R Certificates,  no partnership or other entity treated as a
partnership  for United States federal income tax purposes shall be treated as a
United States Person unless all persons that own an interest in such partnership
either  directly  or through  any entity  that is not a  corporation  for United
States federal income tax purposes are United States Persons, or an estate whose
income is subject to United States  federal income tax regardless of its source,
or a trust if a court  within  the  United  States is able to  exercise  primary
supervision  over the  administration  of the trust and one or more such  United
States  Persons have the authority to control all  substantial  decisions of the
trust. To the extent prescribed in regulations by the Secretary of the Treasury,
which have not yet been  issued,  a trust which was in  existence  on August 20,
1996 (other than a trust treated as owned by the grantor under subpart E of part
I of  subchapter J of chapter 1 of the Code),  and which was treated as a United
States person on August 20, 1996 may elect to continue to be treated as a United
States person notwithstanding the previous sentence.

      WFBNA:  Wells  Fargo  Bank,  National  Association,  or its  successor  in
interest.

      WFBNA SERVICING  AGREEMENT:  With respect to the Mortgage Loans originated
by WFBNA,  the Purchase,  Warranties and Servicing  Agreement dated as of May 1,
2002 between the Seller and WFBNA, attached hereto as Exhibit H-5 as modified by
the related Assignment Agreement.

                                      -36-
<PAGE>

      Section 1.01 Calculation of LIBOR.

      LIBOR  applicable  to the  calculation  of the  Pass-Through  Rate  on the
Adjustable Rate  Certificates for any Interest Accrual Period will be determined
on each Interest  Determination Date. On each Interest Determination Date, LIBOR
shall be  established by the  Securities  Administrator  and, as to any Interest
Accrual Period,  will equal the rate for one month United States dollar deposits
that appears on the Telerate Screen Page 3750 as of 11:00 a.m., London" time, on
such Interest  Determination Date. "Telerate Screen Page 3750" means the display
designated  as page 3750 on the  Telerate  Service  (or such  other  page as may
replace page 3750 on that service for the purpose of displaying London interbank
offered  rates of major  banks).  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,  LIBOR shall be so  established by use of such other service
for displaying  LIBOR or comparable  rates as may be reasonably  selected by the
Securities  Administrator),  the  rate  will be the  Reference  Bank  Rate.  The
"Reference  Bank  Rate"  will be  determined  on the basis of the rates at which
deposits in U.S.  Dollars are offered by the reference banks (which shall be any
three  major  banks that are  engaged in  transactions  in the London  interbank
market, selected by the Securities Administrator) as of 11:00 a.m., London time,
on the Interest Determination Date to prime banks in the London interbank market
for a  period  of one  month in  amounts  approximately  equal to the  aggregate
Current  Principal Amount of the Adjustable Rate  Certificates then outstanding.
The Securities Administrator will request the principal London office of each of
the  reference  banks to provide a quotation  of its rate.  If at least two such
quotations are provided,  the rate will be the arithmetic mean of the quotations
rounded up to the nearest whole multiple of 0.03125%. If on such date fewer than
two quotations are provided as requested,  the rate will be the arithmetic  mean
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 U.S.  Dollars  to leading  European  banks for a period of one month in
amounts  approximately  equal to the aggregate  Current  Principal Amount of the
Adjustable  Rate  Certificates  then  outstanding.  If no such quotations can be
obtained,  the rate  will be LIBOR  for the prior  Distribution  Date;  PROVIDED
HOWEVER, if, under the priorities described above, LIBOR for a Distribution Date
would be  based  on  LIBOR  for the  previous  Distribution  Date for the  third
consecutive  Distribution  Date,  the Securities  Administrator  shall select an
alternative  comparable index (over which the Securities  Administrator e has no
control),  used for  determining  one-month  Eurodollar  lending  rates  that is
calculated and published (or otherwise made available) by an independent  party.
The  establishment  of LIBOR by the  Securities  Administrator  on any  Interest
Determination Date and the Securities  Administrator's subsequent calculation of
the  Pass-Through  Rate applicable to the Adjustable Rate  Certificates  for the
relevant  Interest  Accrual Period,  in the absence of manifest  error,  will be
final and binding.  Promptly  following  each  Interest  Determination  Date the
Securities  Administrator  shall supply the Master  Servicer with the results of
its determination of LIBOR on such date.

                                      -37-
<PAGE>

                                   ARTICLE II
                          Conveyance of Mortgage Loans;
                        Original Issuance of Certificates

      Section 2.01 Conveyance of Mortgage Loans to Trustee.

      (a) The  Depositor  concurrently  with the  execution and delivery of this
Agreement,  sells,  transfers and assigns to the Trust without  recourse all its
right,  title and interest in and to (i) the Mortgage  Loans  identified  in the
Mortgage Loan Schedule, including all interest and principal due with respect to
the  Mortgage  Loans after the  Cut-off  Date,  but  excluding  any  payments of
principal and interest due on or prior to the Cut-off Date;  (ii) such assets as
shall  from  time to time be  credited  or are  required  by the  terms  of this
Agreement to be credited to the Master Servicer Collection  Account,  (iii) such
assets  relating to the  Mortgage  Loans as from time to time may be held by the
Servicers  in Protected  Accounts,  the Master  Servicer in the Master  Servicer
Collection  Account and the Trustee in the  Distribution  Account,  (iv) any REO
Property, (v) the Required Insurance Policies and any amounts paid or payable by
the insurer under any Insurance  Policy (to the extent the mortgagee has a claim
thereto),  (vi) the Mortgage Loan Purchase  Agreement to the extent  provided in
Subsection 2.03(a), (vii) the rights with respect to the Servicing Agreements as
assigned to the Trustee on behalf of the  Certificateholders  by the  Assignment
Agreements,  (viii) the Policy,  the Class I-A-5 Policy  Payments  Account,  the
Rounding  Account and the Reserve Fund and (ix) any  proceeds of the  foregoing.
Although it is the intent of the parties to this  Agreement  that the conveyance
of the  Depositor's  right,  title and interest in and to the Mortgage Loans and
other assets in the Trust Fund  pursuant to this  Agreement  shall  constitute a
purchase and sale and not a loan, in the event that such conveyance is deemed to
be a loan, it is the intent of the parties to this  Agreement that the Depositor
shall be deemed  to have  granted  to the  Trustee  a first  priority  perfected
security interest in all of the Depositor's right, title and interest in, to and
under  the  Mortgage  Loans and other  assets in the Trust  Fund,  and that this
Agreement  shall  constitute  a security  agreement  under  applicable  law. The
Depositor,  the Master  Servicer  and the Trustee  agree that it is not intended
that any mortgage  loan be conveyed to the Trust that is either (i) a "High-Cost
Home Loan" as defined in the New Jersey Home  Ownership Act  effective  November
27, 2003 or (ii) a "High-Cost  Home Loan" as defined in the New Mexico Home Loan
Protection Act effective January 1, 2004.

      (b) In connection  with the above transfer and  assignment,  the Depositor
hereby delivers to the Custodian,  as agent for the Trustee, with respect to (I)
each Mortgage Loan (other than a Cooperative Loan):

            (i) the original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit together with a copy of the related Mortgage Note;

            (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 (w) in the proviso below applies, shall be
      in recordable form);

                                      -38-
<PAGE>

            (iii)  unless the Mortgage  Loan is a MOM Loan, a certified  copy of
      the  assignment  (which  may be in the  form of a  blanket  assignment  if
      permitted in the jurisdiction in which the Mortgaged  Property is located)
      to  "U.S.  Bank  National  Association,  as  Trustee",  with  evidence  of
      recording  with respect to each  Mortgage  Loan in the name of the Trustee
      thereon (or if clause (w) in the  proviso  below  applies or for  Mortgage
      Loans with respect to which the related Mortgaged Property is located in a
      state other than  Maryland  or an Opinion of Counsel has been  provided as
      set forth in this Section 2.01(b), shall be in recordable form);

            (iv) all  intervening  assignments  of the Security  Instrument,  if
      applicable and only to the extent available to the Depositor with evidence
      of recording thereon;

            (v) the original or a copy of the policy or  certificate  of primary
      mortgage guaranty insurance, to the extent available, if any;

            (vi)  the  original   policy  of  title   insurance  or  mortgagee's
      certificate  of  title   insurance  or  commitment  or  binder  for  title
      insurance; and

            (vii) originals of all  modification  agreements,  if applicable and
      available.

and (II) with respect to each Cooperative Loan so assigned:

            (i) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit, together with a copy of the related Mortgage Note;

            (ii) A counterpart  of the  Cooperative  Lease and the Assignment of
      Proprietary   Lease  to  the  originator  of  the  Cooperative  Loan  with
      intervening  assignments  showing  an  unbroken  chain of title  from such
      originator to the Trustee;

            (iii) The related  Cooperative Stock  Certificate,  representing the
      related  Cooperative  Stock pledged with respect to such Cooperative Loan,
      together  with an  undated  stock  power  (or  other  similar  instrument)
      executed in blank;

            (iv) The original  recognition  agreement by the  Cooperative of the
      interests of the mortgagee  with respect to the related  Cooperative  Loan
      and any transfer documents related to the recognition agreement;

            (v) The Security Agreement;

            (vi)  Copies of the  original  UCC-1  financing  statement,  and any
      continuation statements,  filed by the originator of such Cooperative Loan
      as secured party, each with evidence of recording thereof,  evidencing the
      interest of the originator under the Security Agreement and the Assignment
      of Proprietary Lease;

            (vii) Copies of the filed UCC-3 assignments of the security interest
      referenced  in clause (vi) above  showing an unbroken  chain of title from
      the originator to the Trustee, each

                                      -39-
<PAGE>

      with  evidence  of  recording  thereof,  evidencing  the  interest  of the
      originator under the Security  Agreement and the Assignment of Proprietary
      Lease;

            (viii) An executed  assignment of the interest of the  originator in
      the Security  Agreement and  Assignment of Proprietary  Lease,  showing an
      unbroken chain of title from the originator to the Trustee; and

            (ix) The  original of each  modification,  assumption  agreement  or
      preferred loan agreement, if any, relating to such Cooperative Loan;

PROVIDED, HOWEVER, that in lieu of the foregoing, the Depositor may deliver to
the Custodian, as agent of the Trustee, the following documents, under the
circumstances set forth below: (w) in lieu of the original Security Instrument,
assignments to the Trustee or intervening assignments thereof which have been
delivered, are being delivered or will, upon receipt of recording information
relating to the Security Instrument required to be included thereon, be
delivered to recording offices for recording and have not been returned to the
Depositor in time to permit their delivery as specified above, the Depositor may
deliver a true copy thereof with a certification by the Depositor, 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"; (x) in lieu of the
Security Instrument, assignment to the Trustee or intervening assignments
thereof, if the applicable jurisdiction retains the originals of such documents
(as evidenced by a certification from the Depositor to such effect) the
Depositor may deliver photocopies of such documents containing an original
certification by the judicial or other governmental authority of the
jurisdiction where such documents were recorded; (y) in lieu of the Mortgage
Notes relating to the Mortgage Loans identified on Exhibit 5 to the Mortgage
Loan Purchase Agreement, the Depositor may deliver lost note affidavits from the
Seller; and (z) the Depositor shall not be required to deliver intervening
assignments or Mortgage Note endorsements between the related Underlying Seller
and the Seller, between the Seller and the Depositor, and between the Depositor
and the Trustee; 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 or the Custodian, as its agent, a certification to such
effect and shall deposit all amounts paid in respect of such Mortgage Loans in
the Master Servicer Collection Account on the Closing Date. The Depositor shall
deliver such original documents (including any original documents as to which
certified copies had previously been delivered) to the Trustee or the Custodian,
as its agent, promptly after they are received. The Depositor shall cause the
Seller, at its expense, to cause each assignment of the Security Instrument to
the Trustee to be recorded not later than 180 days after the Closing Date,
unless (a) such recordation is not required by the Rating Agencies or an Opinion
of Counsel addressed to the Trustee and Radian has been provided to the Trustee
(with a copy to the Custodian) and Radian which states that recordation of such
Security Instrument is not required to protect the interests of the
Certificateholders in the related Mortgage Loans or (b) MERS is identified on
the Mortgage or on a properly recorded assignment of the Mortgage as the
mortgagee of record solely as nominee for the Seller and its successor and
assigns; provided, however, notwithstanding the foregoing, each assignment shall
be submitted for recording by the Seller in the manner described above, at no
expense to the Trust or the Trustee or the Custodian, as its agent, upon the
earliest to occur of: (i) reasonable direction by the Holders of Certificates
evidencing Fractional Undivided Interests aggregating not less than 25% of the
Trust, (ii) the occurrence of an Event of Default, (iii) the occurrence of a
bankruptcy, insolvency or foreclosure relating to the Seller and (iv) the

                                      -40-
<PAGE>

occurrence of a servicing transfer as described in Section 8.02 hereof.
Notwithstanding the foregoing, if the Seller fails to pay the cost of recording
the assignments, such expense will be paid by the Trustee and the Trustee shall
be reimbursed for such expenses by the Trust in accordance with Section 9.05.

      Section 2.02 Acceptance of Mortgage Loans by Trustee.

      (a) The Trustee  acknowledges  the sale,  transfer and  assignment  of the
Trust Fund to it by the Depositor and receipt of,  subject to further review and
the exceptions  which may be noted pursuant to the procedures  described  below,
and  declares  that it  holds,  the  documents  (or  certified  copies  thereof)
delivered to the Custodian, as its agent, pursuant to Section 2.01, and declares
that it will continue to hold those documents and any  amendments,  replacements
or supplements thereto and all other assets of the Trust Fund delivered to it as
Trustee in trust for the use and benefit of all  present  and future  Holders of
the Certificates and Radian. On the Closing Date, the Custodian, with respect to
the Mortgage  Loans,  shall  acknowledge  with respect to each  Mortgage Loan by
delivery to the  Depositor,  Radian and the Trustee of an Initial  Certification
receipt of the Mortgage File,  but without review of such Mortgage File,  except
to the extent  necessary to confirm that such Mortgage File contains the related
Mortgage  Note or lost note  affidavit.  No later than 90 days after the Closing
Date (or, with respect to any  Substitute  Mortgage  Loan,  within five Business
Days after the receipt by the Trustee or Custodian thereof), the Trustee agrees,
for the benefit of the  Certificateholders  and Radian, to review or cause to be
reviewed by the Custodian on its behalf (under the  Custodial  Agreement),  each
Mortgage  File  delivered  to it and to  execute  and  deliver,  or  cause to be
executed  and  delivered,  to the  Depositor,  Radian and the Trustee an Interim
Certification.  In  conducting  such  review,  the  Trustee  or  Custodian  will
ascertain  whether all required  documents have been executed and received,  and
based on the Mortgage Loan Schedule,  whether those documents relate, determined
on the basis of the Mortgagor name,  original principal balance and loan number,
to the Mortgage  Loans it has  received,  as  identified  in the  Mortgage  Loan
Schedule.  In performing any such review,  the Trustee or the Custodian,  as its
agent, 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, as its agent, finds any document constituting part
of the  Mortgage  File has not been  executed or 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 (a "Material  Defect"),  the Trustee or the Custodian,  as
its agent,  shall promptly  notify the Seller.  In accordance  with the Mortgage
Loan Purchase Agreement, the Seller shall correct or cure any such defect within
ninety (90) days from the date of notice from the Trustee or the  Custodian,  as
its agent,  of the defect and if the Seller  fails to correct or cure the defect
within  such  period,  and such  defect  materially  and  adversely  affects the
interests of the  Certificateholders  in the related  Mortgage Loan, the Trustee
shall enforce the Seller's obligation under the Mortgage Loan Purchase Agreement
to, within 90 days from the Trustee's or the Custodian's notification, provide a
Substitute  Mortgage  Loan (if within two years of the Closing Date) or purchase
such Mortgage Loan at the Repurchase Price;  provided that, if such defect would
cause the Mortgage  Loan to be other than a  "qualified  mortgage" as defined in
Section 860G(a)(3) of the Code, any such cure or repurchase must occur within 90
days from the date such breach was discovered;  provided,  however, that if such
defect  relates  solely to the  inability  of the Seller to deliver the original
Security Instrument or

                                      -41-
<PAGE>

intervening  assignments  thereof,  or a certified copy because the originals of
such  documents,  or a certified  copy have not been returned by the  applicable
jurisdiction, the Seller shall not be required to purchase such Mortgage Loan if
the Seller  delivers  such  original  documents or certified  copy promptly upon
receipt,  but in no event  later  than 360 days  after  the  Closing  Date.  The
foregoing  repurchase  obligation  shall not apply in the event  that the Seller
cannot deliver such original or copy of any document  submitted for recording to
the appropriate  recording  office in the applicable  jurisdiction  because such
document has not been  returned by such office;  provided  that the Seller shall
instead deliver a recording receipt of such recording office or, if such receipt
is not  available,  a  certificate  confirming  that  such  documents  have been
accepted for  recording,  and delivery to the Trustee or the  Custodian,  as its
agent,  shall be effected by the Seller within thirty days of its receipt of the
original recorded document.

      (b) No later  than 180 days after the  Closing  Date,  the  Trustee or the
Custodian,  as its agent, will review, for the benefit of the Certificateholders
and Radian,  the Mortgage Files  delivered to it and will execute and deliver or
cause to be executed and  delivered to the  Depositor,  Radian and the Trustee a
Final Certification. In conducting such review, the Trustee or the Custodian, as
its agent,  will ascertain  whether an original of each document  required to be
recorded has been returned from the recording  office with evidence of recording
thereon or a certified copy has been obtained from the recording  office. If the
Trustee or the Custodian,  as its agent, finds a Material Defect, the Trustee or
the  Custodian,  as its agent,  shall  promptly  notify  the  Seller  (provided,
however,   that  with  respect  to  those  documents  described  in  subsections
(b)(I)(iv),  (v),  and (vii) of Section  2.01,  the  Trustee's  and  Custodian's
obligations  shall  extend  only  to the  documents  actually  delivered  to the
Custodian  pursuant to such  subsections).  In accordance with the Mortgage Loan
Purchase  Agreement,  the Seller shall correct or cure any such defect within 90
days from the date of notice from the Trustee or the Custodian, as its agent, of
the Material  Defect and if the Seller is unable to cure such defect within such
period, and if such defect materially and adversely affects the interests of the
Certificateholders  in the related  Mortgage Loan, the Trustee shall enforce the
Seller's  obligation  under the Mortgage Loan  Purchase  Agreement to, within 90
days from the  Trustee's  or  Custodian's  notification,  provide  a  Substitute
Mortgage  Loan (if  within  two  years of the  Closing  Date) or  purchase  such
Mortgage Loan at the Repurchase Price, provided that, if such defect would cause
the Mortgage Loan to be other than a "qualified  mortgage" as defined in Section
860G(a)(3) of the Code,  any such cure,  repurchase or  substitution  must occur
within 90 days from the date such breach was discovered, provided, however, that
if such  defect  relates  solely to the  inability  of the Seller to deliver the
original Security Instrument or intervening  assignments thereof, or a certified
copy, because the originals of such documents or a certified copy, have not been
returned by the  applicable  jurisdiction,  the Seller  shall not be required to
purchase such Mortgage Loan, if the Seller  delivers such original  documents or
certified copy promptly upon receipt,  but in no event later than 360 days after
the Closing Date.  The foregoing  repurchase  obligation  shall not apply in the
event that the Seller  cannot  deliver  such  original  or copy of any  document
submitted for recording to the  appropriate  recording  office in the applicable
jurisdiction  because  such  document  has not  been  returned  by such  office;
provided  that the Seller  shall  instead  deliver a  recording  receipt of such
recording office or, if such receipt is not available,  a certificate confirming
that such  documents  have been  accepted  for  recording,  and  delivery to the
Trustee or the Custodian,  as its agent,  shall be effected by the Seller within
thirty days of its receipt of the original recorded document.

                                      -42-
<PAGE>

      (c) In the  event  that a  Mortgage  Loan is  purchased  by the  Seller in
accordance with Subsections  2.02(a) or (b) above, the Seller shall remit to the
Master  Servicer  the  Repurchase  Price  for  deposit  in the  Master  Servicer
Collection Account and the Seller shall provide to the Securities Administrator,
the Trustee and Radian  written  notification  detailing  the  components of the
Repurchase  Price.  Upon deposit of the Repurchase  Price in the Master Servicer
Collection Account, the Depositor shall notify the Trustee and the Custodian, as
agent of the  Trustee  (upon  receipt  of a Request  for  Release in the form of
Exhibit D attached hereto with respect to such Mortgage Loan),  shall 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 Repurchase Price in immediately available
funds is received by the  Trustee.  The Trustee  shall amend the  Mortgage  Loan
Schedule, which was previously delivered to it by the Depositor in a form agreed
to between the Depositor and the Trustee,  to reflect such  repurchase and shall
promptly  notify the Rating  Agencies,  Radian and the Master  Servicer  of such
amendment.  The  obligation of the Seller to  repurchase  or substitute  for any
Mortgage  Loan a  Substitute  Mortgage  Loan  as to  which  such a  defect  in a
constituent  document  exists  shall be the sole remedy  respecting  such defect
available  to the  Certificateholders  and  Radian  or to the  Trustee  on their
behalf.

      Section  2.03  Assignment  of  Interest  in  the  Mortgage  Loan  Purchase
Agreement.

      (a)  The  Depositor  hereby  assigns  to the  Trustee,  on  behalf  of the
Certificateholders,  all of its right,  title and interest in the Mortgage  Loan
Purchase  Agreement,  including  but not limited to the  Depositor's  rights and
obligations  pursuant to the  Servicing  Agreements  (noting that the Seller has
retained the right in the event of breach of the representations, warranties and
covenants,  if any,  with respect to the related  Mortgage  Loans of the related
Servicer under the related Servicing Agreement to enforce the provisions thereof
and to seek all or any available  remedies).  The  obligations  of the Seller to
substitute or repurchase,  as applicable, a Mortgage Loan shall be the Trustee's
and the  Certificateholders'  sole remedy for any breach thereof. At the request
of the  Trustee,  the  Depositor  shall take such actions as may be necessary to
enforce  the above  right,  title and  interest  on behalf of the  Trustee,  the
Certificateholders  and Radian or shall  execute such  further  documents as the
Trustee may reasonably  require in order to enable the Trustee to carry out such
enforcement.

      (b)  If  the  Depositor,  the  Securities  Administrator  or  the  Trustee
discovers a breach of any of the representations and warranties set forth in the
Mortgage Loan Purchase Agreement,  which breach materially and adversely affects
the value of the interests of  Certificateholders  or the Trustee in the related
Mortgage Loan, the party discovering the breach shall give prompt written notice
of the breach to the other parties. The Seller,  within 90 days of its discovery
or receipt of notice that such breach has occurred  (whichever  occurs earlier),
shall cure the breach in all material  respects or, subject to the Mortgage Loan
Purchase  Agreement  or Section 2.04 of this  Agreement,  as  applicable,  shall
purchase the Mortgage Loan or any property  acquired  with respect  thereto from
the Trustee; provided,  however, that if there is a breach of any representation
set forth in the  Mortgage  Loan  Purchase  Agreement  or  Section  2.04 of this
Agreement, as applicable, and the Mortgage Loan or the related property acquired
with  respect  thereto has been sold,  then the Seller shall pay, in lieu of the
Repurchase Price, any excess of the

                                      -43-
<PAGE>

Repurchase Price over the Net Liquidation  Proceeds  received upon such sale. If
the Net Liquidation  Proceeds exceed the Repurchase  Price,  any excess shall be
paid to the Seller to the extent not required by law to be paid to the borrower.
Any such  purchase by the Seller  shall be made by  providing an amount equal to
the Repurchase  Price to the Master  Servicer for deposit in the Master Servicer
Collection  Account and written  notification  detailing the  components of such
Repurchase  Price.  The  Depositor  shall  notify the  Trustee and submit to the
Custodian,  as agent for the Trustee,  a Request for Release,  and the Custodian
shall  release,  or the Trustee  shall cause the  Custodian  to release,  to the
Seller the related  Mortgage  File and the Trustee shall execute and deliver all
instruments  of transfer or  assignment  furnished to it by the Seller,  without
recourse,  representation  or  warranty as are  necessary  to vest in the Seller
title to and  rights  under the  Mortgage  Loan or any  property  acquired  with
respect  thereto.  Such purchase shall be deemed to have occurred on the date on
which the Repurchase  Price in available  funds is received by the Trustee.  The
Master  Servicer  shall  amend  the  Mortgage  Loan  Schedule  to  reflect  such
repurchase and shall promptly notify the Trustee, Radian and the Rating Agencies
of such  amendment.  Enforcement of the obligation of the Seller to purchase (or
substitute a  Substitute  Mortgage  Loan for) any Mortgage  Loan or any property
acquired with respect  thereto (or pay the Repurchase  Price as set forth in the
above  proviso)  as to which a  breach  has  occurred  and is  continuing  shall
constitute   the  sole  remedy   respecting   such  breach   available   to  the
Certificateholders or the Trustee on their behalf.

      Section 2.04 Substitution of Mortgage Loans.

      Notwithstanding  anything to the  contrary in this  Agreement,  in lieu of
purchasing a Mortgage Loan  pursuant to the Mortgage Loan Purchase  Agreement or
Sections 2.02 or 2.03 of this Agreement,  the Seller may, no later than the date
by which such purchase by the Seller would otherwise be required,  tender to the
Trustee a Substitute Mortgage Loan accompanied by a certificate of an authorized
officer  of the  Seller  that such  Substitute  Mortgage  Loan  conforms  to the
requirements  set forth in the definition of "Substitute  Mortgage Loan" in this
Agreement;  provided,  however,  that substitution pursuant to the Mortgage Loan
Purchase Agreement or Section 2.04 of this Agreement, as applicable,  in lieu of
purchase shall not be permitted  after the  termination  of the two-year  period
beginning on the Startup Day; provided,  further, that if the breach would cause
the Mortgage Loan to be other than a "qualified  mortgage" as defined in Section
860G(a)(3) of the Code, any such cure or substitution  must occur within 90 days
from the  date the  breach  was  discovered.  The  Custodian,  as agent  for the
Trustee, shall examine the Mortgage File for any Substitute Mortgage Loan in the
manner set forth in Section  2.02(a)  and the Trustee or the  Custodian,  as its
agent,  shall notify the Seller,  in writing,  within five  Business  Days after
receipt,  whether or not the documents relating to the Substitute  Mortgage Loan
satisfy the requirements of the fifth sentence of Subsection 2.02(a). Within two
Business Days after such  notification,  the Seller shall provide to the Trustee
for  deposit  in the  Distribution  Account  the  amount,  if any,  by which the
Outstanding  Principal Balance as of the next preceding Due Date of the Mortgage
Loan for which  substitution is being made, after giving effect to the Scheduled
Principal due on such date, exceeds the Outstanding Principal Balance as of such
date of the Substitute Mortgage Loan, after giving effect to Scheduled Principal
due on such  date,  which  amount  shall be  treated  for the  purposes  of this
Agreement  as if it were the payment by the Seller of the  Repurchase  Price for
the purchase of a Mortgage Loan by the Seller.  After such  notification  to the
Seller and, if any such excess exists, upon receipt of such deposit, the Trustee
shall accept such Substitute  Mortgage Loan which shall  thereafter be deemed to
be a Mortgage

                                      -44-
<PAGE>

Loan  hereunder.  In the event of such a substitution,  accrued  interest on the
Substitute  Mortgage Loan for the month in which the substitution occurs and any
Principal  Prepayments  made thereon  during such month shall be the property of
the Trust Fund and  accrued  interest  for such month on the  Mortgage  Loan for
which the substitution is made and any Principal Prepayments made thereon during
such month shall be the  property of the Seller.  The  Scheduled  Principal on a
Substitute  Mortgage Loan due on the Due Date in the month of substitution shall
be the property of the Seller and the  Scheduled  Principal on the Mortgage Loan
for which the substitution is made due on such Due Date shall be the property of
the Trust Fund. Upon acceptance of the Substitute Mortgage Loan (and delivery to
the Custodian of a Request for Release for such Mortgage  Loan),  the Custodian,
as agent for the Trustee,  shall release to the Seller the related Mortgage File
related to any Mortgage  Loan  released  pursuant to the Mortgage  Loan Purchase
Agreement or Section 2.04 of this  Agreement,  as applicable,  and shall execute
and  deliver  all  instruments  of transfer  or  assignment,  without  recourse,
representation or warranty in form as provided to it as are necessary to vest in
the Seller title to and rights under any Mortgage Loan released  pursuant to the
Mortgage  Loan  Purchase  Agreement  or  Section  2.04  of  this  Agreement,  as
applicable.  The Seller shall deliver to the Custodian the documents  related to
the Substitute  Mortgage Loan in accordance  with the provisions of the Mortgage
Loan Purchase Agreement or Subsections 2.01(b) and 2.02(b) of this Agreement, as
applicable,  with the date of acceptance of the Substitute  Mortgage Loan deemed
to be the  Closing  Date for  purposes  of the time  periods  set forth in those
Subsections.  The  representations and warranties set forth in the Mortgage Loan
Purchase  Agreement shall be deemed to have been made by the Seller with respect
to each  Substitute  Mortgage Loan as of the date of acceptance of such Mortgage
Loan by the Trustee.  The Master Servicer shall amend the Mortgage Loan Schedule
to reflect such  substitution  and shall provide a copy of such amended Mortgage
Loan Schedule to the Trustee, Radian and the Rating Agencies.

      Section 2.05 Issuance of Certificates.

      (a) The Trustee  acknowledges  the  assignment to it of the Mortgage Loans
and the other assets comprising the Trust Fund and, concurrently therewith,  has
signed, and countersigned and delivered to the Depositor,  in exchange therefor,
Certificates  in such  authorized  denominations  representing  such  Fractional
Undivided  Interests as the Depositor has requested.  The Trustee agrees that it
will hold the  Mortgage  Loans and such other assets as may from time to time be
delivered to it  segregated on the books of the Trustee in trust for the benefit
of the Certificateholders.

      (b) The Depositor,  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 Depositor 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.

      (c) The Depositor,  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 Depositor in
and to the REMIC II Regular Interests, and the other

                                      -45-
<PAGE>

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.

      Section 2.06 Representations and Warranties Concerning the Depositor.

      The Depositor  hereby  represents and warrants to the Trustee,  the Master
Servicer and the Securities Administrator as follows:

            (i) the  Depositor  (a) is a  corporation  duly  organized,  validly
      existing and in good standing  under the laws of the State of Delaware and
      (b) is  qualified  and in good  standing  as a foreign  corporation  to do
      business  in each  jurisdiction  where such  qualification  is  necessary,
      except where the failure so to qualify would not reasonably be expected to
      have a material  adverse effect on the  Depositor's  business as presently
      conducted or on the  Depositor's  ability to enter into this Agreement and
      to consummate the transactions contemplated hereby;

            (ii) the Depositor has full corporate power to own its property,  to
      carry on its business as presently conducted and to enter into and perform
      its obligations under this Agreement;

            (iii) the execution and delivery by the Depositor of this  Agreement
      have been duly authorized by all necessary corporate action on the part of
      the Depositor;  and neither the execution and delivery of this  Agreement,
      nor  the  consummation  of  the  transactions  herein  contemplated,   nor
      compliance with the provisions  hereof,  will conflict with or result in a
      breach of, or  constitute a default  under,  any of the  provisions of any
      law, governmental rule, regulation,  judgment,  decree or order binding on
      the  Depositor  or its  properties  or the  articles of  incorporation  or
      by-laws of the  Depositor,  except those  conflicts,  breaches or defaults
      which would not  reasonably be expected to have a material  adverse effect
      on the Depositor's  ability to enter into this Agreement and to consummate
      the transactions contemplated hereby;

            (iv) the  execution,  delivery and  performance  by the Depositor of
      this  Agreement  and the  consummation  of the  transactions  contemplated
      hereby do not require the consent or approval of, the giving of notice to,
      the  registration  with,  or the taking of any other action in respect of,
      any state, federal or other governmental authority or agency, except those
      consents,  approvals,  notices,  registrations  or other  actions  as have
      already been obtained, given or made;

            (v) this  Agreement  has been duly  executed  and  delivered  by the
      Depositor and, assuming due  authorization,  execution and delivery by the
      other parties  hereto,  constitutes a valid and binding  obligation of the
      Depositor  enforceable against it in accordance with its terms (subject to
      applicable bankruptcy and insolvency laws and other similar laws affecting
      the enforcement of the rights of creditors generally);

            (vi) there are no actions,  suits or proceedings  pending or, to the
      knowledge of the Depositor, threatened against the Depositor, before or by
      any court, administrative agency,

                                      -46-
<PAGE>

      arbitrator  or   governmental   body  (i)  with  respect  to  any  of  the
      transactions  contemplated  by this  Agreement or (ii) with respect to any
      other  matter which in the judgment of the  Depositor  will be  determined
      adversely  to the  Depositor  and  will  if  determined  adversely  to the
      Depositor materially and adversely affect the Depositor's ability to enter
      into this Agreement or perform its obligations  under this Agreement;  and
      the  Depositor  is not in default  with respect to any order of any court,
      administrative agency, arbitrator or governmental body so as to materially
      and adversely affect the transactions contemplated by this Agreement; and

            (vii)  immediately  prior  to the  transfer  and  assignment  to the
      Trustee,  each  Mortgage  Note and each  Mortgage  were not  subject to an
      assignment or pledge,  and the Depositor had good and marketable  title to
      and was the sole owner  thereof  and had full right to  transfer  and sell
      such  Mortgage  Loan to the  Trustee  free and  clear of any  encumbrance,
      equity, lien, pledge, charge, claim or security interest.

                                      -47-
<PAGE>

                                   ARTICLE III
                 Administration and Servicing of Mortgage Loans

      Section 3.01 Master Servicer.

      The Master Servicer shall supervise, monitor and oversee the obligation of
the  Servicers to service and  administer  their  respective  Mortgage  Loans in
accordance with the terms of the applicable  Servicing Agreements 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 each  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 each  Servicer and shall cause each  Servicer to perform
and observe  the  covenants,  obligations  and  conditions  to be  performed  or
observed by such Servicer under its applicable Servicing  Agreement.  The Master
Servicer shall  independently and separately  monitor each 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 Servicers' and Master
Servicer's records, and based on such reconciled and corrected information,  the
Master Servicer shall provide such  information to the Securities  Administrator
as shall be  necessary  in order for it to prepare the  statements  specified in
Section 6.04, and prepare any other  information  and statements  required to be
forwarded by the Master Servicer hereunder.  The Master Servicer shall reconcile
the results of its Mortgage Loan monitoring  with the actual  remittances of the
Servicers pursuant to the applicable Servicing Agreements.

      The Trustee shall  furnish 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  Servicers  and the Master  Servicer  to service  and
administer the related Mortgage Loans and REO Property.

      The Trustee  shall  provide  access to the records  and  documentation  in
possession of the Trustee  regarding the related Mortgage Loans and REO Property
and the servicing thereof to the  Certificateholders,  Radian, 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;  provided,  however,  that, unless otherwise  required by
law,  the Trustee  shall not 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 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 actual costs.

      The Trustee  shall  execute and  deliver to 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.

                                      -48-
<PAGE>

      Section 3.02 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 Depositor,  the related Servicer 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 and
Radian has received a REMIC Opinion addressed to the Trustee and Radian 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  addressed  to the Trustee and
Radian.

      Section 3.03 Monitoring of Servicers.

      (a) The Master  Servicer shall be responsible for reporting to the Trustee
and the  Depositor  the  compliance  by each  Servicer with its duties under the
related Servicing Agreement.  In the review of each Servicer's  activities,  the
Master  Servicer  may rely upon an  officer's  certificate  of the  Servicer (or
similar  document  signed by an officer  of the  Servicer)  with  regard to such
Servicer's  compliance with the terms of its Servicing  Agreement.  In the event
that the Master Servicer, in its judgment,  determines that a Servicer should be
terminated in accordance with its Servicing  Agreement,  or that a notice should
be sent pursuant to such  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 Depositor,  Radian 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,   the
Certificateholders  and Radian,  shall enforce the  obligations of each Servicer
under the related Servicing  Agreement,  and shall, in the event that a Servicer
fails to perform  its  obligations  in  accordance  with the  related  Servicing
Agreement,  subject  to  the  preceding  paragraph,  terminate  the  rights  and
obligations  of such  Servicer  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 Servicing
Agreements and the pursuit of other appropriate remedies,  shall be in such form
and  carried out to such an extent and at such time as the Master  Servicer,  in
its good faith business judgment, would require were it the owner of the related
Mortgage Loans.  The Master Servicer shall pay the costs of such  enforcement at
its own  expense,  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 a Servicer, appointment of a successor Servicer or
the transfer and assumption of

                                      -49-
<PAGE>

servicing  by the  Master  Servicer  with  respect  to any  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 Servicer as a result of an event of default by such Servicer
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 the related Servicing Agreement) are not fully
and timely reimbursed by 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 each  Servicer to comply with the
remittance requirements and other obligations set forth in the related Servicing
Agreement.

      (e) If the Master Servicer acts as Servicer,  it will not assume liability
for  the  representations  and  warranties  of the  Servicer,  if  any,  that it
replaces.

      Section 3.04 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 3.05 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  X  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 3.03, shall
not permit any 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 any
REMIC 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 and
Radian have received an Opinion of Counsel (but not at the expense of the Master
Servicer)

                                      -50-
<PAGE>

to the effect that the contemplated  action would not cause any REMIC to fail to
qualify  as a REMIC or result in the  imposition  of a tax upon any  REMIC.  The
Trustee shall furnish the Master Servicer, upon written request from a Servicing
Officer,  with any powers of  attorney  empowering  the Master  Servicer  or any
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  applicable  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 or
any 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  9.11  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 3.06 Due-on-Sale Clauses; Assumption Agreements.

      To the extent  provided  in the  applicable  Servicing  Agreement,  to the
extent  Mortgage  Loans  contain  enforceable  due-on-sale  clauses,  the Master
Servicer  shall cause the Servicers to enforce such clauses in  accordance  with
the applicable Servicing Agreement.  If applicable law prohibits the enforcement
of a  due-on-sale  clause or such clause is otherwise not enforced in accordance
with the applicable Servicing Agreement, and, as a consequence,  a Mortgage Loan
is assumed,  the original Mortgagor may be released from liability in accordance
with the applicable Servicing Agreement.

      Section 3.07 Release of Mortgage Files.

      (a) Upon  becoming  aware of the payment in full of any Mortgage  Loan, or
the receipt by any  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 Servicer will, if required
under the  applicable  Servicing  Agreement  (or if the  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 D
hereto  signed by a  Servicing  Officer  or in a mutually  agreeable  electronic
format  which  will,  in lieu  of a  signature  on its  face,  originate  from a
Servicing Officer (which  certification  shall include a statement to the effect
that all amounts  received in connection  with such payment that are required to
be deposited in the  Protected  Account  maintained by the  applicable  Servicer
pursuant to Section 4.01 or by the applicable Servicer pursuant to its Servicing
Agreement  have  been  or will be so  deposited)  and  shall  request  that  the
Custodian,  on behalf of the  Trustee,  deliver to the  applicable  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  applicable  Servicer  and the Trustee and  Custodian  shall have no
further responsibility with regard to such Mortgage File.

                                      -51-
<PAGE>

Upon any such payment in full,  each 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)
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 the applicable  Servicing Agreement,
the Trustee shall  execute such  documents as shall be prepared and furnished to
the Trustee by a 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 a 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 D (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 Servicer or the Master Servicer, as applicable.  Such request for
release  shall  obligate  the  Servicer  or the  Master  Servicer  to return the
Mortgage File to the Custodian on behalf of the Trustee,  when the need therefor
by the Servicer or the Master Servicer 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  Servicer or the
Master Servicer.

      Section 3.08 Documents, Records and Funds in Possession of Master Servicer
To Be Held for Trustee.

      (a) The Master  Servicer  shall  transmit and each Servicer (to the extent
required by the related  Servicing  Agreement)  shall transmit to the Trustee or
Custodian  such  documents  and  instruments  coming into the  possession of the
Master  Servicer or such Servicer from time to time as are required by the terms
hereof, or in the case of the Servicers,  the applicable Servicing Agreement, to
be  delivered  to the  Trustee or  Custodian.  Any funds  received by the Master
Servicer or by a Servicer in respect of any Mortgage Loan or which otherwise are
collected  by the Master  Servicer or by a Servicer as  Liquidation  Proceeds or
Insurance Proceeds in respect of any Mortgage Loan shall be held for the benefit
of the Trustee and the Certificateholders subject to the Master Servicer's right
to retain or withdraw  from the Master  Servicer  Collection  Account the Master
Servicing Compensation and other amounts provided in this Agreement,  and to the
right of each Servicer to retain its Servicing Fee and other amounts as provided
in the applicable  Servicing  Agreement.  The Master Servicer shall, and (to the
extent provided in the applicable Servicing Agreement) shall cause each 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,  Radian 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 the
Office of Trust  Supervision  and the FDIC 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

                                      -52-
<PAGE>

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,  Radian and the Certificateholders and shall be and remain the sole
and  exclusive  property  of the  Trustee;  provided,  however,  that the Master
Servicer and each 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  applicable  Servicing
Agreement.

      Section 3.09 Standard Hazard Insurance and Flood Insurance Policies.

      (a) For  each  Mortgage  Loan,  the  Master  Servicer  shall  enforce  any
obligation of the Servicers under the related  Servicing  Agreements to maintain
or cause to be  maintained  standard  fire and  casualty  insurance  and,  where
applicable,  flood  insurance,  all in  accordance  with the  provisions  of the
related  Servicing  Agreements.  It is understood and agreed that such insurance
shall be with insurers  meeting the  eligibility  requirements  set forth in the
applicable  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 Section  4.01 and 4.02,  any  amounts  collected  by the
Servicers  or the  Master  Servicer,  or by any  Servicer,  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 the applicable  Servicing Agreement) shall be deposited into the
Master Servicer  Collection  Account,  subject to withdrawal pursuant to Section
4.02 and 4.03.  Any cost  incurred  by the Master  Servicer  or any  Servicer in
maintaining any such insurance if the Mortgagor defaults in its obligation to do
so shall be added to the amount owing under the Mortgage Loan where the terms of
the Mortgage Loan so permit;  provided,  however,  that the addition of any such
cost  shall  not  be  taken  into  account  for  purposes  of  calculating   the
distributions to be made to  Certificateholders  and shall be recoverable by the
Master Servicer or such Servicer pursuant to Section 4.02 and 4.03.

      Section 3.10 Presentment of Claims and Collection of Proceeds.

      The  Master  Servicer  shall (to the  extent  provided  in the  applicable
Servicing Agreement) cause the related Servicer to prepare and present on behalf
of the Trustee, Radian 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 a 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,

                                      -53-
<PAGE>

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 3.11 Maintenance of the Primary Mortgage Insurance Policies.

      (a) The Master  Servicer  shall not take,  or permit any  Servicer (to the
extent such action is prohibited  under the applicable  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  or such  Servicer,  would  have been  covered  thereunder.  The Master
Servicer  shall use its best  reasonable  efforts to cause each Servicer (to the
extent  required  under 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 in
accordance  with the  provisions  of this  Agreement  and the related  Servicing
Agreement,  as applicable.  The Master  Servicer shall not, and shall not permit
any Servicer (to the extent required under 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 present,  or to cause each Servicer (to
the extent required under the related Servicing Agreement) to present, on behalf
of the Trustee, Radian and the  Certificateholders,  claims to the insurer under
any  Primary  Mortgage  Insurance  Policies  and, in this  regard,  to take such
reasonable  action as shall be  necessary to permit  recovery  under any Primary
Mortgage Insurance  Policies  respecting  defaulted Mortgage Loans.  Pursuant to
Section  4.01 and 4.02,  any  amounts  collected  by the Master  Servicer or any
Servicer under any Primary Mortgage Insurance Policies shall be deposited in the
Master Servicer Collection  Account,  subject to withdrawal pursuant to Sections
4.02 and 4.03.

      Section 3.12 Trustee to Retain  Possession of Certain  Insurance  Policies
and Documents.

      The Trustee (or the Custodian,  as directed by the Trustee),  shall retain
possession and custody of the originals (to the extent available) of any Primary
Mortgage Insurance Policies, or certificate of insurance if applicable,  and any
certificates  of renewal as to the  foregoing as may be issued from time to time
as contemplated by this Agreement. Until all amounts distributable in 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.

                                      -54-
<PAGE>

      Section 3.13 Realization Upon Defaulted Mortgage Loans.

      The Master  Servicer  shall cause each  Servicer  (to the extent  required
under 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 the applicable Servicing Agreement.

      Section 3.14 Compensation for the Master Servicer.

      The Master  Servicer will be entitled to all income and gain realized from
any  investment  of funds in the  Distribution  Account and the Master  Servicer
Collection  Account,  pursuant  to  Article  IV,  for  the  performance  of  its
activities hereunder.  Servicing compensation in the form of assumption fees, if
any, late payment charges, as collected, if any, or otherwise (but not including
any prepayment premium or penalty) shall be retained by the applicable  Servicer
and shall not be deposited in the Protected  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 3.15 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 and Radian. The Master Servicer shall, to the extent provided
in the applicable Servicing Agreement, cause the applicable 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
applicable Servicer to protect and conserve, such REO Property in the manner and
to the extent required by the applicable Servicing Agreement, in accordance with
the  REMIC  Provisions  and in a manner  that  does not  result in a tax on "net
income from foreclosure  property" or cause such REO Property to fail to qualify
as "foreclosure property" within the meaning of Section 860G(a)(8) of the Code.

      (b) The Master  Servicer  shall,  to the extent  required  by the  related
Servicing  Agreement,  cause  the  applicable  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  applicable  Servicer,  upon the  final
disposition  of any REO  Property,  shall be entitled to  reimbursement  for any
related unreimbursed Monthly 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 the  related  Servicing  Agreement,  the
Liquidation Proceeds from the final disposition of the REO Property,  net of any
payment to the Master

                                      -55-
<PAGE>

Servicer and the applicable 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 Servicer Remittance Date.

      Section 3.16 Annual Officer's Certificate as to Compliance.

      (a) The  Master  Servicer  shall  deliver to the  Trustee,  Radian and the
Rating  Agencies  on or before  August 1 of each year,  commencing  on August 1,
2005,  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 any Servicer
has failed to perform any of its duties,  responsibilities and obligations under
its 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 3.17 Annual Independent Accountant's Servicing Report.

      If the Master Servicer has, during the course of any fiscal year, directly
serviced  any of the  Mortgage  Loans,  then the Master  Servicer at its expense
shall  cause a  nationally  recognized  firm  of  independent  certified  public
accountants to furnish a statement to the Trustee,  Radian,  the Rating Agencies
and the Depositor on or before March 1 of each year, commencing on March 1, 2005
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

                                      -56-
<PAGE>

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.  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 3.18 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 (or other
comparable  form  containing  the comparable  information  or other  information
mutually agreed upon) with a copy of the statement to the Certificateholders for
such Distribution  Date as an exhibit thereto.  Prior to January 30 in any 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, 2005 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 of each Servicer
(or, in the case of U.S.  Central,  its  sub-servicers)  and annual statement of
compliance  of  each  Servicer   (and,  in  the  case  of  U.S.   Central,   its
sub-servicers),  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 3.16 and 3.17. Prior to (i) March 31, 2005,
or such  earlier  filing  date as may be required  by the  Commission,  and (ii)
unless and until a Form 15 Suspension Notice shall have been filed,  March 31 of
each year  thereafter,  or such  earlier  filing  date as may be required by the
Commission,  the Securities  Administrator  shall file a Form 10-K, in substance
conforming  to industry  standards,  with  respect to the Trust.  Such Form 10-K
shall include the Master Servicer Certification and other documentation provided
by the Master Servicer pursuant to the second preceding sentence.  The Depositor
hereby  grants to the  Securities  Administrator  a limited power of attorney to
execute and file each such  document on behalf of the  Depositor.  Such power of
attorney  shall  continue  until  either  the  earlier  of  (i)  receipt  by the
Securities Administrator from the Depositor of written termination of such power
of attorney and (ii) the termination of the Trust Fund. The Depositor  agrees to
promptly  furnish  to the  Securities  Administrator,  from  time to  time  upon
request,  such further information,  reports and financial statements within its
control  related to this  Agreement  and 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
3.18; 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").  Fees and expenses  incurred by the Securities
Administrator  in  connection  with this Section 3.18 shall not be  reimbursable
from the Trust Fund.

      Section 3.19 The Company.

      On the Closing Date, the Company will receive from the Depositor a payment
of $5,000.

                                      -57-
<PAGE>

      Section 3.20 UCC.

      The  Depositor  shall  inform  the  Trustee  in  writing  of  any  Uniform
Commercial  Code  financing  statements  that were filed on the Closing  Date in
connection  with the  Trust  with  stamped  recorded  copies  of such  financing
statements  to be  delivered  to  the  Trustee  promptly  upon  receipt  by  the
Depositor.  The  Trustee  agrees to  monitor  and notify  the  Depositor  if any
continuation  statements for such Uniform  Commercial Code financing  statements
need to be filed. If directed by the Depositor in writing, the Trustee will file
any such  continuation  statements  solely at the expense of the Depositor.  The
Depositor shall file any financing  statements or amendments thereto required by
any change in the Uniform Commercial Code.

      Section 3.21 Optional Purchase of Defaulted Mortgage Loans.

      (a) With  respect  to any  Mortgage  Loan  which as of the  first day of a
Calendar  Quarter  is  delinquent  in  payment  by 90  days or more or is an REO
Property,  the Company  shall have the right to purchase such Mortgage Loan from
the Trust 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.

      (b) If at any time the Company 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 the  Company  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 to the Company at
the request of the Company without recourse,  representation or warranty and the
Company shall succeed to all of 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.  The Company
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.

                                      -58-
<PAGE>

                                   ARTICLE IV
                                    Accounts

      Section 4.01 Protected Accounts.

      (a) The Master  Servicer  shall enforce the obligation of each Servicer to
establish  and maintain a Protected  Account in accordance  with the  applicable
Servicing Agreement,  with records to be kept with respect thereto on a Mortgage
Loan by Mortgage Loan basis,  into which accounts  shall be deposited  within 48
hours (or as of such other time specified in the related Servicing Agreement) of
receipt,  all collections of principal and interest on any Mortgage Loan and any
REO Property received by a Servicer, including Principal Prepayments,  Insurance
Proceeds,  Liquidation Proceeds, and advances made from the Servicer's own funds
(less servicing  compensation as permitted by the applicable Servicing Agreement
in the case of any  Servicer)  and all  other  amounts  to be  deposited  in the
Protected  Account.  The Servicer is 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 the related  Servicing  Agreement,
the Protected Account shall be held by a Designated  Depository  Institution and
segregated on the books of such  institution  in the name of the Trustee for the
benefit of Certificateholders and Radian.

      (b) To the extent provided in the related 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  shall  mature,  or shall be  subject  to  redemption  or
withdrawal,  no later  than the date on which  such  funds  are  required  to be
withdrawn for deposit in the Master Servicer  Collection  Account,  and shall be
held  until  required  for  such  deposit.  The  income  earned  from  Permitted
Investments  made  pursuant  to this  Section  4.01 shall be paid to the related
Servicer  under  the  applicable  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  related  Servicer.  The
related  Servicer  (to the extent  provided in the  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 the related Servicing  Agreement and subject
to this  Article IV, on or before each  Servicer  Remittance  Date,  the related
Servicer  shall  withdraw  or shall  cause to be  withdrawn  from its  Protected
Accounts  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 such  Servicer  pursuant  to its  Servicing
      Agreement  which were due on or before the  related  Due Date,  net of the
      amount  thereof  comprising  its Servicing Fee or any fees with respect to
      any lender-paid primary mortgage insurance policy;

                                      -59-
<PAGE>

            (ii)  Full  Principal   Prepayments  and  any  Liquidation  Proceeds
      received  by such  Servicer  with  respect  to the  Mortgage  Loans in the
      related  Prepayment  Period,  with  interest to the date of  prepayment or
      liquidation, net of the amount thereof comprising its Servicing Fee;

            (iii) Partial  Principal  Prepayments  received by such Servicer for
      the Mortgage Loans in the related Prepayment Period; and

            (iv) Any amount to be used as a Monthly Advance.

      (d)  Withdrawals  may be made from an Account only to make  remittances as
provided in Section 4.01(c),  4.02 and 4.03; to reimburse the Master Servicer or
a  Servicer  for  Monthly  Advances  which  have been  recovered  by  subsequent
collections 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  10.01.  As provided  in Sections  4.01(a) and 4.02(b)
certain amounts  otherwise due to the Servicers may be retained by them and need
not be deposited in the Master Servicer Collection Account.

      Section 4.02 Master Servicer Collection Account.

      (a) The Master  Servicer  shall  establish and maintain in the name of the
Trustee,  for the  benefit  of the  Certificateholders  and  Radian,  the Master
Servicer  Collection  Account as a segregated  trust  account or  accounts.  The
Master  Servicer  Collection  Account 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 Monthly Advance and any Compensating Interest Payments;

            (iii) Any Insurance Proceeds or Net 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  pursuant to the Mortgage Loan Purchase  Agreement
      or  Sections  2.02 or 2.03  hereof,  any  amounts  which are to be treated
      pursuant to Section 2.04 of this  Agreement as the payment of a Repurchase
      Price in connection  with the tender of a Substitute  Mortgage Loan by the
      Seller,  the Repurchase Price with respect to any Mortgage Loans purchased
      by the Company  pursuant to Section 3.21, and all proceeds of any Mortgage
      Loans  or  property  acquired  with  respect  thereto  repurchased  by the
      Depositor or its designee pursuant to Section 10.01;

            (v) Any amounts  required to be deposited  with respect to losses on
      investments of deposits in an Account; and

                                      -60-
<PAGE>

            (vi) Any  other  amounts  received  by or on  behalf  of the  Master
      Servicer 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  and Radian 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 (i) prepayment or late payment  charges or assumption,
tax service, statement account or payoff,  substitution,  satisfaction,  release
and other like fees and charges  and (ii) the items  enumerated  in  Subsections
4.05(a)(i),  (ii), (iii), (iv), (vi), (vii),  (viii), (ix), (x), (xi) and (xii),
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  (which  may be
managed or advised by the Master  Servicer  or its  affiliate)  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 on
amounts on deposit in the Master Servicer Account from time to time shall be for
the account of the Master Servicer.  The Master Servicer from time to time shall
be  permitted  to withdraw  or receive  distribution  of any and all  investment
earnings from the Master Servicer Collection Account. 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 4.03 Permitted  Withdrawals and Transfers from the Master Servicer
Collection Account.

      (a) The Master Servicer will, from time to time on demand of a 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 10.01 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 (i) any  expenses,  costs and  liabilities
recoverable by the Trustee, the Master Servicer or the Securities  Administrator
or the Custodian pursuant to Sections 3.03, 7.04 and

                                      -61-
<PAGE>

9.05 and (ii) any amounts payable to the Master Servicer as set forth in Section
3.14; 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 7.03(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 Monthly  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 4.04 Distribution Account.

      (a) The Trustee  shall  establish and maintain in the name of the Trustee,
for the benefit of the  Certificateholders  and Radian, 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 Radian in  accordance  with the terms and  provisions of
this Agreement.

      (c) The Distribution Account shall constitute a trust account of the Trust
Fund  segregated on the books of the Trustee and held by the Trustee in trust in
its Corporate Trust Office, 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 or the Master
Servicer (whether made directly,  or indirectly through a liquidator or receiver
of the Trustee or the Master  Servicer).  The  Distribution  Account shall be an
Eligible  Account.  The amount at any time credited to the Distribution  Account
shall be (i) held in cash and fully insured by the FDIC to the maximum  coverage
provided thereby or (ii) invested in the name of the Trustee,  in such Permitted
Investments  (which may be managed  or  advised  by the Master  Servicer  or its
affiliate)  as may be selected by the Master  Servicer  or  deposited  in demand
deposits  with such  depository  institutions  as may be  selected by the Master
Servicer, provided that time deposits of such depository institutions would be a
Permitted  Investment.  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 Master  Servicer.  The Master  Servicer 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 Master Servicer shall remit the
amount  of the  loss  to the  Trustee  who  shall  deposit  such  amount  in the
Distribution  Account.  With respect to the  Distribution  Account and the funds
deposited  therein,  the  Master  Servicer  shall  take  such  action  as may be
necessary  to  ensure  that  the  Certificateholders  shall be  entitled  to the
priorities

                                      -62-
<PAGE>

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,  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 and the Servicing
Agreements 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):

            (i) to reimburse the Master Servicer or any Servicer for any Monthly
      Advance of its own funds,  the right of the Master  Servicer or a 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 Monthly Advance was
      made;

            (ii) to reimburse the Master Servicer or any Servicer from Insurance
      Proceeds or Liquidation  Proceeds  relating to a particular  Mortgage Loan
      for amounts expended by the Master Servicer or such Servicer in good faith
      in connection with the restoration of the related Mortgaged Property which
      was damaged by an Uninsured Cause or in connection with the liquidation of
      such Mortgage Loan;

            (iii)  to  reimburse  the  Master  Servicer  or  any  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  or  such  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
      (xi) of this  Subsection  4.03 (a) to the Master  Servicer;  and (ii) such
      Liquidation  Expenses were not included in the  computation of such Excess
      Liquidation Proceeds;

            (iv) to reimburse  the Master  Servicer or any Servicer for advances
      of funds (other than Monthly  Advances)  made with respect to the Mortgage
      Loans,  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;

            (v) to reimburse the Master Servicer or any Servicer for any Monthly
      Advance or advance,  after a Realized Loss has been allocated with respect
      to the related

                                      -63-
<PAGE>

      Mortgage  Loan if the Monthly  Advance or advance has not been  reimbursed
      pursuant to clauses (i) and (iv);

            (vi) to pay the Master Servicer as set forth in Section 3.14;

            (vii) to  reimburse  the Master  Servicer  for  expenses,  costs and
      liabilities  incurred by and reimbursable to it pursuant to Sections 3.03,
      7.04(c) and (d);

            (viii)  to pay to  the  Master  Servicer,  as  additional  servicing
      compensation,  any Excess Liquidation  Proceeds to the extent not retained
      by the related Servicer;

            (ix) to  reimburse  or pay any  Servicer any such amounts as are due
      thereto  under  the  applicable  Servicing  Agreement  and  have  not been
      retained by or paid to the Servicer, to the extent provided in the related
      Servicing Agreement;

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

            (xi) to remove amounts deposited in error; and

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

      (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
(iv) 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 4.02(b).

      (c) On each Distribution  Date, the Trustee shall distribute the Available
Funds to the extent on deposit in the Distribution Account to the Holders of the
Certificates and Radian in accordance with distribution instructions provided to
it by the Securities Administrator no later than two Business Days prior to such
Distribution  Date and determined by the Securities  Administrator in accordance
with Section 6.01.

                                      -64-
<PAGE>

                                    ARTICLE V
                                  Certificates

      Section 5.01 Certificates.

      (a) The  Depository,  the  Depositor  and the Trustee  have entered into a
Depository Agreement dated as of the Closing Date (the "Depository  Agreement").
Except  for  the  Residual  Certificates,   the  Private  Certificates  and  the
Individual  Certificates and as provided in Subsection 5.01(b), the Certificates
shall  at all  times  remain  registered  in the name of the  Depository  or its
nominee  and at all times:  (i)  registration  of such  Certificates  may not be
transferred  by the  Trustee  except  to a  successor  to the  Depository;  (ii)
ownership and transfers of registration of such Certificates on the books of the
Depository shall be governed by applicable rules  established by the Depository;
(iii) the  Depository  may collect  its usual and  customary  fees,  charges and
expenses from its Depository Participants;  (iv) the Trustee shall deal with the
Depository as representative of such Certificate  Owners of the respective Class
of  Certificates  for purposes of  exercising  the rights of  Certificateholders
under  this  Agreement,  and  requests  and  directions  for and  votes  of such
representative  shall  not be deemed  to be  inconsistent  if they are made with
respect to different  Certificate Owners; and (v) the Trustee may rely and shall
be fully protected in relying upon information  furnished by the Depository with
respect to its Depository Participants.

      The  Residual  Certificates  and the Private  Certificates  are  initially
Physical Certificates.  If at any time the Holders of all of the Certificates of
one or more such  Classes  request  that the Trustee  cause such Class to become
Global Certificates,  the Trustee and the Depositor will take such action as may
be reasonably  required to cause the  Depository to accept such Class or Classes
for trading if it may legally be so traded.

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

      (b) If (i)(A) the  Depositor  advises  the  Trustee  in  writing  that the
Depository   is  no  longer   willing  or  able  to   properly   discharge   its
responsibilities  as  Depository  and (B) the  Depositor  is  unable to locate a
qualified  successor  within 30 days or (ii) the Depositor at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the  Depository,  the  Trustee  shall  request  that the  Depository  notify all
Certificate  Owners of the occurrence of any such event and of the  availability
of definitive,  fully registered  Certificates to Certificate  Owners requesting
the same.  Upon surrender to the Trustee of the  Certificates by the Depository,
accompanied by registration  instructions  from the Depository for registration,
the Trustee shall issue the definitive  Certificates.  Neither the Depositor nor
the Trustee shall be liable for any delay in delivery of such  instructions  and
may  conclusively   rely  on,  and  shall  be  protected  in  relying  on,  such
instructions.

                                      -65-
<PAGE>

      (c) (i) REMIC I will be  evidenced  by (x) the  REMIC I Regular  Interests
(designated below),  which will be uncertificated and  non-transferable  and are
hereby  designated as the "regular  interests" in REMIC I and have the principal
balances and accrue interest at the Pass-Through  Rates equal to those set forth
in this Section  5.01(c)(i) and (y) the Class R-I Certificates,  which is hereby
designated as the single "residual interest" in REMIC I.

  REMIC I INTEREST     INITIAL BALANCE     PASS-THROUGH RATE    RELATED SUBGROUP
  ----------------     ---------------     -----------------    ----------------
       I-1-A          $        2,218.00          5.25%            Subgroup I-1
      I-1-ZZZ         $  123,174,572.00          5.25%            Subgroup I-1
       I-2-A          $          236.97          8.00%            Subgroup I-2
      I-2-ZZZ         $   13,159,936.03          8.00%            Subgroup I-2
        I-PO          $       67,955.00          0.00%            Subgroup I-1
       II-1-A         $        1,687.64          4.50%            Subgroup II-1
      II-1-ZZZ        $   93,219,997.36          4.50%            Subgroup II-1
       II-2-A         $          890.07          5.00%            Subgroup II-2
      II-2-ZZZ        $   49,164,440.93          5.00%            Subgroup II-2
       II-3-A         $          266.07          5.25%            Subgroup II-3
      II-3-ZZZ        $   14,696,836.93          5.25%            Subgroup II-3
       II-PO          $      858,661.00          0.00%            Subgroup II-1
       II-X-1             (1)                     (2)             Subgroup II-3
        R-I           $           50.00          5.25%            Subgroup I-1

(1) REMIC II Regular  Interest  II-X-1 will have a Notional  Amount equal to the
aggregate  Scheduled Principal Balance of the Group II Mortgage Loans with a Net
Mortgage Rate greater than 5.25%.

(2) REMIC I Regular  Interest  II-X-1 will  accrue  interest at a per annum rate
equal to the excess,  if any, of (a) the weighted  average Net Mortgage  Rate on
each Group II Mortgage  Loans with a Net Mortgage Rate greater than 5.2500% over
(b) 5.2500% per annum.

      Distributions  of  principal  shall be  deemed  to be made to the  REMIC I
Regular Interests, in each case from the related Subgroup,  first, 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 0.1% of the
excess of (x) the aggregate Scheduled Principal Balance of the Mortgage Loans in
the  related  Subgroup  over (y) the  Current  Principal  Amount  of the  Senior
Certificate in such Subgroup  (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 second, any remaining principal
in each  Subgroup  to the  related  REMIC I  Regular  Interest  ending  with the
designation ZZZ (provided that a portion of the remaining principal equal to the
Class PO Certificate Principal  Distribution Amount attributable to the Discount
Mortgage  Loans will be distributed  to REMIC I Regular  Interest PO).  Realized
Losses from each  Subgroup  shall be applied after all  distributions  have been
made on each  Distribution  Date, first, to the related 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 0.1% of the  excess of (x) the
aggregate  Scheduled  Principal  Balance of the  Mortgage  Loans in the  related
Subgroup over (y) the Current Principal Amount of the Senior  Certificate in the
related  Subgroup (except that if any

                                      -66-
<PAGE>

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
second,  any remaining  Realized Losses from each Subgroup shall be allocated to
the related REMIC I Regular  Interests  ending with the  designation ZZZ (except
that if a Realized Loss is recognized with respect to a Discount  Mortgage Loan,
the  applicable  portion  of such  Realized  Loss will be  allocated  to REMIC I
Regular Interest PO).

            (ii)  REMIC  II  will  be  evidenced  by (x) the  REMIC  II  Regular
      Interests   (designated   below),   which  will  be   uncertificated   and
      non-transferable  and are hereby designated as the "regular  interests" in
      REMIC  II and have the  principal  balances  and  accrue  interest  at the
      Pass-Through  Rates equal to those set forth in this  Section  5.01(c)(ii)
      and (y) the Class  R-II  Certificate,  which is hereby  designated  as the
      single "residual interest" in REMIC II.

 REMIC II INTEREST    INITIAL BALANCE      PASS-THROUGH RATE    RELATED GROUP
 -----------------    ---------------      -----------------    -------------
       I-A-1         $    34,500,000.00         5.2500%            Group I
       I-A-2         $    56,390,000.00         5.2500%            Group I
       I-A-3         $       395,000.00         5.2500%            Group I
       I-A-4         $     7,577,692.00         5.2500%            Group I
       I-A-5         $    10,000,000.00         5.2500%            Group I
       I-A-6         $    12,096,000.00         5.2500%            Group I
       I-A-7         $    12,923,202.00         8.0000%            Group I
        I-PO         $        67,955.00         0.0000%            Group I
       II-A-1        $    91,534,041.00         4.5000%            Group II
       II-A-2        $    48,275,263.00         5.0000%            Group II
       II-A-3        $    14,431,033.00         5.2500%            Group II
       II-PO         $       858,661.00         0.0000%            Group II
       II-X-1        $    10,727,607.00           (2)              Group II
        R-I          $            50.00         5.2500%            Group I
        R-II         $            50.00         5.2500%            Group I
       R-III         $            50.00         5.2500%            Group I
        B-1          $     2,943,000.00           (2)                N/A
        B-2          $       884,000.00           (2)                N/A
         B-3         $       588,000.00           (2)                N/A
        B-4          $       295,000.00           (2)                N/A
        B-5          $       441,000.00           (2)                N/A
        B-6          $       147,747.00           (2)                N/A

(1) REMIC II Regular Interest II-X-1 will not have a Pass-Through Rate, but will
be entitled to 100% of amounts distributed on REMIC I Regular Interest II-X-1.

(2) The Pass-Through Rate on the Class B-1, Class B-2, Class B-3, Class B-4,
Class B-5 and Class B-6 Certificates will be a per annum rate equal to the
weighted average of the Pass-Through Rates on REMIC I Regular Interests I-1-A,
I-2-A, II-1-A, II-2-A and II-3-A, weighted on the basis of the Uncertificated
Principal Balance of each such REMIC I Regular Interest.

      Interest  shall be  payable  to the  REMIC  II  Regular  Interests  at the
applicable  Pass-Through Rate on the related  Uncertificated  Principal Balance.
Principal shall be payable to, and

                                      -67-
<PAGE>

shortfalls,  losses  and  prepayments  are  allocable  to,  the REMIC II Regular
Interests  as such  amounts  are  payable  and  allocable  to the  Corresponding
Certificates.

            (iii) The  Classes  of the  Certificates  shall  have the  following
      designations, initial principal amounts and Pass-Through Rates:

           DESIGNATION        INITIAL PRINCIPAL AMOUNT      PASS-THROUGH RATE
           -----------        ------------------------      -----------------
              I-A-1            $34,500,000                       5.2500%
              I-A-2            $56,390,000                       5.2500%
              I-A-3            $395,000                          5.2500%
              I-A-4            $7,577,692                        5.2500%
              I-A-5            $10,000,000                       5.2500%
              I-A-6            $12,096,000                       5.2500%
              I-A-7            $12,923,202                         (1)
              I-A-8                 (2)                            (3)
              I-PO             $67,955                           0.0000%
             II-A-1            $91,534,041                       4.5000%
             II-A-2            $48,275,263                       5.0000%
             II-A-3            $14,431,033                       5.2500%
              II-PO            $858,661                          0.0000%
             II-X-1                (4)                           0.2949%
               R-I             $50                               5.2500%
              R-II             $50                               5.2500%
              R-III            $50                               5.2500%
               B-1             $2,943,000                          (7)
               B-2             $884,000                            (7)
               B-3             $588,000                            (7)
               B-4             $295,000                            (7)
               B-5             $441,000                            (7)
               B-6             $147,747                            (7)

      (1)   The Class I-A-7  Certificates  will bear interest at a  Pass-Through
            Rate  equal  to  approximately   1.850%  per  annum  for  the  first
            Distribution Date, and thereafter at an adjustable Pass-Through Rate
            equal to 0.500% per annum plus LIBOR,  subject to a minimum  rate of
            0.500% per annum and a maximum rate equal to 8.0000% per annum.

      (2)   The  Class  I-A-8  Certificates  do  not  have  an  initial  Current
            Principal  Amount.  The Class  I-A-8  Certificates  have an  initial
            Notional Amount of $12,923,202. For federal income tax purposes, the
            Class I-A-8  Certificates will have a Notional Amount equal to REMIC
            II Regular Interest I-A-7.

      (3)   The Class I-A-8  Certificates  will bear interest at a  Pass-Through
            Rate  equal  to  approximately   6.150%  per  annum  for  the  first
            Distribution Date, and thereafter at an adjustable Pass-Through Rate
            equal to 7.500% per annum minus LIBOR,  subject to a minimum rate of
            0.0000% per annum and a maximum rate equal to 7.500% per annum.

      (4)   The  Class  II-X-1  Certificates  do not  have  an  initial  Current
            Principal  Amount.  The Class  I-X-1  Certificates  have an  initial
            Notional Amount equal to the aggregate  Scheduled  Principal Balance
            of the Group II Mortgage Loans with a Net Mortgage Rate greater than
            5.2500% per annum.  The initial  Notional Amount of the Class II-X-1
            Certificates  is  equal  to  $10,727,607.  For  federal  income  tax
            purposes,  the Class  II-X-1  Certificates  will not have a Notional
            Amount, but will be entitled to 100% of amounts distributed on REMIC
            I Regular Interest II-X-1.

                                      -68-
<PAGE>

      (5)   The Class II-X-1  Certificates  will bear interest each Distribution
            Date on their notional amount at a variable  pass-through rate equal
            to the excess,  if any,  of (a) the  weighted  average Net  Mortgage
            Rates on the  Group  II  Mortgage  Loans  with a Net  Mortgage  Rate
            greater than 5.2500%  over (b) 5.2500% per annum.  The  pass-through
            rate  for the  initial  interest  accrual  period  is  approximately
            0.2949% per annum. For federal income tax purposes, the Class II-X-1
            Certificates will not have a Pass-Through Rate, but will be entitled
            to 100% of amounts distributed on REMIC I Regular Interest II-X-1.

      (6)   The Class B Certificates  will each will bear interest at a variable
            pass-through rate equal to the weighted average of 5.2500%,  8.0000%
            , 4.5000%,  5.0000% and 5.2500% per annum,  weighted on the basis of
            the  aggregate  Scheduled  Principal  Balance of the Mortgage  Loans
            included in Subgroup I-1, Subgroup I-2, Subgroup II-1, Subgroup II-2
            and Subgroup II-3, respectively (other than the PO Percentage of the
            Scheduled  Principal  Balance  of such  Mortgage  Loans),  minus the
            aggregate  Current  Principal  Amount of the Subgroup I-1,  Subgroup
            I-2,  Subgroup II-1,  Subgroup II-2 and Subgroup II-3  Certificates,
            respectively. The pass-through rate for the initial interest accrual
            period is  approximately  5.0921% per annum.  For federal income tax
            purposes,  however, the Class B Certificates will bear interest at a
            variable  Pass-Through  Rate  equal to the  weighted  average of the
            Pass-Through Rates on REMIC II Regular Interests B-1, B-2, B-3, B-4,
            B-5 and B-6, weighted on the basis of the  Uncertificated  Principal
            Balance of each such REMIC II Regular Interest immediately preceding
            the related Distribution Date.

      (d) 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 in the Trust  Fund has been
designated  as the  "latest  possible  maturity  date"  for the  REMIC I Regular
Interests, REMIC II Regular Interests and the Certificates.

      (e) With respect to each  Distribution  Date,  each Class of  Certificates
shall accrue interest during the related Interest  Accrual Period.  With respect
to each Distribution Date and each such Class of Certificates, interest shall be
calculated,  on the basis of a 360-day year  comprised of twelve 30-day  months,
based  upon  the  respective  Pass-Through  Rate set  forth,  or  determined  as
provided, above and the Current Principal Amount (or Notional Amount in the case
of the Interest Only Certificates) of such Class applicable to such Distribution
Date.

      (f) The  Certificates  shall be  substantially  in the  forms set forth in
Exhibits  A-1,  A-2 and A-3.  On  original  issuance,  the  Trustee  shall sign,
countersign  and  shall  deliver  the  Certificates  at  the  direction  of  the
Depositor.  Pending the preparation of definitive Certificates of any Class, the
Trustee  may sign  and  countersign  temporary  Certificates  that are  printed,
lithographed or typewritten,  in authorized  denominations  for  Certificates of
such Class, substantially of the tenor of the definitive Certificates in lieu of
which  they  are  issued  and  with  such  appropriate  insertions,   omissions,
substitutions  and other  variations as the officers or  authorized  signatories
executing such  Certificates  may determine,  as evidenced by their execution of
such  Certificates.  If temporary  Certificates  are issued,  the Depositor will
cause definitive  Certificates to be prepared without  unreasonable delay. After
the preparation of definitive Certificates,  the temporary Certificates shall be
exchangeable  for  definitive  Certificates  upon  surrender  of  the  temporary
Certificates  at the office of the Trustee,  without charge to the Holder.  Upon
surrender  for  cancellation  of any one or  more  temporary  Certificates,  the
Trustee  shall sign and  countersign  and  deliver in  exchange  therefor a like
aggregate  principal  amount,  in authorized  denominations  for such Class,  of
definitive Certificates of the same Class.

                                      -69-
<PAGE>

Until  so  exchanged,  such  temporary  Certificates  shall in all  respects  be
entitled to the same benefits as definitive Certificates.

      (g) Each Class of Book-Entry  Certificates  will be registered as a single
Certificate  of  such  Class  held by a  nominee  of the  Depository  or the DTC
Custodian,  and  beneficial  interests  will be held by  investors  through  the
book-entry  facilities of the Depository in minimum  denominations of (i) in the
case of the Senior  Certificates  (other than the Class I-A-5  Certificates  and
Residual  Certificates),  $1,000 and in each case  increments of $1.00 in excess
thereof, (ii) in the case of the Class I-A-5 Certificates, $1,000 and increments
of $1,000 in excess  thereof  and (iii) in the case of the  Offered  Subordinate
Certificates, $25,000 and increments of $1.00 in excess thereof, except that one
Certificate  of each such Class may be issued in a different  amount so that the
sum of the  denominations  of all  outstanding  Certificates of such Class shall
equal the Current  Principal  Amount of such Class on the Closing  Date.  On the
Closing Date, the Trustee shall execute and  countersign  Physical  Certificates
all in an  aggregate  principal  amount that shall  equal the Current  Principal
Amount of such Class on the  Closing  Date.  The Private  Certificates  shall be
issued in certificated  fully-registered form in minimum dollar denominations of
$25,000  and  integral  multiples  of $1.00 in excess  thereof,  except that one
Private  Certificate  of each Class may be issued in a different  amount so that
the sum of the  denominations  of all outstanding  Private  Certificates of such
Class  shall  equal the  Current  Principal  Amount of such Class on the Closing
Date. The Class R-I, Class R-II and Class R-III Certificate shall each be issued
in certificated  fully-registered  form,  each, in the denomination of $50. Each
Class of Global  Certificates,  if any, shall be issued in fully registered form
in minimum dollar  denominations  of $50,000 and integral  multiples of $1.00 in
excess thereof,  except that one Certificate of each Class may be in a different
denomination  so  that  the  sum  of  the   denominations   of  all  outstanding
Certificates  of such Class  shall equal the  Current  Principal  Amount of such
Class on the Closing Date.  On the Closing  Date,  the Trustee shall execute and
countersign  (i)  in the  case  of  each  Class  of  Offered  Certificates,  the
Certificate in the entire Current  Principal  Amount of the respective Class and
(ii) in the case of each Class of Private Certificates,  Individual Certificates
all in an  aggregate  principal  amount that shall  equal the Current  Principal
Amount of each such  respective  Class on the  Closing  Date.  The  Certificates
referred  to in  clauses  (i) or (ii) and if at any time  there are to be Global
Certificates, the Global Certificates shall be delivered by the Depositor to the
Depository or pursuant to the Depository's  instructions,  shall be delivered by
the  Depositor  on  behalf  of the  Depository  to and  deposited  with  the DTC
Custodian.  The  Trustee  shall sign the  Certificates  by  facsimile  or manual
signature and countersign  them by manual  signature on behalf of the Trustee by
one or more authorized  signatories,  each of whom shall be Responsible Officers
of the Trustee or its agent.  A  Certificate  bearing  the manual and  facsimile
signatures of individuals who were the authorized  signatories of the Trustee or
its agent at the time of issuance shall bind the Trustee,  notwithstanding  that
such  individuals or any of them have ceased to hold such positions prior to the
delivery of such Certificate.

      (h) No Certificate  shall be entitled to any benefit under this Agreement,
or be valid for any  purpose,  unless  there  appears  on such  Certificate  the
manually  executed  countersignature  of the  Trustee  or its  agent,  and  such
countersignature upon any Certificate shall be conclusive evidence, and the only
evidence,  that such Certificate has been duly executed and delivered hereunder.
All Certificates issued on the Closing Date shall be dated the Closing Date. All
Certificates   issued   thereafter   shall   be   dated   the   date  of   their
countersignature.

                                      -70-
<PAGE>

      (i) The Closing Date is hereby  designated  as the  "startup"  day of each
REMIC within the meaning of Section 860G(a)(9) of the Code.

      (j) For federal income tax purposes, each REMIC shall have a tax year that
is a calendar year and shall report income on an accrual basis.

      (k) The  Trustee on behalf of the Trust  shall  cause each REMIC to timely
elect  to  be  treated  as  a  REMIC  under  Section  860D  of  the  Code.   Any
inconsistencies or ambiguities in this Agreement or in the administration of any
Trust  established  hereby  shall be  resolved in a manner  that  preserves  the
validity of such elections.

      (l) The  following  legend shall be placed on the  Residual  Certificates,
whether upon original  issuance or upon issuance of any other Certificate of any
such Class in exchange therefor or upon transfer thereof:

            THIS  CERTIFICATE MAY NOT BE ACQUIRED  DIRECTLY OR INDIRECTLY BY, OR
      ON BEHALF OF, AN EMPLOYEE  BENEFIT  PLAN OR OTHER  RETIREMENT  ARRANGEMENT
      WHICH IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986,
      AS AMENDED,  UNLESS THE PROPOSED  TRANSFEREE  PROVIDES THE TRUSTEE WITH AN
      OPINION OF COUNSEL  ADDRESSED TO THE DEPOSITOR,  TRUSTEE,  MASTER SERVICER
      AND  SECURITIES   ADMINISTRATOR  AND  ON  WHICH  THEY  MAY  RELY  THAT  IS
      SATISFACTORY TO THE TRUSTEE THAT THE PURCHASE OF CERTIFICATES ON BEHALF OF
      SUCH  PERSON  WILL NOT  RESULT IN OR  CONSTITUTE  A  NONEXEMPT  PROHIBITED
      TRANSACTION, IS PERMISSIBLE UNDER APPLICABLE LAW AND WILL NOT GIVE RISE TO
      ANY  ADDITIONAL  OBLIGATIONS  ON THE  PART OF THE  DEPOSITOR,  THE  MASTER
      SERVICER, THE SECURITIES ADMINISTRATOR OR THE TRUSTEE.

The following legend shall be placed upon the Private Certificates, whether upon
original issuance or upon issuance of any other Certificate of any such Class in
exchange therefor or upon transfer thereof:

      THIS  CERTIFICATE  MAY NOT BE ACQUIRED  DIRECTLY OR  INDIRECTLY  BY, OR ON
BEHALF OF, AN EMPLOYEE  BENEFIT PLAN OR OTHER  RETIREMENT  ARRANGEMENT  WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974, AS
AMENDED,  OR SECTION  4975 OF THE  INTERNAL  REVENUE  CODE OF 1986,  AS AMENDED,
UNLESS THE  TRANSFEREE  CERTIFIES OR REPRESENTS  THAT THE PROPOSED  TRANSFER AND
HOLDING OF A  CERTIFICATE  AND THE  SERVICING,  MANAGEMENT  AND OPERATION OF THE
TRUST AND ITS ASSETS: (I) WILL NOT RESULT IN ANY PROHIBITED TRANSACTION WHICH IS
NOT COVERED  UNDER AN  INDIVIDUAL  OR CLASS  PROHIBITED  TRANSACTION  EXEMPTION,
INCLUDING,  BUT NOT LIMITED TO, PROHIBITED  TRANSACTION EXEMPTION ("PTE") 84-14,
PTE 91-38, PTE 90-1, PTE 95-

                                      -71-
<PAGE>

60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY ADDITIONAL OBLIGATIONS ON THE
PART OF THE DEPOSITOR, THE SECURITIES ADMINISTRATOR,  THE MASTER SERVICER OR THE
TRUSTEE,  WHICH  WILL  BE  DEEMED  REPRESENTED  BY  AN  OWNER  OF  A  BOOK-ENTRY
CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE OPINION  SPECIFIED IN SECTION
5.07 OF THE AGREEMENT IS PROVIDED.

      Section 5.02 Registration of Transfer and Exchange of Certificates.

      (a) The Trustee shall maintain at its Corporate Trust Office a Certificate
Register in which,  subject to such reasonable  regulations as it may prescribe,
the Trustee shall provide for the  registration of Certificates and of transfers
and exchanges of Certificates as herein provided.

      (b)  Subject  to  Subsection  5.01(a)  and,  in the  case  of  any  Global
Certificate or Physical  Certificate upon the satisfaction of the conditions set
forth below,  upon surrender for  registration of transfer of any Certificate at
any office or agency of the Trustee  maintained  for such  purpose,  the Trustee
shall  sign,  countersign  and  shall  deliver,  in the  name of the  designated
transferee  or  transferees,  a new  Certificate  of a like Class and  aggregate
Fractional Undivided Interest, but bearing a different number.

      (c) By  acceptance  of an  Individual  Certificate,  whether upon original
issuance or subsequent transfer, each holder of such a Certificate  acknowledges
the restrictions on the transfer of such Certificate set forth in the Securities
Legend and agrees  that it will  transfer  such a  Certificate  only as provided
herein.  In addition to the  provisions  of  Subsection  5.02(h),  the following
restrictions  shall  apply with  respect to the  transfer  and  registration  of
transfer of an Individual Certificate to a transferee that takes delivery in the
form of an Individual Certificate:

            (i)  The  Trustee  shall  register  the  transfer  of an  Individual
      Certificate  if the requested  transfer is being made to a transferee  who
      has  provided  the  Trustee  with a Rule 144A  Certificate  or  comparable
      evidence as to its QIB status.

            (ii) The Trustee  shall  register  the  transfer  of any  Individual
      Certificate  if (x) the transferor has advised the Trustee in writing that
      the  Certificate  is  being  transferred  to an  Institutional  Accredited
      Investor;  and (y) prior to the transfer the  transferee  furnishes to the
      Trustee an Investment  Letter (and the Trustee shall be fully protected in
      so doing), provided that, if based upon an Opinion of Counsel addressed to
      the Trustee to the effect  that the  delivery of (x) and (y) above are not
      sufficient to confirm that the proposed transfer is being made pursuant to
      an exemption  from, or in a transaction  not subject to, the  registration
      requirements of the Securities Act and other  applicable laws, the Trustee
      shall as a condition of the  registration of any such transfer require the
      transferor to furnish such other  certifications,  legal opinions or other
      information prior to registering the transfer of an Individual Certificate
      as shall be set forth in such Opinion of Counsel.

      (d) Subject to Subsection 5.02(h), so long as a Global Certificate of such
Class is outstanding and is held by or on behalf of the Depository, transfers of
beneficial  interests  in such Global  Certificate,  or  transfers by holders of
Individual Certificates of such Class to transferees

                                      -72-
<PAGE>

that  take  delivery  in  the  form  of  beneficial   interests  in  the  Global
Certificate,  may be made only in accordance with this Subsection 5.02(d) and in
accordance with the rules of the Depository:

            (i) In the case of a beneficial  interest in the Global  Certificate
      being transferred to an Institutional Accredited Investor, such transferee
      shall  be  required  to  take  delivery  in  the  form  of  an  Individual
      Certificate or  Certificates  and the Trustee shall register such transfer
      only upon compliance with the provisions of Subsection 5.02(c)(ii).

            (ii) In the  case of a  beneficial  interest  in a Class  of  Global
      Certificates  being transferred to a transferee that takes delivery in the
      form of an Individual Certificate or Certificates of such Class, except as
      set forth in clause (i) above,  the Trustee  shall  register such transfer
      only upon compliance with the provisions of Subsection 5.02(c)(i).

            (iii)  In the case of an  Individual  Certificate  of a Class  being
      transferred  to  a  transferee  that  takes  delivery  in  the  form  of a
      beneficial  interest in a Global  Certificate  of such Class,  the Trustee
      shall  register such transfer if the  transferee  has provided the Trustee
      with a Rule 144A Certificate or comparable evidence as to its QIB status.

            (iv) No  restrictions  shall apply with  respect to the  transfer or
      registration   of  transfer  of  a  beneficial   interest  in  the  Global
      Certificate of a Class to a transferee  that takes delivery in the form of
      a beneficial  interest in the Global  Certificate of such Class;  provided
      that   each   such   transferee   shall  be   deemed  to  have  made  such
      representations  and warranties  contained in the Rule 144A Certificate as
      are sufficient to establish that it is a QIB.

      (e) Subject to Subsection 5.02(h), an exchange of a beneficial interest in
a Global Certificate of a Class for an Individual Certificate or Certificates of
such Class, an exchange of an Individual  Certificate or Certificates of a Class
for a  beneficial  interest  in the  Global  Certificate  of such  Class  and an
exchange of an Individual  Certificate  or  Certificates  of a Class for another
Individual  Certificate or Certificates of such Class (in each case,  whether or
not such exchange is made in  anticipation of subsequent  transfer,  and, in the
case of the Global  Certificate  of such Class,  so long as such  Certificate is
outstanding  and is held by or on behalf of the  Depository) may be made only in
accordance with this Subsection  5.02(e) and in accordance with the rules of the
Depository:

            (i) A holder of a beneficial  interest in a Global  Certificate of a
      Class may at any time exchange such beneficial  interest for an Individual
      Certificate or Certificates of such Class.

            (ii) A holder of an  Individual  Certificate  or  Certificates  of a
      Class may  exchange  such  Certificate  or  Certificates  for a beneficial
      interest in the Global  Certificate of such Class if such holder furnishes
      to the Trustee a Rule 144A  Certificate  or comparable  evidence as to its
      QIB status.

            (iii) A holder of an Individual  Certificate of a Class may exchange
      such  Certificate  for an equal aggregate  principal  amount of Individual
      Certificates of such Class in different authorized  denominations  without
      any certification.

                                      -73-
<PAGE>

      (f)(i)  Upon   acceptance  for  exchange  or  transfer  of  an  Individual
Certificate of a Class for a beneficial interest in a Global Certificate of such
Class as provided herein,  the Trustee shall cancel such Individual  Certificate
and shall (or shall request the Depository  to) endorse on the schedule  affixed
to the applicable  Global  Certificate  (or on a  continuation  of such schedule
affixed to the Global  Certificate and made a part thereof) or otherwise make in
its  books and  records  an  appropriate  notation  evidencing  the date of such
exchange or transfer  and an increase in the  certificate  balance of the Global
Certificate  equal to the  certificate  balance of such  Individual  Certificate
exchanged or transferred therefor.

            (ii) Upon  acceptance  for  exchange  or  transfer  of a  beneficial
      interest in a Global Certificate of a Class for an Individual  Certificate
      of such Class as provided herein,  the Trustee shall (or shall request the
      Depository to) endorse on the schedule affixed to such Global  Certificate
      (or on a continuation of such schedule affixed to such Global  Certificate
      and made a part  thereof)  or  otherwise  make in its books and records an
      appropriate  notation evidencing the date of such exchange or transfer and
      a decrease in the certificate  balance of such Global Certificate equal to
      the certificate balance of such Individual  Certificate issued in exchange
      therefor or upon transfer thereof.

      (g) The Securities  Legend shall be placed on any  Individual  Certificate
issued in exchange for or upon transfer of another Individual  Certificate or of
a beneficial interest in a Global Certificate.

      (h) Subject to the restrictions on transfer and exchange set forth in this
Section 5.02, the holder of any Individual  Certificate may transfer or exchange
the same in whole or in part (in an  initial  certificate  balance  equal to the
minimum  authorized  denomination  set  forth in  Section  5.01(g)  above or any
integral  multiple of $1.00 in excess thereof) by surrendering  such Certificate
at the Corporate Trust Office, or at the office of any transfer agent,  together
with an executed instrument of assignment and transfer  satisfactory in form and
substance  to the  Trustee in the case of  transfer  and a written  request  for
exchange  in the case of  exchange.  The holder of a  beneficial  interest  in a
Global  Certificate  may, subject to the rules and procedures of the Depository,
cause the  Depository  (or its  nominee)  to notify the  Trustee in writing of a
request for transfer or exchange of such  beneficial  interest for an Individual
Certificate  or  Certificates.  Following  a  proper  request  for  transfer  or
exchange,  the Trustee shall,  within five Business Days of such request made at
the Corporate Trust Office, sign, countersign and deliver at the Corporate Trust
Office,  to the  transferee  (in the case of transfer) or holder (in the case of
exchange) or send by first class mail at the risk of the transferee (in the case
of  transfer)  or  holder  (in the  case of  exchange)  to such  address  as the
transferee or holder, as applicable,  may request, an Individual  Certificate or
Certificates, as the case may require, for a like aggregate Fractional Undivided
Interest  and  in  such  authorized  denomination  or  denominations  as  may be
requested.   The  presentation  for  transfer  or  exchange  of  any  Individual
Certificate  shall not be valid unless made at the Corporate Trust Office by the
registered holder in person, or by a duly authorized attorney-in-fact.

      (i) At the option of the Certificateholders, Certificates may be exchanged
for other Certificates of authorized denominations of a like Class and aggregate
Fractional  Undivided  Interest,  upon  surrender  of  the  Certificates  to  be
exchanged at the Corporate Trust Office; provided,  however, that no Certificate
may be exchanged for new Certificates unless the original

                                      -74-
<PAGE>

Fractional Undivided Interest represented by each such new Certificate (i) is at
least equal to the minimum authorized  denomination or (ii) is acceptable to the
Depositor as indicated to the Trustee in writing.  Whenever any Certificates are
so  surrendered  for exchange,  the Trustee shall sign and  countersign  and the
Trustee shall deliver the Certificates  which the  Certificateholder  making the
exchange is entitled to receive.

      (j) If the Trustee so requires, every Certificate presented or surrendered
for  transfer or exchange  shall be duly  endorsed  by, or be  accompanied  by a
written instrument of transfer, with a signature guarantee, in form satisfactory
to the Trustee,  duly executed by the holder thereof or his or her attorney duly
authorized in writing.

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

      (l) The Trustee shall cancel all Certificates  surrendered for transfer or
exchange  but shall retain such  Certificates  in  accordance  with its standard
retention policy or for such further time as is required by the record retention
requirements of the Securities Exchange Act of 1934, as amended,  and thereafter
may destroy such Certificates.

      Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates.

      (a) If (i) any mutilated Certificate is surrendered to the Trustee, or the
Trustee receives evidence to its satisfaction of the destruction,  loss or theft
of any Certificate, and (ii) there is delivered to the Trustee (and with respect
to any Class I-A-5 Certificates, to Radian) such security or indemnity as it may
require to save it harmless,  and (iii) the Trustee has not received notice that
such  Certificate  has been acquired by a third Person,  the Trustee shall sign,
countersign  and  deliver,  in  exchange  for or in lieu of any such  mutilated,
destroyed,  lost or stolen  Certificate,  a new  Certificate  of like  tenor and
Fractional  Undivided  Interest but in each case bearing a different number. The
mutilated,  destroyed, lost or stolen Certificate shall thereupon be canceled of
record by the Trustee and shall be of no further effect and evidence no rights.

      (b) Upon the issuance of any new Certificate  under this Section 5.03, the
Trustee may require  the payment of a sum  sufficient  to cover any tax or other
governmental  charge  that may be  imposed  in  relation  thereto  and any other
expenses  (including the fees and expenses of the Trustee) connected  therewith.
Any duplicate  Certificate issued pursuant to this Section 5.03 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.

      Section 5.04 Persons Deemed Owners.

      Prior to due  presentation of a Certificate for  registration of transfer,
the Depositor, the Trustee or Radian and any agent of the Depositor, the Trustee
or Radian may treat the Person in whose name any  Certificate  is  registered as
the  owner  of such  Certificate  for the  purpose  of  receiving  distributions
pursuant  to Section  6.01 and for all other  purposes  whatsoever.  None of the
Depositor,  the Trustee,  Radian or any agent of the  Depositor,  the Trustee or
Radian  shall be affected by notice to the  contrary.  No  Certificate  shall be
deemed duly presented for a transfer

                                      -75-
<PAGE>

effective  on any  Record  Date  unless the  Certificate  to be  transferred  is
presented  no later  than the  close  of  business  on the  third  Business  Day
preceding such Record Date.

      Section 5.05 Transfer Restrictions on Residual Certificates.

      (a) Residual  Certificates,  or interests therein,  may not be transferred
without the prior  express  written  consent of the Tax  Matters  Person and the
Depositor.  As a  prerequisite  to such consent,  the proposed  transferee  must
provide the Tax Matters Person,  the Depositor and the Trustee with an affidavit
that the proposed transferee is a Permitted Transferee (and an affidavit that it
is a U.S. Person) as provided in Subsection 5.05(b).

      (b) No  transfer,  sale or other  disposition  of a  Residual  Certificate
(including a  beneficial  interest  therein)  may be made  unless,  prior to the
transfer,  sale or other  disposition  of a Residual  Certificate,  the proposed
transferee  (including  the  initial  purchasers  thereof)  delivers  to the Tax
Matters Person,  the Trustee and the Depositor an affidavit in the form attached
hereto as Exhibit E stating,  among  other  things,  that as of the date of such
transfer  (i) such  transferee  is a  Permitted  Transferee  and that  (ii) such
transferee is not acquiring  such  Residual  Certificate  for the account of any
person who is not a  Permitted  Transferee.  The Tax  Matters  Person  shall not
consent to a transfer of a Residual  Certificate if it has actual knowledge that
any statement made in the affidavit issued pursuant to the preceding sentence is
not true.  Notwithstanding any transfer, sale or other disposition of a Residual
Certificate to any Person who is not a Permitted Transferee, such transfer, sale
or  other  disposition  shall  be  deemed  to be of no  legal  force  or  effect
whatsoever  and such  Person  shall not be  deemed to be a Holder of a  Residual
Certificate  for any  purpose  hereunder,  including,  but not  limited  to, the
receipt  of  distributions  thereon.  If  any  purported  transfer  shall  be in
violation of the provisions of this  Subsection  5.05(b),  then the prior Holder
thereof shall, upon discovery that the transfer of such Residual Certificate was
not in fact permitted by this Subsection 5.05(b), be restored to all rights as a
Holder thereof  retroactive to the date of the purported  transfer.  None of the
Trustee, the Tax Matters Person or the Depositor shall be under any liability to
any Person for any  registration or transfer of a Residual  Certificate  that is
not  permitted  by this  Subsection  5.05(b) or for making  payments due on such
Residual  Certificate to the purported Holder thereof or taking any other action
with respect to such purported  Holder under the provisions of this Agreement so
long as the written  affidavit  referred to above was  received  with respect to
such transfer,  and the Tax Matters  Person,  the Trustee and the Depositor,  as
applicable,  had no  knowledge  that it was untrue.  The prior  Holder  shall be
entitled to recover from any purported Holder of a Residual Certificate that was
in fact not a permitted  transferee under this Subsection 5.05(b) at the time it
became a Holder all payments made on such Residual Certificate. Each Holder of a
Residual Certificate, by acceptance thereof, shall be deemed for all purposes to
have consented to the provisions of this Subsection 5.05(b) and to any amendment
of this Agreement  deemed  necessary  (whether as a result of new legislation or
otherwise) by counsel of the Tax Matters  Person or the Depositor to ensure that
the  Residual  Certificates  are  not  transferred  to any  Person  who is not a
Permitted  Transferee and that any transfer of such Residual  Certificates  will
not cause the  imposition  of a tax upon the Trust or cause any REMIC to fail to
qualify as a REMIC.

      (c) The Residual  Certificates  (including a beneficial  interest therein)
may not be purchased by or  transferred to any person who is not a United States
Person.

                                      -76-
<PAGE>

      (d) By accepting a Residual  Certificate,  the purchaser thereof agrees to
be a Tax Matters Person, and appoints the Securities Administrator to act as its
agent with respect to all matters concerning the tax obligations of the Trust.

      Section 5.06 Restrictions on Transferability of Certificates.

      (a) No offer,  sale,  transfer or other disposition  (including pledge) of
any Certificate  shall be made by any Holder thereof unless registered under the
Securities  Act,  or an  exemption  from the  registration  requirements  of the
Securities  Act and any  applicable  state  securities  or  "Blue  Sky"  laws is
available  and the  prospective  transferee  (other than the  Depositor) of such
Certificate  signs and  delivers to the  Trustee an  Investment  Letter,  if the
transferee is an  Institutional  Accredited  Investor,  in the form set forth as
Exhibit F-l hereto, or a Rule 144A  Certificate,  if the transferee is a QIB, in
the form set forth as Exhibit F-2 hereto.  Notwithstanding the provisions of the
immediately  preceding sentence, no restrictions shall apply with respect to the
transfer or registration of transfer of a beneficial interest in any Certificate
that is a Global  Certificate of a Class to a transferee  that takes delivery in
the form of a  beneficial  interest  in the  Global  Certificate  of such  Class
provided  that  each  such  transferee   shall  be  deemed  to  have  made  such
representations  and  warranties  contained in the Rule 144A  Certificate as are
sufficient to establish that it is a QIB. In the case of a proposed  transfer of
any  Certificate  to a  transferee  other than a QIB, the Trustee may require an
Opinion of Counsel addressed to the Trustee that such transaction is exempt from
the  registration  requirements  of the Securities Act. The cost of such opinion
shall not be an expense of the Trustee or the Trust Fund.

      (b) The Private Certificates shall each bear a Securities Legend.

      Section 5.07 ERISA Restrictions.

      (a) Subject to the provisions of subsection (b), no Residual  Certificates
or Private  Certificates may be acquired directly or indirectly by, or on behalf
of, an employee benefit plan or other retirement arrangement which is subject to
Title I of ERISA or Section  4975 of the Code,  unless the  proposed  transferee
provides  either (i) the  Trustee,  with an Opinion of Counsel  addressed to the
Depositor,  the Trustee,  the Master  Servicer and the Securities  Administrator
(upon which they may rely) which is satisfactory  to the Trustee,  which opinion
will not be at the expense of the Depositor, the Trustee, the Master Servicer or
the Securities  Administrator,  that the purchase of such  Certificates by or on
behalf of such Plan is permissible  under applicable law, will not constitute or
result in a nonexempt prohibited  transaction under ERISA or Section 4975 of the
Code and will not subject the  Depositor,  the Master  Servicer,  the Securities
Administrator  or the Trustee to any obligation in addition to those  undertaken
in the  Agreement or (ii) in the case of the Class B-4,  Class B-5 and Class B-6
Certificates,  a representation  or certification to the Trustee (upon which the
Trustee is  authorized  to rely) to the effect that the  proposed  transfer  and
holding of such a Certificate and the servicing, management and operation of the
Trust:  (I) will not result in a  prohibited  transaction  under  Section 406 of
ERISA or Section 4975 of the Code which is not covered  under an  individual  or
class prohibited  transaction  exemption including but not limited to Department
of Labor  Prohibited  Transaction  Exemption  ("PTE") 84-14 (Class Exemption for
Plan Asset Transactions  Determined by Independent Qualified  Professional Asset
Managers);  PTE 91-38 (Class Exemption for Certain

                                      -77-
<PAGE>

Transactions  Involving  Bank  Collective  Investment  Funds);  PTE 90-1  (Class
Exemption for Certain  Transactions  Involving Insurance Company Pooled Separate
Accounts),  PTE  95-60  (Class  Exemption  for  Certain  Transactions  Involving
Insurance  Company General  Accounts),  and PTCE 96-23 (Class Exemption for Plan
Asset  Transactions  Determined  by In-House  Asset  Managers  and (II) will not
subject the Depositor, the Securities Administrator,  the Master Servicer or the
Trustee to any obligation in addition to those undertaken in the Agreement.

      (b) Any Person  acquiring an interest in a Global  Certificate  which is a
Private Certificate, by acquisition of such Certificate, shall be deemed to have
represented  to the  Trustee  that in the case of the Class  B-4,  Class B-5 and
Class B-6  Certificates,  either:  (i) it is not  acquiring  an interest in such
Certificate directly or indirectly by, or on behalf of, an employee benefit plan
or other retirement  arrangement which is subject to Title I of ERISA or Section
4975 of the Code,  or (ii) the  transfer  and  holding  of an  interest  in such
Certificate  to  that  Person  and  the  subsequent  servicing,  management  and
operation  of the Trust and its  assets:  (I) will not result in any  prohibited
transaction  which is not  covered  under  an  individual  or  class  prohibited
transaction exemption,  including, but not limited to, PTE 84-14, PTE 91-38, PTE
90-1,  PTE  95-60 or PTE  96-23 and (II) will not  subject  the  Depositor,  the
Securities  Administrator,  the Master Servicer or the Trustee to any obligation
in addition to those undertaken in the Agreement.

      (c)  Each  beneficial  owner  of a  Class  B-1,  Class  B-2 or  Class  B-3
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  90-30,  as amended from time to time (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 Investors Service, Inc., and the certificate is so rated or (iii) (1) it
is an  insurance  company,  (2) the  source of funds used to acquire or hold the
certificate or interest  therein is an "insurance  company general  account," as
such term is defined in Prohibited  Transaction Class Exemption  ("PTCE") 95-60,
and (3) the conditions in Sections I and III of PTCE 95-60 have been satisfied.

      (d)  Neither  the  Trustee,   the  Master   Servicer  nor  the  Securities
Administrator will be required to monitor, determine or inquire as to compliance
with the  transfer  restrictions  with respect to the Global  Certificates.  Any
attempted  or  purported  transfer  of  any  Certificate  in  violation  of  the
provisions  of  Subsections  (a) or (b) above  shall be void ab initio  and such
Certificate  shall be  considered  to have been held  continuously  by the prior
permitted  Certificateholder.  Any transferor of any Certificate in violation of
such provisions,  shall indemnify and hold harmless the Trustee,  the Securities
Administrator  and the Master Servicer from and against any and all liabilities,
claims, costs or expenses incurred by the Trustee, the Securities  Administrator
or the Master Servicer as a result of such attempted or purported transfer.  The
Trustee shall have no liability for transfer of any such Global  Certificates in
or  through  book-entry  facilities  of  any  Depository  or  between  or  among
Depository  Participants or Certificate Owners made in violation of the transfer
restrictions set forth herein.

                                      -78-
<PAGE>

      Section 5.08 Rule 144A Information.

      For so long  as any  Certificates  are  outstanding  and  are  "restricted
securities"  within the meaning of Rule 144(a)(3) of the Securities Act, (1) the
Depositor  will  provide  or  cause  to  be  provided  to  any  holder  of  such
Certificates and any prospective  purchaser thereof designated by such a holder,
upon the  request  of such  holder or  prospective  purchaser,  the  information
required  to be  provided  to  such  holder  or  prospective  purchaser  by Rule
144A(d)(4)  under the  Securities  Act; and (2) the Depositor  shall update such
information from time to time in order to prevent such information from becoming
false and misleading and will take such other actions as are necessary to ensure
that  the  safe  harbor  exemption  from the  registration  requirements  of the
Securities  Act under  Rule 144A is and will be  available  for  resales of such
Certificates conducted in accordance with Rule 144A.

                                      -79-
<PAGE>

                                   ARTICLE VI
                         Payments to Certificateholders

      Section 6.01 Distributions on the Certificates.

      (a) Interest and principal (as  applicable)  on the  Certificates  will be
distributed monthly on each Distribution Date,  commencing in August 2004, in an
amount equal to the Available Funds on deposit in the  Distribution  Account for
such  Distribution  Date. On each  Distribution  Date,  the  Available  Funds on
deposit in the Distribution Account shall be distributed as follows:

            (i) on each  Distribution  Date, the Group I Available Funds will be
distributed to the Group I Senior Certificates as follows:

      FIRST, to the Class I-A-1,  Class I-A-2,  Class I-A-3,  Class I-A-4, Class
I-A-5,  Class I-A-6,  Class I-A-7,  Class I-A-8, Class R-I, Class R-II and R-III
Certificates,  on a pro rata  basis,  the Accrued  Certificate  Interest on such
classes for such  Distribution  Date. As described  below,  Accrued  Certificate
Interest on the Class I-A-1, Class I-A-2, Class I-A-3, Class I-A-4, Class I-A-5,
Class I-A-6,  Class I-A-7,  Class I-A-8,  Class R-I,  Class R-II and Class R-III
Certificates  is  subject to  reduction  in the event of  certain  Net  Interest
Shortfalls allocable thereto;

      SECOND, to the Class I-A-1,  Class I-A-2,  Class I-A-3, Class I-A-4, Class
I-A-5,  Class  I-A-6,  Class I-A-7 and Class I-A-8  Certificates,  on a pro rata
basis, any Accrued  Certificate  Interest thereon remaining  undistributed  from
previous Distribution Dates, to the extent of remaining Group I Available Funds;
and

      THIRD, concurrently as follows:

            (I)   to the extent of the remaining Group I Available Funds related
                  to Subgroup I-1, to the Class I-A-1, Class I-A-2, Class I-A-3,
                  Class I-A-4,  Class I-A-5,  Class I-A-6, Class R-I, Class R-II
                  and Class R-III Certificates,  as principal,  the Subgroup I-1
                  Principal Distribution Amount as follows:  FIRST, to the Class
                  R-I,  Class R-II and Class R-III,  in that order,  and in each
                  case in reduction  of the Current  Principal  Amount  thereof,
                  until the Current Principal Amount of each such class has been
                  reduced to zero; SECOND, to the Class I-A-6  Certificates,  in
                  reduction of the Current  Principal Amount thereof,  until the
                  Current  Principal Amount thereof has been reduced to zero, in
                  an amount equal to the Lockout Principal Amount;  THIRD, up to
                  an  amount  of  $10,000,  to  the  Class  I-A-5  Certificates,
                  commencing  on  the  distribution  date  in  August  2007,  in
                  reduction of the Current  Principal Amount thereof,  until the
                  Current  Principal Amount thereof has been reduced by $10,000;
                  FOURTH,  to the Class  I-A-1,  Class  I-A-2  and  Class  I-A-3
                  Certificates,  on a  pro  rata  basis  based  on  the  Current
                  Principal  Amount  of each such  class,  in  reduction  of the
                  Current Principal Amounts thereof, until the Current Principal
                  Amount of each such class has been

                                      -80-
<PAGE>

                  reduced to zero;  FIFTH, to the Class I-A-4  Certificates,  in
                  reduction of the current  Principal Amount thereof,  until the
                  Current  Principal  Amount  thereof has been  reduced to zero;
                  SIXTH,  to the Class I-A-5  Certificates,  in reduction of the
                  Current Principal Amount thereof,  until the Current Principal
                  Amount thereof has been reduced to zero;  and SEVENTH,  to the
                  Class  I-A-6   Certificates,   in  reduction  of  the  Current
                  Principal Amount thereof,  until the Current  Principal Amount
                  thereof has been reduced to zero.

            (II)  to the extent of the remaining Group I Available Funds related
                  to  Subgroup  I-2,  to  the  Class  I-A-7   Certificates,   as
                  principal,  the Subgroup  I-2  Principal  Distribution  Amount
                  thereof,  in reduction of the Current Principal Amount,  until
                  the Current Principal Amount thereof has been reduced to zero;

      FOURTH, to the Class I-PO  Certificates,  the related Class PO Certificate
Principal  Distribution  Amount for such  Distribution Date to the extent of the
remaining Group I Available  Funds,  until the Current  Principal Amount thereof
has been reduced to zero;

      FIFTH, to the Class I-PO Certificates, the Class I-PO Certificate Deferred
Amount,  provided, that (i) on any Distribution Date,  distributions pursuant to
this  priority  FIFTH  shall  not  exceed  the  excess,  if any,  of (x) Group I
Available  Funds  remaining  after giving  effect to  distributions  pursuant to
priority  FIRST  through  FOURTH above over (y) the sum of the amount of Accrued
Certificate Interest for such Distribution Date and Accrued Certificate Interest
remaining  undistributed  from  previous  Distribution  Dates on all  classes of
Subordinate  Certificates then outstanding,  (ii) such  distributions  shall not
reduce the Current  Principal Amount of the Class I-PO Certificates and (iii) no
distribution  will be made in  respect of the Class  I-PO  Certificate  Deferred
Amount on or after the Cross-Over Date; and

      SIXTH, to the Insurer, any amounts due and owing to the Insurer under this
Agreement.

            (ii) on each Distribution Date, the Group II Available Funds will be
distributed to the Group II Senior Certificates as follows:

      FIRST,  to the Group II Senior  Certificates  (other  than the Class II-PO
Certificates),  on a pro rata basis,  the Accrued  Certificate  Interest on such
classes for such  Distribution  Date. As described  below,  Accrued  Certificate
Interest on the Class  II-A-1,  Class  II-A-2 and Class II-A-3  Certificates  is
subject to reduction in the event of certain Net Interest  Shortfalls  allocable
thereto;

      SECOND,  to the Group II Senior  Certificates  (other than the Class II-PO
Certificates),  on a pro rata basis,  any Accrued  Certificate  Interest thereon
remaining  undistributed  from  previous  Distribution  Dates,  to the extent of
remaining Group II Available Funds; and

                                      -81-
<PAGE>

      THIRD, concurrently as follows:

            (I)   to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-1, to the Class II-A-1 Certificates, as
                  principal,  the Subgroup II-1 Principal  Distribution  Amount,
                  until the Current Principal Amount thereof has been reduced to
                  zero;

            (II)  to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-2, to the Class II-A-2 Certificates, as
                  principal,  the Subgroup II-2  Principal  Distribution  Amount
                  until the Current Principal Amount thereof has been reduced to
                  zero;

            (III) to the  extent  of the  remaining  Group  II  Available  Funds
                  related to Subgroup II-3, to the Class II-A-3 Certificates, as
                  principal,  the Subgroup II-2 Principal  Distribution  Amount,
                  until the Current Principal Amount thereof has been reduced to
                  zero.

      FOURTH, to the Class II-PO Certificates,  the related Class PO Certificate
Principal  Distribution  Amount for such  Distribution Date to the extent of the
remaining Group II Available Funds,  until the Current  Principal Amount thereof
has been reduced to zero; and

      FIFTH,  to the  Class  II-PO  Certificates,  the Class  II-PO  Certificate
Deferred  Amount,  provided,  that (i) on any Distribution  Date,  distributions
pursuant to this  priority  FIFTH  shall not exceed the  excess,  if any, of (x)
Group II Available Funds remaining after giving effect to distributions pursuant
to priority FIRST through FOURTH above over (y) the sum of the amount of Accrued
Certificate Interest for such Distribution Date and Accrued Certificate Interest
remaining  undistributed  from  previous  Distribution  Dates on all  classes of
Subordinate  Certificates then outstanding,  (ii) such  distributions  shall not
reduce the Current Principal Amount of the Class II-PO Certificates and (iii) no
distribution  will be made in respect of the Class  II-PO  Certificate  Deferred
Amount on or after the Cross-Over Date.

      (iii)  Except  as  provided  in  paragraphs  (iv) and (v)  below,  on each
Distribution Date on or prior to the Cross-Over Date, an amount equal to the sum
of the remaining  Group I Available Funds and Group II Available Funds after the
distributions in paragraphs (i) and (ii) above will be distributed sequentially,
in the following order, to the Class B-1, Class B-2, Class B-3, Class B-4, Class
B-5 and Class B-6 Certificates, in each case up to an amount equal to and in the
following  order:  (a)  the  Accrued  Certificate   Interest  thereon  for  such
Distribution  Date,  (b) any  Accrued  Certificate  Interest  thereon  remaining
undistributed  from previous  Distribution  Dates and (c) such class'  Allocable
Share for such  Distribution  Date, in each case, to the extent of the remaining
Group I Available Funds and Group II Available Funds.

      (iv) On each  Distribution Date prior to the Cross-Over Date but after the
reduction  of  the  Current  Principal  Amount  of any of  the  Group  I  Senior
Certificates  or Group II Senior  Certificates  (other than the  Interest  Only,
Class I-PO and Class II-PO Certificates) to zero, the remaining class or classes
of Senior Certificates (other than the Interest Only, Class I-PO and Class II-PO
Certificates)  will be  entitled  to  receive  in  reduction  of  their  Current
Principal

                                      -82-
<PAGE>

Amounts,  pro rata based upon their Current Principal Amounts  immediately prior
to such Distribution Date, in addition to any Principal  Prepayments  related to
such remaining  Senior  Certificates'  respective  Loan Group  allocated to such
Senior Certificates,  100% of the Non-PO Percentage of the Principal Prepayments
on any  Mortgage  Loan in the Loan Group  relating to such fully repaid class or
classes of Senior  Certificates;  provided,  however,  that if (A) the  weighted
average of the  Subordinate  Percentages  on such  Distribution  Date  equals or
exceeds two times the initial  weighted  average of the Subordinate  Percentages
and  (B)  the  aggregate  Scheduled  Principal  Balance  of the  Mortgage  Loans
delinquent 60 days or more  (including  for this purpose any such Mortgage Loans
in foreclosure  and Mortgage  Loans with respect to which the related  Mortgaged
Property has been acquired by the Trust),  averaged over the last six months, as
a  percentage  of the  sum of the  aggregate  Current  Principal  Amount  of the
Subordinate  Certificates does not exceed 50% and (C) with respect to Loan Group
I, no amounts are due to the Insurer in accordance with priority SIXTH of clause
(i) above,  then the  additional  allocation  of Principal  Prepayments  to such
remaining class or classes of Senior Certificates in accordance with this clause
(iv)  will  not be made  and  100% of the  Non-PO  Percentage  of the  Principal
Prepayments  on any  Mortgage  Loan in the Loan  Group  relating  to such  fully
prepaid  class or  classes  of  Senior  Certificates  will be  allocated  to the
Subordinate  Certificates.  If any amounts are due to the Insurer in  accordance
with priority SIXTH of clause (i) above,  Principal Prepayments not allocated to
the fully  prepaid  class or classes  Group I Senior  Certificates  as described
above shall be paid to the Insurer to the extent of amounts due.

      (v) If on any Distribution  Date on which the aggregate  Current Principal
Amount of the Group I Senior Certificates or Group II Senior Certificates (other
than the  Interest  Only,  Class  I-PO and Class  II-PO  Certificates)  would be
greater than the aggregate  Scheduled Principal Balance of the Mortgage Loans in
its related Loan Group  (other than the PO  Percentage  of the related  Discount
Mortgage Loans) or any amounts are due to the Insurer pursuant to priority SIXTH
of clause (i) above and any Subordinate  Certificates are still outstanding,  in
each case, after giving effect to distributions to be made on such  Distribution
Date, (i) 100% of amounts otherwise allocable to the Subordinate Certificates in
respect of principal will be distributed to the Group I Senior  Certificates and
Group II Senior Certificates (other than the Interest Only, Class I-PO and Class
II-PO  Certificates),  as  applicable,  in  reduction  of the Current  Principal
Amounts thereof,  until the aggregate  Current Principal Amount of such class or
classes of Senior  Certificates,  as applicable  (other than the Interest  Only,
Class I-PO and Class II-PO  Certificates),  is equal to the aggregate  Scheduled
Principal  Balance of the  Mortgage  Loans in its related Loan Group (other than
the PO Percentage of the related Discount  Mortgage Loans) and to payment to the
Insurer  of  all  amounts  due  under  this  Agreement,  and  (ii)  the  Accrued
Certificate Interest otherwise allocable to the Subordinate Certificates on such
Distribution Date will be reduced,  if necessary,  and distributed to such class
or classes of Senior  Certificates in an amount equal to the Accrued Certificate
Interest for such  Distribution  Date on the excess of (x) the aggregate Current
Principal  Amount of such class or classes of Senior  Certificates  over (y) the
aggregate  Scheduled Principal Balance of the Mortgage Loans in the related Loan
Group (other than the PO Percentage of the related Discount  Mortgage Loans) and
to payment to the  Insurer of all  amounts  due under this  Agreement.  Any such
reduction in the Accrued  Certificate  Interest on the Subordinate  Certificates
will be allocated in reverse order of the  Subordinate  Certificates'  numerical
designations, commencing with the Class B-6 Certificates.

                                      -83-
<PAGE>

      (vi) If, after  distributions  have been made pursuant to priorities FIRST
and SECOND of clause (i) above on any  Distribution  Date, the remaining Group I
Available  Funds is less than the sum of the Subgroup I-1,  Subgroup I-2 and the
related Class PO Certificate Principal  Distribution Amounts, such amounts shall
be reduced,  and such remaining  funds will be distributed to the Group I Senior
Certificates,  other  than the  Class  I-A-8  Certificates  on the basis of such
reduced amounts. Notwithstanding any reduction in principal distributable to the
Class I-PO Certificates pursuant to this paragraph, the Current Principal Amount
of the  Class  I-PO  Certificates  shall be  reduced  not only by  principal  so
distributed but also by the difference  between (i) principal  distributable  to
the Class I-PO  Certificates  in accordance  with  priority  FIFTH of clause (i)
above, and (ii) principal  actually  distributed to the Class I-PO  Certificates
after  giving  effect to this  clause (vi) (such  difference  for the Class I-PO
Certificates,  the "Class  I-PO  Certificate  Cash  Shortfall").  The Class I-PO
Certificate Cash Shortfall with respect to any  Distribution  Date will be added
to the Class I-PO Certificate Deferred Amount.

      (vii) If, after  distributions have been made pursuant to priorities FIRST
and SECOND of clause (ii) above on any Distribution Date, the remaining Group II
Available  Funds  is less  than the sum of the  Subgroup  II-1,  Subgroup  II-2,
Subgroup  II-3 and the  related  Class  PO  Certificate  Principal  Distribution
Amounts,  such  amounts  shall be  reduced,  and such  remaining  funds  will be
distributed  to the Group II Senior  Certificates,  other than the Class  II-X-I
Certificates,  on  the  basis  of  such  reduced  amounts.  Notwithstanding  any
reduction in principal distributable to the Class II-PO Certificates pursuant to
this clause (vii), the Current Principal Amount of the Class II-PO  Certificates
shall be reduced not only by principal so distributed but also by the difference
between  (i)  principal   distributable  to  the  Class  II-PO  Certificates  in
accordance with priority FIFTH of clause (ii) above, and (ii) principal actually
distributed  to the  Class  II-PO  Certificates  after  giving  effect  to  this
paragraph (such  difference for the Class II-PO  Certificates,  the "Class II-PO
Certificate Cash  Shortfall").  The Class II-PO  Certificate Cash Shortfall with
respect to any  Distribution  Date will be added to the Class II-PO  Certificate
Deferred Amount.

      (viii) On each  Distribution  Date, any Available  Funds  remaining  after
payment of  interest  and  principal  to the  Classes of  Certificates  entitled
thereto  and  payment  of amounts  due and owing to the  Insurer in each case as
described above, will be distributed to the Class R-III Certificates;  provided,
that if on any Distribution  Date there are any Group I Available Funds or Group
II Available  Funds remaining after payment of interest and principal to a Class
or Classes of Certificates entitled thereto and payment of amounts due and owing
to the Insurer,  such amounts will be distributed to the other classes of Senior
Certificates,  pro rata, based upon their Current Principal Amounts,  and to the
Insurer,  until all amounts due to all classes of Senior Certificates and to the
Insurer have been paid in full,  before any amounts are distributed to the Class
R-III Certificates.

      (ix) Notwithstanding the priorities relating to distributions of principal
among the  Insured  Certificates  described  above,  on any  Distribution  Date,
distributions  in respect  of  principal  on the  Insured  Certificates  will be
allocated among the Holders of the Insured  Certificates as set forth in Section
6.10. On each Distribution Date on which amounts are available for distributions
in  reduction  of the  Current  Principal  Amount  of the  Insured  Certificates
(including,  for purposes of this paragraph,  the portion of any Insured Payment
allocable to principal) the aggregate  amount  available for such  distributions
will  be  rounded

                                      -84-
<PAGE>

upward by the Rounding  Amount.  Such rounding will be accomplished on the first
Distribution  Date on which  distributions in reduction of the Current Principal
Amount of the Insured  Certificates  are made by  withdrawing  from the Rounding
Account the Rounding Amount for deposit into the Distribution  Account, and such
Rounding Amount will be added to the amount that is available for  distributions
in reduction of the Current  Principal  Amount of the Insured  Certificates.  On
each succeeding  Distribution  Date on which  distributions  in reduction of the
Current  Principal  Amount of the  Insured  Certificates  are made,  first,  the
aggregate  amount  available  for  distribution  in  reduction  of  the  Current
Principal  Amount  of the  Insured  Certificates  will be  applied  to repay the
Rounding Amount  withdrawn from the Rounding  Account on the prior  Distribution
Date and then, the remainder of such allocable amount, if any, will be similarly
rounded upward through  another  withdrawal  from the Rounding  Account and such
determined  Rounding  Amount will be added to the amount that is  available  for
distribution  in  reduction  of the  Current  Principal  Amount  of the  Insured
Certificates.  Any funds  remaining  in the Rounding  Account  after the Current
Principal  Amount  of the  Insured  Certificates  is  reduced  to zero  shall be
distributed to the Class R-III Certificateholders.

      Section 6.02 Allocation of 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, based on information
provided by the related Servicer.

      (b) Realized Losses with respect to a Mortgage Loan will be allocated on a
pro rata basis between the PO Percentage of the Scheduled  Principal  Balance of
such  Mortgage  Loan  and the  Non-PO  Percentage  of such  Scheduled  Principal
Balance.

      (c) On each Distribution  Date, the PO Percentage of the principal portion
of any Realized Loss on a Discount  Mortgage  Loan and any Class PO  Certificate
Cash Shortfall will be allocated to the Principal  Only  Certificates  until the
Current  Principal Amount of the Principal Only Certificates is reduced to zero.
With respect to any Distribution Date through the Cross-Over Date, the aggregate
of all amounts so allocable to a class of Principal  Only  Certificates  on such
date in respect of any Realized Losses and any related Class PO Certificate Cash
Shortfall  and all  amounts  previously  allocated  in respect of such  Realized
Losses or Class PO  Certificate  Cash  Shortfall  and not  distributed  on prior
Distribution  Dates will be the "Class PO Certificate  Deferred  Amount." To the
extent  funds are  available  therefor  on any  Distribution  Date  through  the
Cross-Over Date,  distributions in respect of the Class PO Certificate  Deferred
Amount for the Class PO  Certificates  will be made in accordance  with priority
FIFTH of Section 6.01(a)(i) or (a)(ii) as applicable. No interest will accrue on
the Class PO Certificate  Deferred Amount. On each Distribution Date through the
Cross-Over  Date,  the Current  Principal  Amount of the lowest ranking Class of
Subordinate  Certificates  then outstanding will be reduced by the amount of any
distributions  in respect of any Class PO  Certificate  Deferred  Amount on such
Distribution Date in accordance with the priorities set forth above, through the
operation of the Subordinate  Certificate Writedown Amount. After the Cross-Over
Date, no more distributions will be made in respect of, and applicable  Realized
Losses and Class PO Certificate Cash Shortfalls  allocable to the Principal Only
Certificates will not be added to, the Class PO Certificate Deferred Amount.

                                      -85-
<PAGE>

      (d) The Non-PO  Percentage of the principal  portion of Realized Losses on
the Mortgage Loans will be allocated on any Distribution Date as follows: first,
to the Class B-6 Certificates;  second, to the Class B-5 Certificates; third, to
the Class B-4 Certificates; fourth, to the Class B-3 Certificates; fifth, to the
Class B-2 Certificates;  and sixth, to the Class B-1 Certificates,  in each case
until the Current  Principal  Amount of such class has been reduced to zero. The
applicable Non-PO Percentage of the principal portion of any Excess Loss for any
Distribution  Date will be allocated pro rata among all  outstanding  Classes of
Certificates  (other than the Principal Only  Certificates and the Interest Only
Certificates) based on their Current Principal Amounts in each until the Current
Principal  Amount of such class has been reduced to zero;  provided however that
the  amount  of  any  Excess  Loss  otherwise   allocable  to  the  Class  I-A-2
Certificates  will be allocated to the Class I-A-3 Certificate until the Current
Principal  Amount of such  Class has been  reduced to zero and then to the Class
I-A-2 Certificates.  Thereafter,  the Non-PO Percentage of the principal portion
of Realized  Losses on the  Mortgage  Loans in a Loan Group will be allocated on
any Distribution Date to the Class or Classes of Senior Certificates (other than
the Interest Only  Certificates  and the  Principal  Only  Certificates)  of the
related Senior  Certificate Group, pro rata, based upon their respective Current
Principal  Amounts;  provided  however  that the amount of any  Realized  Losses
otherwise  allocable to the Class I-A-2  Certificates  shall be allocated to the
Class I-A-3  Certificates  until the Current  Principal  Amount thereof has been
reduced to zero and then to the Class I-A-2  Certificates.  Once the Subordinate
Certificates  have been reduced to zero, the Non-PO  Percentage of the principal
portion of Realized Losses on the Mortgage Loans (if any) will be allocated on a
pro rata basis to the  remaining  Senior  Certificates  (other than the Interest
Only Certificates).

      (e)  Notwithstanding  the foregoing  clause (d), no such allocation of any
Realized Loss shall be made on a Distribution  Date to any Class of Certificates
to the  extent  that  such  allocation  would  result  in the  reduction  of the
aggregate  Current  Principal  Amounts  of  all  the  Certificates  as  of  such
Distribution   Date,  after  giving  effect  to  all   distributions  and  prior
allocations  of Realized  Losses or Excess Losses on the Mortgage  Loans on such
date, to an amount less than the aggregate Scheduled Principal Balance of all of
the Mortgage  Loans as of the first day of the month of such  Distribution  Date
(such limitation, the "Loss Allocation Limit").

      (f)  Any  Realized   Losses  or  Excess  Loss  allocated  to  a  Class  of
Certificates shall be allocated among the Certificates of such Class (other than
the Interest  Only  Certificates)  in  proportion  to their  respective  Current
Principal  Amounts.  Any allocation of Realized  Losses shall be accomplished by
reducing the Current Principal Amount of the related Certificates on the related
Distribution Date.

      (g)  Realized  Losses  or  an  Excess  Loss  shall  be  allocated  on  the
Distribution  Date in the  month  following  the  month in which  such  loss was
incurred and, in the case of the principal portion thereof,  after giving effect
to distributions made on such Distribution Date.

      (h)  On  each  Distribution  Date,  the  Securities   Administrator  shall
determine  and  notify  the  Trustee of the  Subordinate  Certificate  Writedown
Amount.   Any   Subordinate   Certificate   Writedown   Amount  shall  effect  a
corresponding  reduction in the Current  Principal Amount of (i) if prior to the
Cross-Over Date, the Current Principal Amounts of the Subordinate  Certificates,
in the reverse order of their  numerical  Class  designations  and (ii) from and
after  the  Cross-Over  Date,  the  Senior  Certificates,   in  accordance  with
priorities set forth in clause (b)

                                      -86-
<PAGE>

above, which reduction shall occur on such Distribution Date after giving effect
to distributions made on such Distribution Date.

      (i) Any Net  Interest  Shortfall  will be  allocated  among the Classes of
Certificates  in proportion  to the  respective  amounts of Accrued  Certificate
Interest  that would  have been  allocated  thereto  in the  absence of such Net
Interest  Shortfall  for such  Distribution  Date.  The interest  portion of any
Realized  Losses with respect to the Mortgage Loans occurring on or prior to the
Cross-Over  Date will not be allocated among any  Certificates,  but will reduce
the amount of Available Funds on the related  Distribution  Date. As a result of
the subordination of the Subordinate Certificates in right of distribution, such
Realized  Losses  on the  Mortgage  Loans  will  be  borne  by  the  Subordinate
Certificates, in inverse order of their numerical Class designations.  Following
the  Cross-Over  Date, the interest  portion of Realized  Losses on the Mortgage
Loans will be  allocated to the Senior  Certificates  to the extent not covered,
with respect to the Class I-A-5 Certificates, by the Reserve Fund.

      (j) Any Deficient  Valuation will on each  Distribution  Date be allocated
solely to the Subordinate Certificates until the Bankruptcy Coverage Termination
Date. The Bankruptcy Loss Amount and the related  coverage levels may be reduced
or modified upon written confirmation from the related Rating Agencies that such
reduction or modification  will not adversely affect the then current ratings of
the Senior  Certificates  by the related  Rating  Agencies  (determined  without
regard to the Policy). Such reduction may adversely affect the coverage provided
by subordination  with respect to Bankruptcy Losses. Any Fraud Loss will on each
Distribution Date be allocated solely to the Subordinate  Certificates until the
Fraud  Coverage   Termination  Date.  Any  Special  Hazard  Loss  will  on  each
Distribution   Date  be  allocated   solely  to  the   outstanding   Subordinate
Certificates until the Special Hazard Termination Date.

      Section 6.03 Payments.

      (a) On each Distribution Date, other than the final Distribution Date, the
Trustee  shall  distribute  to  each  Certificateholder  of  record  as  of  the
immediately preceding Record Date the  Certificateholder's pro rata share of its
Class (based on the aggregate  Fractional Undivided Interest represented by such
Holder's  Certificates)  of all  amounts  required  to be  distributed  on  such
Distribution Date to such Class, based on information provided to the Trustee by
the Securities  Administrator.  The Securities Administrator shall calculate the
amount  to be  distributed  to  each  Class  and,  based  on such  amounts,  the
Securities  Administrator  shall  determine the amount to be distributed to each
Certificateholder.   All  of  the  Securities  Administrator's  calculations  of
payments  shall  be based  solely  on  information  provided  to the  Securities
Administrator by the Master Servicer.  Neither the Securities  Administrator nor
the  Trustee  shall  be  required  to  confirm,  verify  or  recompute  any such
information but shall be entitled to rely conclusively on such information.

      (b) Payment of the above amounts to each  Certificateholder  shall be made
(i) by check mailed to each  Certificateholder  entitled  thereto at the address
appearing in the Certificate  Register or (ii) upon receipt by the Trustee on or
before the fifth Business Day preceding the Record Date of written  instructions
from a  Certificateholder  by wire transfer to a United  States  dollar  account
maintained  by the  payee  at any  United  States  depository  institution  with
appropriate  facilities for receiving such a wire transfer;  provided,  however,
that the final

                                      -87-
<PAGE>

payment  in  respect  of each  Class  of  Certificates  will be made  only  upon
presentation  and  surrender of such  respective  Certificates  at the office or
agency of the  Trustee  specified  in the notice to  Certificateholders  of such
final payment.

      Section 6.04 Statements to Certificateholders.

      (a)  Concurrently  with  each  distribution  to  Certificateholders,   the
Securities  Administrator shall make available to the parties hereto, Radian and
each  Certificateholder via the Securities  Administrator's  internet website as
set forth below,  the following  information,  expressed with respect to clauses
(i)  through  (vii) in the  aggregate  and as a  Fractional  Undivided  Interest
representing an initial Current  Principal  Amount of $1,000,  or in the case of
the Residual Certificates, an initial Current Principal Amount of $50:

            (i) the Current  Principal Amount (or Notional Amount) of each Class
      of Certificates immediately prior to such Distribution Date;

            (ii) the amount of the  distribution  allocable to principal on each
      applicable Class of Certificates;

            (iii)  the  aggregate  amount of  interest  accrued  at the  related
      Pass-Through  Rate with respect to each Class during the related  Interest
      Accrual Period;

            (iv)  the Net  Interest  Shortfall  and  any  other  adjustments  to
      interest at the related  Pass-Through  Rate  necessary  to account for any
      difference  between  interest accrued and aggregate  interest  distributed
      with respect to each Class of Certificates;

            (v) the amount of the  distribution  allocable  to  interest on each
      Class of Certificates;

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

            (vii) the  Current  Principal  Amount (or  Notional  Amount) of each
      Class of Certificates after such Distribution Date;

            (viii) the amount of any  Monthly  Advances,  Compensating  Interest
      Payments and outstanding  unreimbursed  advances by the Master Servicer or
      the Servicers included in such distribution;

            (ix) the aggregate amount of any Realized Losses (listed  separately
      for each category of Realized Loss) during the related  Prepayment  Period
      and  cumulatively  since  the  Cut-off  Date  and the  amount  and  source
      (separately identified) of any distribution in respect thereof included in
      such distribution;

            (x) with  respect to each  Mortgage  Loan which  incurred a Realized
      Loss during the related Prepayment  Period, (i) the loan number,  (ii) the
      Scheduled  Principal Balance of such Mortgage Loan as of the Cut-off Date,
      (ii) the  Scheduled  Principal  Balance  of such  Mortgage  Loan as of the
      beginning of the related Due Period, (iii) the Net Liquidation

                                      -88-
<PAGE>

      Proceeds  with  respect to such  Mortgage  Loan and (iv) the amount of the
      Realized Loss with respect to such Mortgage Loan;

            (xi) the amount of Scheduled  Principal and  Principal  Prepayments,
      (including but separately  identifying  the principal  amount of Principal
      Prepayments, Insurance Proceeds, the purchase price in connection with the
      purchase of Mortgage Loans, cash deposits in connection with substitutions
      of  Mortgage  Loans  and Net  Liquidation  Proceeds)  and the  number  and
      principal  balance of Mortgage Loans  purchased or substituted  for during
      the relevant period and cumulatively since the Cut-off Date;

            (xii)  the  number  of  Mortgage  Loans   (excluding  REO  Property)
      remaining  in the  Trust  Fund  as of the  end of the  related  Prepayment
      Period;

            (xiii)  information  regarding any Mortgage Loan delinquencies as of
      the end of the related Prepayment  Period,  including the aggregate number
      and  aggregate   Outstanding  Principal  Balance  of  Mortgage  Loans  (a)
      delinquent 30 to 59 days on a contractual  basis,  (b) delinquent 60 to 89
      days on a  contractual  basis,  and (c)  delinquent  90 or more  days on a
      contractual  basis,  in each case as of the close of  business on the last
      Business Day of the immediately preceding month;

            (xiv) the number of Mortgage Loans in the foreclosure  process as of
      the end of the related Due Period and the aggregate  Outstanding Principal
      Balance of such Mortgage Loans;

            (xv) the number and aggregate  Outstanding  Principal Balance of all
      Mortgage  Loans as to which the Mortgaged  Property was REO Property as of
      the end of the related Due Period;

            (xvi)  the  book  value  (the sum of (A) the  Outstanding  Principal
      Balance of the Mortgage  Loan,  (B) accrued  interest  through the date of
      foreclosure  and (C) foreclosure  expenses) of any REO Property;  provided
      that,  in  the  event  that  such  information  is  not  available  to the
      Securities  Administrator on the Distribution Date, such information shall
      be furnished promptly after it becomes available;

            (xvii)  the amount of  Realized  Losses  allocated  to each Class of
      Certificates  since the prior  Distribution  Date and in the aggregate for
      all prior Distribution Dates; and

            (xviii) the Average Loss Severity Percentage;

            (xix) the amount of Special Hazard Losses, Fraud Losses,  Bankruptcy
      Losses  and  Extraordinary  Losses  on such  Distribution  Date and in the
      aggregate for all prior Distribution Dates; and

            (xx) the then applicable Subgroup Senior Percentage, Subgroup Senior
      Prepayment  Percentage,  Subordinate Percentage and Subordinate Prepayment
      Percentage for each Subgroup.

                                      -89-
<PAGE>

      The  information  set forth above shall be calculated or reported,  as the
case may be, by the Securities Administrator, based solely on, and to the extent
of, information provided to the Securities Administrator by the Master Servicer.
The Securities Administrator may conclusively rely on such information and shall
not be required to confirm, verify or recalculate any such information.

      The  Securities  Administrator  may  make  available  each  month,  to any
interested party, the monthly statement to Certificateholders via the Securities
Administrator's  website initially 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  option are entitled to have a paper copy mailed to them via
first class mail by calling the Securities Administrator's customer service desk
and indicating such. The Securities Administrator shall have the right to change
the way such reports are  distributed  in order to make such  distribution  more
convenient   and/or  more   accessible  to  the  parties,   and  the  Securities
Administrator  shall  provide  timely and adequate  notification  to all parties
regarding any such change.

      To the extent  timely  received  from the  Securities  Administrator,  the
Trustee   will  also  make   monthly   statements   available   each   month  to
Certificateholders  and Radian 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
website service can be obtained by calling the Trustee's  customer  service desk
at (800) 934-6802.

      (b) By April 30 of each year  beginning in 2005,  the Trustee will furnish
such report to each Holder of the  Certificates of record at any time during the
prior  calendar  year  as to the  aggregate  of  amounts  reported  pursuant  to
subclauses  (a)(ii)  and (a)(v)  above with  respect to the  Certificates,  plus
information with respect to the amount of servicing  compensation and such other
customary information as the Securities  Administrator may determine and advises
the  Trustee to be  necessary  and/or to be  required  by the  Internal  Revenue
Service  or by a federal  or state law or rules or  regulations  to enable  such
Holders to prepare their tax returns for such calendar  year.  Such  obligations
shall  be  deemed  to have  been  satisfied  to the  extent  that  substantially
comparable information shall be provided by the Securities  Administrator or the
Trustee pursuant to the requirements of the Code.

      Section 6.05 Monthly Advances.

      If the Scheduled  Payment on a Mortgage Loan that was due on a related Due
Date is delinquent  other than as a result of  application of the Relief Act and
for which the related  Servicer was required to make an advance  pursuant to 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 a Nonrecoverable  Advance.
Subject  to the  foregoing,  the Master  Servicer  shall  continue  to make such
advances  through the date that the related  Servicer is required to do so under
its  Servicing  Agreement.  If the  Master  Servicer  deems an  advance  to be a
Nonrecoverable

                                      -90-
<PAGE>

Advance,  on the  Distribution  Account  Deposit Date, the Master Servicer shall
present an Officer's  Certificate to the Trustee and Radian (i) stating that the
Master Servicer elects not to make a Monthly Advance in a stated amount and (ii)
detailing the reason it deems the advance to be a Nonrecoverable Advance.

      Section 6.06 Compensating Interest Payments.

      The  Master  Servicer  shall  deposit in the  Master  Servicer  Collection
Account not later than each Distribution Account Deposit Date an amount equal to
the lesser of (i) the sum of the  aggregate  amounts  required to be paid by the
Servicers under the Servicing  Agreements with respect to subclauses (a) and (b)
of the  definition of Interest  Shortfall with respect to the Mortgage Loans for
the related Distribution Date, and not so paid by the related Servicers and (ii)
the Master Servicer  Compensation for such Distribution  Date (such amount,  the
"Compensating  Interest Payment").  The Master Servicer shall not be entitled to
any reimbursement of any Compensating Interest Payment.

      Section 6.07 Policy Matters.

      (a) If, on the third  Business  Day  before  any  Distribution  Date,  the
Securities Administrator notifies the Trustee that a Deficiency Amount exists on
such  Distribution  Date, the Trustee shall give notice to Radian and the Fiscal
Agent (as defined in the 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 Policy by 12:00 noon,  New York City time on such third
Business Day. The Trustee's  responsibility  for delivering the notice to Radian
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 Preference  Amount (as defined in the Policy),
the Trustee shall (i) promptly  notify Radian and the Fiscal Agent,  if any, and
(ii) comply  with the  provisions  of the Policy to obtain  payment by Radian of
such  Preference  Amount.  In  addition,  the  Trustee  shall mail notice to all
Holders of the Class I-A-5  Certificates so affected that, in the event that any
such  Holder's  scheduled  payment is a Preference  Amount,  such Holder will be
entitled to payment  pursuant to the terms of the Policy,  a copy of which shall
be made  available to such Holders by the Trustee.  The Trustee shall furnish to
Radian and the Fiscal  Agent,  if any,  its records  listing the payments on the
affected  Class I-A-5  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  I-A-5  Certificates  (the
"Class  I-A-5  Policy  Payments  Account")  over  which the  Trustee  shall have
exclusive control and sole right of withdrawal.  The Class I-A-5 Policy Payments
Account shall be an Eligible Account.  The Trustee shall deposit any amount paid
under the Policy into the Class I-A-5  Policy  Payments  Account and  distribute
such amount only for the purposes of making the payments to Holders of the Class
I-A-5 Certificates in respect of the Insured Payment for which the related claim
was made under the Policy. Such amounts shall

                                      -91-
<PAGE>

be allocated by the Trustee to Holders of Class I-A-5  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 6.01. 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 I-A-5  Certificates  from funds in the I-A-5  Policy
Payments Account shall be noted as provided in subsection (e) below.  Funds held
in the Class I-A-5 Policy Payments Account shall not be invested by the Trustee.

      (d) Any funds received from Radian for deposit into the Class I-A-5 Policy
Payments  Account  pursuant to the Policy in respect of a  Distribution  Date or
otherwise  as a result of any claim  under the  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  I-A-5  Certificates,  or (ii) of other  amounts
payable under the Policy. Funds received by the Trustee as a result of any claim
under the Policy  shall be used  solely for  payment to the Holders of the Class
I-A-5  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 Servicer, the Securities  Administrator,
the Master  Servicer or the Trust Fund.  Any funds  remaining in the Class I-A-5
Policy Payments Account on the first Business Day after each  Distribution  Date
shall be remitted  promptly to Radian  pursuant  to the written  instruction  of
Radian.

      (e) The Trustee shall keep complete and accurate records in respect of (i)
all funds  remitted to it by Radian and  deposited  into the Class I-A-5  Policy
Payments  Account  and (ii) the  allocation  of such  funds to (A)  payments  of
interest on and principal in respect of any Class I-A-5 Certificates and (B) the
amount of funds available to make  distributions on the Class I-A-5 Certificates
pursuant to Section 6.01. Radian 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 I-A-5 Certificate
by its acceptance of the Class I-A-5 Certificate agrees,  that, without the need
for any further action on the part of Radian or the Trustee to the extent Radian
makes payments,  directly or indirectly,  on account of principal of or interest
on any Class I-A-5  Certificates,  Radian will be fully subrogated to the rights
of the Holders of such Class I-A-5  Certificates  to receive such  principal and
interest from the Trust Fund.  The Holders of the Class I-A-5  Certificates,  by
acceptance  of the Class I-A-5  Certificates,  assign their rights as Holders of
the I-Class A-5 Certificates to the extent of Radian's  interest with respect to
amounts paid under the Policy. Anything herein to the contrary  notwithstanding,
solely for purposes of determining  Radian's rights, as applicable,  as subrogee
for payments distributable pursuant to Section 6.01, any payment with respect to
distributions to the Class I-A-5  Certificates which is made with funds received
pursuant  to the terms of the  Policy,  shall not be  considered  payment of the
Class  I-A-5  Certificates  from the  Trust  Fund and  shall  not  result in the
distribution  or the provision for the  distribution in reduction of the Current
Principal  Amount of the Class I-A-5  Certificates  as described in this Article
VI.

      The Trustee,  the Seller,  the  Depositor  and the Master  Servicer  shall
cooperate in all respects  with any  reasonable  request by Radian for action to
preserve or enforce Radian's rights

                                      -92-
<PAGE>

or interests under this Agreement  without  limiting the rights or affecting the
interests of the Holders as otherwise set forth herein.

      (g)  Upon a  Responsible  Officer  of the  Trustee  becoming  aware of the
occurrence of an Event of Default,  the Trustee shall promptly  notify Radian of
such Event of Default.

      (h) The Trustee shall promptly notify Radian of either of the following as
to which a Responsible Officer has actual knowledge: (A) the commencement of any
proceeding by or against the Seller 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  I-A-5  Certificates  as to which it has actual  knowledge.
Each  Holder  of a Class  I-A-5  Certificate,  by its  purchase  of Class  I-A-5
Certificates,  and the Trustee  hereby  agrees that Radian (so long as no Radian
Default (as defined  below) 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, Radian shall be subrogated to the rights of
the Trustee and each Holder of a Class I-A-5  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 Radian Contact Person who shall
be available to Radian to provide reasonable access to information regarding the
Mortgage  Loans.  The  initial  Radian  Contact  Person is to the  attention  of
Secondary Marketing.

      (j) The  Trustee  shall  promptly  surrender  the  Policy  to  Radian  for
cancellation  upon the  reduction of the Current  Principal  Amount of the Class
I-A-5 Certificates to zero.

      (k) The Trustee shall send to Radian any statements or communications sent
by the Trustee to Holders of the Class  I-A-5  Certificates  including,  without
limitation, statements prepared pursuant to Section 6.04, 8.03 and 9.12, in each
case at the same time such reports,  statements and communications are otherwise
sent.

      (l) For so long as there is not a  continuing  default by Radian under its
obligations under the Policy (a "Radian Default"),  each Holder of a Class I-A-5
Certificate  agrees that Radian shall be treated by the Seller,  the  Depositor,
the Master Servicer,  the Securities  Administrator and the Trustee as if Radian
were the Holder of all Class I-A-5  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  I-A-5  Certificates  hereunder  without  any  further  consent of the
Holders of the Class I-A-5 Certificates and such holders shall not exercise such
rights without the prior written consent of Radian.

      With respect to this Section 6.07, (i) the terms  "Receipt" and "Received"
shall mean actual delivery to Radian and Radian's Fiscal Agent, if any, received
prior to 12:00 noon, New

                                      -93-
<PAGE>

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  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.
Radian 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 Radian 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.

      Section 6.08 Reserve Fund.

      The Reserve Fund will be maintained by the Trustee in a separate  account.
The Reserve Fund will be beneficially owned by Bear, Stearns & Co. Inc. and will
not be an asset of the  REMICs.  The  Trustee  shall make a  withdrawal  on each
Distribution  Date from  amounts on deposit in the Reserve  Fund,  to the extent
funds  are  available  therein,  to cover  any  Prepayment  Interest  Shortfalls
allocated to the Class I-A-5  Certificates  that were not offset by Compensating
Interest Payments and any Interest Shortfalls relating to the application of the
Relief Act allocated to the Insured  Certificates.  The Trustee shall distribute
such   amounts   withdrawn   from  the   Reserve   Fund  to  the   Class   I-A-5
Certificateholders  on such  Distribution  Date in the same  manner as  interest
payments  are to be  allocated  with  respect  to the Class  I-A-5  Certificates
pursuant to Section  6.01.  The balance of any amount  remaining  in the Reserve
Fund on the Distribution Date on which the Current Principal Amount of the Class
I-A-5 Certificates has been reduced to zero will be distributed to Bear, Stearns
& Co. Inc. Section 6.09 Rounding Account.

      (a) No later  than the  Closing  Date,  the  Trustee  will  establish  and
maintain  with itself a segregated  trust  account that is an Eligible  Account,
which shall be titled  "Rounding  Account,  U.S. Bank National  Association,  as
trustee for the  registered  holders of Prime  Mortgage  Trust 2004-1,  Mortgage
Pass-Through  Certificates,  Series  2004-1,  Class I-A-5." On the Closing Date,
Bear,  Stearns & Co. Inc. shall deposit with the Trustee,  and the Trustee shall
deposit into the Rounding Account, cash in an amount equal to $999.99.

      (b) The Trustee on each  Distribution  Date shall,  based upon information
provided  to it by the  Master  Servicer  for  the  related  Distribution  Date,
withdraw  funds  from the  Rounding  Account to pay the  Rounding  Amount to the
Certificate Owners of the Insured Certificates  pursuant to Section 6.01(ix). In
addition,  the Trustee on each Distribution  Date shall,  based upon information
provided  to it by the  Master  Servicer  for  the  related  Distribution  Date,
withdraw funds from the  Distribution  Account to repay to the Rounding  Account
the Rounding Amount from the prior  Distribution Date as contemplated in Section
6.01(ix).

      Section 6.10 Principal Distributions on the Insured Certificates.

      Distributions in reduction of the Current  Principal Amount of the Insured
Certificates will be made in integral  multiples of $1,000 at the request of the
appropriate representatives of Deceased Holders of such Insured Certificates and
at the request of Living Owners of such

                                      -94-
<PAGE>

Insured  Certificates or by mandatory  distributions by Random Lot,  pursuant to
clauses (a) and (d) below, or on a pro rata basis pursuant to clause (e) below.

      (a) On each Distribution  Date on which  distributions in reduction of the
Current   Principal   Amount  of  the  Insured   Certificates   are  made,  such
distributions  will be made in the  following  priority  among  the  Certificate
Owners of the Insured Certificates:

            (i) any request by the personal representatives of a Deceased Holder
      or by a surviving  tenant by the entirety,  by a surviving joint tenant or
      by a surviving tenant in common,  but not exceeding an aggregate amount of
      $100,000 per request; and

            (ii) any request by a Living  Owner,  but not exceeding an aggregate
      amount of $10,000 per request.

      Thereafter,  distributions  will be  made,  with  respect  to the  Insured
Certificates,  as provided in clauses (i) and (ii) above up to a second $100,000
and $10,000, respectively. This sequence of priorities will be repeated for each
request  for  principal  distributions  made by the  Certificate  Owners  of the
Insured Certificates until all such requests have been honored.

      Requests for distributions in reduction of the Current Principal Amount of
the Insured  Certificates  presented on behalf of Deceased Holders in accordance
with the  provisions  of clause  (i) above  will be  accepted  in order of their
receipt by the  Depository.  Requests  for  distributions  in  reduction  of the
Current Principal Amount of the Insured Certificate presented in accordance with
the  provisions  of clause  (ii)  above will be  accepted  in the order of their
receipt by the Depository after all requests presented in accordance with clause
(i) above have been honored.  All requests for distributions in reduction of the
Current  Principal  Amount  of the  Insured  Certificates  will be  accepted  in
accordance  with the provisions set forth in Section  6.10(c).  All requests for
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates  with  respect to any  Distribution  Date must be  received  by the
Depository and on the Depository's "participant terminal system" and received by
the  Trustee no later than the close of business  on the  related  Record  Date.
Requests for  distributions  that are on the Depository's  participant  terminal
system and received by the Trustee  after the related  Record Date and requests,
in either case, for  distributions not accepted with respect to any Distribution
Date, will be treated as requests for  distributions in reduction of the Current
Principal  Amount of Insured  Certificates on the next  succeeding  Distribution
Date, and each succeeding  Distribution  Date thereafter,  until such request is
accepted or is withdrawn as provided in Section  6.10(c).  Such  requests as are
not so withdrawn  shall retain their order of priority  without the need for any
further action on the part of the appropriate  Certificate  Owner of the related
Insured Certificate, all in accordance with the procedures of the Depository and
the  Trustee.  Upon the  transfer  of the  beneficial  ownership  of the Insured
Certificate,  any distribution request previously submitted with respect to such
Certificate  will be deemed to have been  withdrawn only upon the receipt by the
Trustee on or before the Record Date for such  Distribution Date of notification
of  such  withdrawal  in  the  manner  set  forth  in  Section  6.10(c)  on  the
Depository's participant terminal system.

      Distributions in reduction of the Current  Principal Amount of the Insured
Certificates  will be  applied  in an  amount  equal to the  Subgroup  Principal
Distribution Amount allocable to such

                                      -95-
<PAGE>

Class  pursuant  to  Section  6.01(a)(i),  plus,  with  respect  to the  Insured
Certificates,  any amounts  available for distribution from the Rounding Account
established   as  provided  in  Section   6.09,   provided  that  the  aggregate
distribution  in  reduction  of the  Current  Principal  Amount  of the  Insured
Certificates on any Distribution  Date shall be made in an integral  multiple of
$1,000.

      To the extent  that the  portion of the  Subgroup  Principal  Distribution
Amount allocable to  distributions in reduction of the Current  Principal Amount
of the Insured  Certificates  on any  Distribution  Date  exceeds the  aggregate
Current  Principal  Amount of the  Insured  Certificates  with  respect to which
distribution  requests, as set forth above, have been received (plus any amounts
required to be distributed  pursuant to the Rounding Account with respect to the
Insured  Certificates),  distributions  in  reduction  of the Current  Principal
Amount  of the  Insured  Certificates  will be made  by  mandatory  distribution
pursuant to Section 6.10(d).

      (b) An Insured Certificate shall be deemed to be held by a Deceased Holder
for purposes of this Section 6.10 if the death of the Certificate  Owner thereof
is deemed to have occurred.  Insured Certificates  beneficially owned by tenants
by the  entirety,  joint  tenants or tenants in common will be  considered to be
beneficially  owned by a single  owner.  The death of a tenant by the  entirety,
joint  tenant  or  tenant  in  common  will be  deemed  to be the  death  of the
Certificate  Owner, and the Insured  Certificates so beneficially  owned will be
eligible for priority with respect to  distributions in reduction of the Current
Principal  Amount  thereof,  subject to the  limitations  stated above.  Insured
Certificates beneficially owned by a trust will be considered to be beneficially
owned by each  beneficiary  of the  trust to the  extent  of such  beneficiary's
beneficial  interest  therein,  but in no  event  will a  trust's  beneficiaries
collectively  be deemed  to be  Certificate  Owners  of a number  of  Individual
Insured  Certificates  of  which  such  trust  is  the  owner.  The  death  of a
beneficiary of a trust will be deemed to be the death of a Certificate  Owner of
the Insured  Certificates,  as  applicable,  owned by the trust to the extent of
such beneficiary's beneficial interest in such trust. The death of an individual
who was a tenant by the entirety,  joint tenant or tenant in common in a tenancy
which  is the  beneficiary  of a trust  will be  deemed  to be the  death of the
beneficiary  of such  trust.  The  death  of a  person  who,  during  his or her
lifetime,  was  entitled  to  substantially  all  of  the  beneficial  ownership
interests in Individual  Insured  Certificates will be deemed to be the death of
the Certificate Owner of the Insured Certificates regardless of the registration
of ownership, if such beneficial interest can be established to the satisfaction
of the Depository Participant.  Such beneficial interest will be deemed to exist
in typical  cases of street name or nominee  ownership,  ownership by a trustee,
ownership under the Uniform Gifts to Minors Act and community  property or other
joint ownership  arrangements between a husband and wife. Certificate beneficial
interests shall include the power to sell,  transfer or otherwise  dispose of an
Insured Certificate and the right to receive the proceeds therefrom,  as well as
interest and  distributions in reduction of the Current  Principal Amount of the
Insured Certificates,  as applicable,  payable with respect thereto. The Trustee
shall not be under any duty to determine  independently  the  occurrence  of the
death of any deceased  Certificate  Owner.  The Trustee may rely  entirely  upon
documentation  delivered to it pursuant to Section 6.10(c) in  establishing  the
eligibility of any Certificate  Owner to receive the priority  accorded Deceased
Holders in Section 6.10(a).

      (c) Requests  for  distributions  in  reduction  of the Current  Principal
Amount of Insured  Certificates  must be made by  delivering  a written  request
therefor to the Depository  Participant or Indirect Depository  Participant that
maintains the account evidencing such Certificate

                                      -96-
<PAGE>

Owner's interest in Insured Certificates.  In the case of a request on behalf of
a  Deceased  Holder,  appropriate  evidence  of death  and any tax  waivers  are
required to be forwarded to the Depository Participant under separate cover. The
Depository  Participant  shall  forward  a  certification,  satisfactory  to the
Trustee,  certifying  the death of the  Deceased  Holder and the  receipt of the
appropriate  death and tax waivers.  The Depository  Participant  should in turn
make the request of the  Depository  (or, in the case of an Indirect  Depository
Participant,  such  Indirect  Depository  Participant  must  notify the  related
Depository Participant of such request, which Depository Participant should make
the request of the Depository) on the Depository's  participant terminal system.
The Depository  may establish such  procedures as it deems fair and equitable to
establish the order of receipt of requests for such distributions received by it
on the same day. None of the Depositor, the Seller, the Master Servicer,  Radian
or the  Trustee  shall be  liable  for any delay in  delivery  of  requests  for
distributions  or withdrawals of such requests by the  Depository,  a Depository
Participant or any Indirect Depository Participant.

      The  Depository  shall  maintain a list of those  Depository  Participants
representing the appropriate  Certificate  Owners of Insured  Certificates  that
have submitted  requests for distributions in reduction of the Current Principal
Amount of  Insured  Certificates,  together  with the order of  receipt  and the
amounts of such requests on the Depository's  participant  terminal system.  The
Depository will honor requests for  distributions  in the order of their receipt
(subject to the  priorities  described in Section  6.10(a)  above).  The Trustee
shall  notify  the  Depository  as to which  requests  should be honored on each
Distribution  Date at least two Business  Days prior to such  Distribution  Date
based on the report  received  by the Trustee  pursuant  to Section  4.05(c) and
shall  notify  the  Depository  as to  the  amount  of  the  Subgroup  Principal
Distribution Amount to be distributed to the Insured  Certificates by Random Lot
pursuant to Section  6.10(d).  Requests  shall be honored by the  Depository  in
accordance with the procedures,  and subject to the priorities and  limitations,
described  in this  Section  6.10.  The exact  procedures  to be followed by the
Trustee and the  Depository  for purposes of  determining  such  priorities  and
limitations  will be those  established  from time to time by the Trustee or the
Depository,  as the case may be. The decisions of the Trustee and the Depository
concerning such matters will be final and binding on all affected persons.

      Individual Insured Certificates that have been accepted for a distribution
shall be due and payable on the applicable  Distribution Date. Such Certificates
shall cease to bear interest after the last day of the month preceding the month
in which such Distribution Date occurs.

      Any  Certificate  Owner of an Insured  Certificate  that has  requested  a
distribution  may withdraw its request by so notifying in writing the Depository
Participant or Indirect  Depository  Participant that maintains such Certificate
Owner's  account.  In the event that such account is  maintained  by an Indirect
Depository  Participant,  such Indirect  Depository  Participant must notify the
related Depository Participant which in turn must forward the withdrawal of such
request on the Depository's participant terminal system. If such withdrawal of a
request for distribution  has not been received on the Depository's  participant
terminal system on or before the Record Date for the next Distribution Date, the
previously made request for distribution will be irrevocable with respect to the
making of  distributions  in  reduction of the Current  Principal  Amount of the
Insured Certificates on such Distribution Date.

                                      -97-
<PAGE>

      In the event any  requests for  distributions  in reduction of the Current
Principal  Amount of the Insured  Certificates  are  rejected by the Trustee for
failure to comply with the  requirements of this Section 6.10, the Trustee shall
return such request to the appropriate Depository Participant with a copy to the
Depository with an explanation as to the reason for such rejection.

      (d) To the extent, if any, that  distributions in reduction of the Current
Principal Amount of the Insured  Certificates on a Distribution  Date exceed the
outstanding Current Principal Amount of the Insured Certificates with respect to
which  distribution  requests have been received by the related  Record Date, as
provided in Section 6.10(a) above, the additional  distributions in reduction of
the  Current  Principal  Amount  of the  Insured  Certificates  will  be made by
mandatory  distributions in reduction thereof.  Such mandatory  distributions on
Individual  Insured  Certificates  will be made by Random Lot in accordance with
the  then-applicable  Random Lot  procedures of the  Depository,  the Depository
Participants  and  the  Indirect   Depository   Participants   representing  the
Certificate  Owners.  The Trustee  shall notify the  Depository of the aggregate
amount of the  mandatory  distribution  in  reduction  of the Current  Principal
Amount of the Insured Certificates to be made on any such Distribution Date. The
Depository  shall then  allocate  such  aggregate  amount  among its  Depository
Participants on a Random Lot basis.  Each Depository  Participant  and, in turn,
each Indirect  Depository  Participant will then select,  in accordance with its
own procedures,  Individual  Insured  Certificates  from among those held in its
accounts  to  receive  mandatory  distributions  in  reduction  of  the  Current
Principal  Amount of the  Insured  Certificates,  such that the total  amount so
selected  is equal  to the  aggregate  amount  of such  mandatory  distributions
allocated to such Depository  Participant by the Depository and to such Indirect
Depository  Participant by its related Depository  Participant,  as the case may
be.  Depository  Participants  and Indirect  Depository  Participants  that hold
Insured  Certificates  selected for mandatory  distributions in reduction of the
Current  Principal  Amount  thereof  are  required  to  provide  notice  of such
mandatory  distributions to the affected Certificate Owners. The Master Servicer
agrees to notify the Trustee of the amount of  distributions in reduction of the
Current  Principal  Amount  of the  Insured  Certificates  to be  made  on  each
Distribution  Date in a timely  manner  such that the  Trustee  may  fulfill its
obligations  pursuant to the letter of  representations  dated the Closing  Date
among the Company, the Trustee and the Depository.

      (e)  Notwithstanding  any  provisions  herein  to  the  contrary,  on  any
Distribution  Date on which (i) any Realized Losses are allocated to the Insured
Certificates  and (ii) a Radian  Default  has  occurred  and/or  is  continuing,
distributions  in  reduction  of the  Current  Principal  Amount of the  Insured
Certificates  will be made pro rata on the basis of their respective  percentage
interests  with the respect to the Insured  Certificates  among the  Certificate
Owners of the Insured Certificates and will not be made in integral multiples of
$1,000 nor  pursuant to requests for  distribution  as permitted by this Section
6.10 or mandatory distributions by Random Lot.

      (f) In the event that  Definitive  Certificates  representing  the Insured
Certificates  are  issued  pursuant  to  Section  5.01,  an  amendment  to  this
Agreement,  which may be approved without the consent of any Certificateholders,
shall  establish  procedures  relating to the manner in which  distributions  in
reduction of the Current Principal Amount of such Insured Certificates are to be
made;  provided  that  such  procedures  shall  be  consistent,  to  the  extent
practicable and

                                      -98-
<PAGE>

customary  for  certificates  similar  to the  Insured  Certificates,  with  the
provisions of this Section 6.10.

                                      -99-
<PAGE>

                                   ARTICLE VII
                               The Master Servicer

      Section 7.01 Liabilities of the Master Servicer.

      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 Master Servicer.

      (a) 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  Master   Servicer  may  be  merged  or
consolidated,  or any corporation  resulting from any merger or consolidation to
which the Master  Servicer  shall be a party,  or any Person  succeeding  to the
business of the Master  Servicer,  shall be the successor of 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,  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, the Servicing Agreements,  the Assignment Agreements
or the Certificates or the powers of attorney delivered by the Trustee hereunder
(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  Depositor  written
notice thereof  promptly after the Trustee shall have with respect to such claim
or legal action knowledge thereof.  The Master Servicer's failure to receive any
such notice shall not affect the Trustee's right to  indemnification  hereunder,
except to the  extent the  Master  Servicer  is  materially  prejudiced  by such
failure to give notice.  This indemnity shall survive the resignation or removal
of  the  Trustee,  Master  Servicer  or the  Securities  Administrator  and  the
termination of this Agreement.

                                     -100-
<PAGE>

      (b) The  Depositor  will  indemnify any  Indemnified  Person for any loss,
liability  or expense of any  Indemnified  Person not  otherwise  covered by the
Master Servicer's indemnification pursuant to Subsection (a) above.

      Section 7.04 Limitations on Liability of 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  Master  Servicer  nor any of the  directors,  officers,
employees or agents of the Master  Servicer  shall be under any liability to the
Indemnified Persons, the Depositor, 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 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 Master  Servicer and any director,  officer,  employee or agent of
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 Master Servicer, the Custodian and any director, officer, employee
or agent of the Master  Servicer 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 Certificates or any Servicing Agreement
(except to the extent that the Master  Servicer is  indemnified  by the Servicer
thereunder),  other than (i) any such loss,  liability or expense 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 to the  Custodian's  failure to
perform its duties under the Custodial Agreement, respectively, or (ii) any such
loss,  liability or expense  incurred by reason of 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) The Master  Servicer  shall not 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

                                     -101-
<PAGE>

Account as provided by Section 4.03.  Nothing in this  Subsection  7.04(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 3.01(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
any Servicer, except as otherwise expressly provided herein.

      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 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
Independent Counsel addressed to the Trustee and Radian to such effect delivered
to the Trustee and Radian.  No such  resignation  by the Master  Servicer  shall
become  effective  until the Company 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 8.02 hereof.  The Trustee shall notify the Rating Agencies and Radian 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 Company or the Trustee may
make such  arrangements  for the  compensation of such successor master servicer
out of  payments  on the  Mortgage  Loans as the Company 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. Notwithstanding the foregoing,
the  compensation  payable to a  successor  master  servicer  may not exceed the
compensation which the Master Servicer would have been entitled to retain if the
Master Servicer had continued to act as Master Servicer hereunder.

      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 and the
Company may terminate the Master Servicer  without cause and select a new Master
Servicer;  provided,  however,  that: (i) the purchaser or transferee  accepting
such assignment and delegation (a) shall be a Person which shall be qualified to
service mortgage loans for Fannie Mae or Freddie Mac; (b) shall have a net worth
of not less than $10,000,000  (unless  otherwise  approved by each Rating Agency
pursuant

                                     -102-
<PAGE>

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 and
Radian  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  (determined  without  regard to the Policy) 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  and Radian an  Officer's  Certificate  and an Opinion of
Independent  Counsel addressed to the Trustee and Radian,  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 the
Company,  the Company shall pay the terminated Master Servicer a termination fee
equal to 0.25% of the  aggregate  Scheduled  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.

                                     -103-
<PAGE>

                                  ARTICLE VIII
                                     Default

      Section 8.01 Events of Default.

      "Event of Default,"  wherever used herein,  means any one of the following
events  (whatever  the reason for such Event of Default  and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment,  decree or order of any court or any order,  rule or regulation of any
administrative  or  governmental  body) and only with respect to the  defaulting
Master Servicer:

            (i) The  Master  Servicer  fails  to cause  to be  deposited  in the
      Distribution  Account any amount so required to be  deposited  pursuant to
      this Agreement (other than a Monthly Advance),  and such failure continues
      unremedied  for a period of three  Business Days after the date upon which
      written notice of such failure,  requiring the same to be remedied,  shall
      have been given to the Master Servicer; or

            (ii) The Master Servicer fails to observe or perform in any material
      respect any other  material  covenants  and  agreements  set forth in this
      Agreement to be performed by it, which covenants and agreements materially
      affect  the  rights  of  Certificateholders,  and such  failure  continues
      unremedied  for a period of 60 days after the date on which written notice
      of such failure,  properly  requiring the same to be remedied,  shall have
      been given to the Master Servicer by the Trustee or to the Master Servicer
      and the  Trustee by the  Holders  of  Certificates  evidencing  Fractional
      Undivided Interests aggregating not less than 25% of the Trust Fund; or

            (iii) There is entered against the Master Servicer a decree or order
      by a court or agency or supervisory  authority having  jurisdiction in the
      premises for the  appointment of a conservator,  receiver or liquidator in
      any insolvency, readjustment of debt, marshaling of assets and liabilities
      or  similar  proceedings,  or for the  winding  up or  liquidation  of its
      affairs,  and the  continuance of any such decree or order is unstayed and
      in effect for a period of 60 consecutive  days, or an involuntary  case is
      commenced  against the Master Servicer under any applicable  insolvency or
      reorganization  statute and the petition is not  dismissed  within 60 days
      after the commencement of the case; or

            (iv)  The  Master   Servicer   consents  to  the  appointment  of  a
      conservator or receiver or liquidator in any  insolvency,  readjustment of
      debt,  marshaling of assets and  liabilities or similar  proceedings of or
      relating to the Master Servicer or substantially  all of its property;  or
      the Master  Servicer  admits in  writing  its  inability  to pay its debts
      generally  as they become due,  files a petition to take  advantage of any
      applicable insolvency or reorganization  statute,  makes an assignment for
      the  benefit of its  creditors,  or  voluntarily  suspends  payment of its
      obligations;

            (v) 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; or

                                     -104-
<PAGE>

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

In each and every such case, so long as such Event of Default with respect to
the Master Servicer shall not have been remedied, either the Trustee or the
Holders of Certificates evidencing Fractional Undivided Interests aggregating
not less than 51% of the principal of the Trust Fund, by notice in writing to
the Master Servicer (and to the Trustee if given by such Certificateholders),
with a copy to the Rating Agencies and Radian, and with the consent of the
Company, may terminate all of the rights and obligations (but not the
liabilities) of the Master Servicer under this Agreement and in and to the
Mortgage Loans and/or the REO Property serviced by the Master Servicer and the
proceeds thereof. Upon the receipt by the Master Servicer of the written notice,
all authority and power of the Master Servicer under this Agreement, whether
with respect to the Certificates, the Mortgage Loans, REO Property or under any
other related agreements (but only to the extent that such other agreements
relate to the Mortgage Loans or related REO Property) shall, subject to Section
8.02, automatically and without further action pass to and be vested in the
Trustee pursuant to this Section 8.01; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the Master
Servicer as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement or assignment of the Mortgage Loans and
related documents, or otherwise. The Master Servicer agrees to cooperate with
the Trustee in effecting the termination of the Master Servicer's rights and
obligations hereunder, including, without limitation, the transfer to the
Trustee of (i) the property and amounts which are then or should be part of the
Trust or which thereafter become part of the Trust; and (ii) originals or copies
of all documents of the Master Servicer reasonably requested by the Trustee to
enable it to assume the Master Servicer's duties thereunder. In addition to any
other amounts which are then, or, notwithstanding the termination of its
activities under this Agreement, may become payable to the Master Servicer under
this Agreement, the Master Servicer shall be entitled to receive, out of any
amount received on account of a Mortgage Loan or related REO Property, that
portion of such payments which it would have received as reimbursement under
this Agreement if notice of termination had not been given. The termination of
the rights and obligations of the Master Servicer shall not affect any
obligations incurred by the Master Servicer prior to such termination.

      Notwithstanding the foregoing,  if an Event of Default described in clause
(vi) 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 Monthly 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
Monthly  Advance the  nonpayment  of which was an Event of Default  described in
clause (vi) of this Section  8.01.  Any such action taken by the Trustee must be
prior to the distribution on the relevant Distribution Date.

                                     -105-
<PAGE>

      Section 8.02 Trustee to Act; Appointment of Successor.

      (a) Upon the  receipt by the Master  Servicer  of a notice of  termination
pursuant  to Section  8.01 or an  Opinion of  Independent  Counsel  pursuant  to
Section 7.05 to the effect that the Master  Servicer is legally unable to act or
to delegate  its duties to a Person  which is legally  able to act,  the Trustee
shall automatically  become the successor in all respects to the Master Servicer
in its capacity under this Agreement and the  transactions set forth or provided
for herein and shall thereafter be subject to all the responsibilities,  duties,
liabilities and limitations on liabilities relating thereto placed on the Master
Servicer by the terms and provisions  hereof  (including the requirement to make
Monthly Advances pursuant to Section 6.05); provided,  however, that the Company
shall have the right to either (a)  immediately  assume the duties of the Master
Servicer or (b) select a successor Master Servicer;  provided further,  however,
that the  Trustee  shall  have no  obligation  whatsoever  with  respect  to any
liability  (other than advances  deemed  recoverable  and not  previously  made)
incurred  by the  Master  Servicer  at or prior to the time of  termination.  As
compensation  therefor,  but  subject  to Section  7.06,  the  Trustee  shall be
entitled to  compensation  which the Master Servicer would have been entitled to
retain if the Master  Servicer had continued to act hereunder,  except for those
amounts due the Master Servicer as reimbursement  permitted under this Agreement
for advances  previously made or expenses previously  incurred.  Notwithstanding
the above,  the Trustee may, if it shall be unwilling so to act, or shall, if it
is  legally  unable  so to  act,  appoint  or  petition  a  court  of  competent
jurisdiction to appoint,  any established  housing and home finance  institution
which is a Fannie Mae- or Freddie Mac-approved  servicer,  and with respect to a
successor  to the  Master  Servicer  only,  having a net  worth of not less than
$10,000,000, 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;  provided,  that the Trustee shall obtain a letter from each
Rating Agency that the ratings, if any, on each of the Certificates  (determined
without  regard to the Policy) will not be lowered as a result of the  selection
of the successor to the Master Servicer.  Pending  appointment of a successor to
the  Master  Servicer  hereunder,  the  Trustee  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 the Mortgage Loans as it and such successor  shall agree;  provided,
however, that the provisions of Section 7.06 shall apply, the compensation shall
not be in excess of that which the Master  Servicer  would have been entitled to
if the Master  Servicer had continued to act hereunder,  and that such successor
shall undertake and assume the obligations of the Trustee to pay compensation to
any third Person acting as an agent or independent contractor in the performance
of master servicing  responsibilities  hereunder. The Trustee and such successor
shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession.

      (b) If the  Trustee  shall  succeed to any  duties of the Master  Servicer
respecting the Mortgage Loans as provided  herein,  it shall do so in a separate
capacity and not in its capacity as Trustee and, accordingly,  the provisions of
Article IX shall be  inapplicable  to the Trustee in its duties as the successor
to the Master  Servicer in the servicing of the Mortgage  Loans  (although  such
provisions  shall  continue to apply to the Trustee in its capacity as Trustee);
the  provisions  of Article VII,  however,  shall apply to it in its capacity as
successor master servicer.

                                     -106-
<PAGE>

      Section 8.03 Notification to Certificateholders.

      Upon any termination or appointment of a successor to the Master Servicer,
the Trustee shall give prompt written notice  thereof to  Certificateholders  at
their  respective  addresses  appearing in the  Certificate  Register and to the
Rating Agencies and Radian.

      Section 8.04 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.  The  Holders  of  Certificates
evidencing  Fractional Undivided Interests  aggregating not less than 51% of the
Trust Fund 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 any required  distribution on the  Certificates,  which default may only be
waived by Holders of  Certificates  evidencing  Fractional  Undivided  Interests
aggregating 100% of the Trust Fund. 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
Radian.

      Section 8.05 List of Certificateholders.

      Upon written request of three or more  Certificateholders  of record,  for
purposes of communicating  with other  Certificateholders  with respect to their
rights under this  Agreement,  the Trustee  will afford such  Certificateholders
access during business hours to the most recent list of Certificateholders  held
by the Trustee.

                                     -107-
<PAGE>

                                   ARTICLE IX
             Concerning the Trustee and the Securities Administrator

      Section 9.01 Duties of the Trustee and the 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  subject to Section
8.02(b)  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.

      (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 and the Securities  Administrator pursuant to any
provision  of this  Agreement,  the  Trustee and the  Securities  Administrator,
respectively,  shall  examine  them to  determine  whether  they are 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 hereunder;  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  6.01 and 10.01  herein based
solely on the report of the Securities Administrator.

      (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,
      the duties and obligations of the Trustee and the Securities Administrator
      shall be determined  solely by the express  provisions of this  Agreement,
      neither  the  Trustee  nor the  Securities  Administrator  shall be liable
      except for the performance of their  respective  duties and obligations as
      are  specifically  set forth in this  Agreement,  no implied  covenants or
      obligations  shall be read into this Agreement  against the Trustee or the
      Securities  Administrator  and, in the absence of bad faith on the part of
      the Trustee or the Securities Administrator,  respectively, the Trustee or
      the Securities Administrator,  respectively,  may conclusively rely, as to
      the truth of the statements and the correctness of the opinions  expressed
      therein, upon any certificates or opinions furnished to 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

                                     -108-
<PAGE>

      Responsible  Officers  of the  Trustee  or an  officer  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  Fractional  Undivided Interests  aggregating not
      less than 25% of the Trust Fund, 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's  Corporate  Trust Office 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  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;

            (vii)  None of the  Securities  Administrator,  the  Depositor,  the
      Company 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 and

            (viii) Neither the Trustee nor the Securities Administrator shall be
      required  to  expend or risk its own funds or  otherwise  incur  financial
      liability in the  performance  of any of its duties  hereunder,  or in the
      exercise of any of its rights or powers, if there is reasonable ground for
      believing that the repayment of such funds or adequate  indemnity  against
      such risk or  liability is not  reasonably  assured to it, and none of the
      provisions  contained  in this  Agreement  shall in any event  require the
      Trustee or the Securities  Administrator to perform, or be responsible for
      the  manner  of  performance  of,  any of the  obligations  of the  Master
      Servicer under the Servicing Agreements,  except during such time, if any,
      as the Trustee  shall be the  successor to, and be vested with the rights,
      duties,  powers and privileges of, the Master  Servicer in accordance with
      the terms of this Agreement.

                                     -109-
<PAGE>

      (e) All funds received by the Master Servicer and the Trustee and required
to be  deposited  in the Master  Servicer  Collection  Account  or  Distribution
Account  pursuant to this  Agreement will be promptly so deposited by the Master
Servicer and the Trustee.

      (f)  Except  for  those  actions  that  the  Trustee  or  the   Securities
Administrator  is  required  to take  hereunder,  neither  the  Trustee  nor the
Securities  Administrator  shall have any  obligation  or  liability to take any
action or to refrain from taking any action  hereunder in the absence of written
direction as provided hereunder.

      Section  9.02 Certain  Matters  Affecting  the Trustee and the  Securities
Administrator.

      Except as otherwise provided in Section 9.01:

            (i) The Trustee and the Securities  Administrator may rely and shall
      be  protected  in acting or  refraining  from  acting in  reliance  on any
      resolution,  certificate  of  the  Depositor,  the  Master  Servicer  or a
      Servicer,  certificate  of auditors or any other  certificate,  statement,
      instrument,  opinion, report, notice, request,  consent, order, appraisal,
      bond or other paper or  document  believed by it to be genuine and to have
      been signed or presented by the proper party or parties;

            (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
      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,  neither the Trustee nor the Securities  Administrator  shall be
      liable in its  individual  capacity  for any  action  taken,  suffered  or
      omitted by it in good faith and believed by it to be  authorized or within
      the discretion or rights or powers conferred upon it by this Agreement;

            (v) Neither the Trustee nor the  Securities  Administrator  shall be
      bound to make any  investigation  into the facts or matters  stated in any
      resolution,  certificate,  statement, instrument, opinion, report, notice,
      request, consent, order, approval, bond or other paper or

                                     -110-
<PAGE>

      document,  unless requested in writing to do so by Holders of Certificates
      evidencing Fractional Undivided Interests aggregating not less than 25% of
      the Trust Fund 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 agent to  perform  its  custodial
      functions  with  respect to the Mortgage  Files or 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 a  custodian  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,  other  than a  payment  or
      transfer  under  Subsection  4.01(b) or Section 4.02,  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;

            (viii) 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;

            (ix) 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 9.07; and

            (x) 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 the Seller
      pursuant to this  Agreement or the Mortgage  Loan Purchase  Agreement,  as
      applicable,  or the  eligibility of any Mortgage Loan for purposes of this
      Agreement.

                                     -111-
<PAGE>

      Section  9.03  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,  or the
Custodian  on its  behalf,  nor the  Securities  Administrator  shall  have  any
responsibility  for their  correctness.  Neither the Trustee nor the  Securities
Administrator  makes any 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 2.05 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 Sections 2.02 and 2.04. 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.  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  statement
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 and Securities Administrator May Own Certificates.

      The Trustee and the Securities Administrator 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 Trustee or
the Securities  Administrator,  as  applicable,  and may otherwise deal with the
parties hereto.

      Section 9.05 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 between the Trustee and
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  4.03(b) 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

                                     -112-
<PAGE>

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.  If  funds  in the  Master  Servicer
Collection  Account are  insufficient  therefor,  the Trustee and the Securities
Administrator  shall  recover such expenses 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  9.06   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 such 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 S&P or Fitch  Ratings  with  respect to their
long-term rating and rated "BBB" or higher by S&P or Fitch Ratings 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 9.10,  rated in one of
the two highest  long-term debt categories of, or otherwise  acceptable to, each
of the Rating Agencies.  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  or the  Securities
Administrator  shall cease to be eligible in accordance  with the  provisions of
this Section  9.06,  the Trustee or the  Securities  Administrator  shall resign
immediately in the manner and with the effect specified in Section 9.08.

      Section 9.07 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  9.07  shall be  furnished  to any
Certificateholder upon reasonable written request.

                                     -113-
<PAGE>

      Section  9.08  Resignation  and  Removal  of the  Trustee  and  Securities
Administrator.

      (a) The Trustee and the  Securities  Administrator  may at any time resign
and be discharged from the Trust hereby created by giving written notice thereof
to the Depositor 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, the successor Trustee or Securities Administrator, as applicable. If
no successor  Trustee or 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.

      (b) If at any time the Trustee or the Securities Administrator shall cease
to be eligible in accordance  with the provisions of Section 9.06 and shall fail
to resign after written request  therefor by the Depositor or if at any time the
Trustee or the Securities  Administrator  shall become  incapable of acting,  or
shall be adjudged a bankrupt or  insolvent,  or a receiver of the Trustee or the
Securities Administrator,  as applicable, or of its property shall be appointed,
or any  public  officer  shall  take  charge or  control  of the  Trustee or the
Securities  Administrator,  as applicable, or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation, then the Depositor shall
promptly  remove the  Trustee,  or shall be  entitled  to remove the  Securities
Administrator,  as  applicable,  and appoint a successor  Trustee or  Securities
Administrator,  as applicable, by written instrument, in triplicate, one copy of
which  instrument  shall  be  delivered  to each of the  Trustee  or  Securities
Administrator,  as applicable,  so removed,  the successor Trustee or Securities
Administrator, as applicable.

      (c) The Holders of Certificates  evidencing Fractional Undivided Interests
aggregating  not less  than 51% of the  Trust  Fund may at any time  remove  the
Trustee or the  Securities  Administrator  and  appoint a  successor  Trustee or
Securities Administrator by written instrument or instruments, in quadruplicate,
signed by such Holders or their attorneys-in-fact duly authorized,  one complete
set of which  instruments  shall  be  delivered  to the  Depositor,  the  Master
Servicer, the Securities  Administrator (if the Trustee is removed), the Trustee
(if the  Securities  Administrator  is removed),  and the Trustee or  Securities
Administrator  so removed and the successor so appointed.  In the event that the
Trustee or Securities Administrator is removed by the Holders of Certificates in
accordance with this Section 9.08(c),  the Holders of such Certificates shall be
responsible  for  paying any  compensation  payable  to a  successor  Trustee or
successor  Securities  Administrator,  in  excess  of  the  amount  paid  to the
predecessor Trustee or predecessor Securities Administrator, as applicable.

      (d)  No   resignation   or  removal  of  the  Trustee  or  the  Securities
Administrator and appointment of a successor Trustee or Securities Administrator
pursuant to any of the  provisions  of this Section 9.08 shall become  effective
except upon  appointment of and acceptance of such  appointment by the successor
Trustee or Securities Administrator as provided in Section 9.09.

                                     -114-
<PAGE>

      Section 9.09 Successor Trustee and Successor Securities Administrator.

      (a)  Any  successor  Trustee  or  Securities  Administrator  appointed  as
provided in Section 9.08 shall execute, acknowledge and deliver to the Depositor
and to  its  predecessor  Trustee  or  Securities  Administrator  an  instrument
accepting  such  appointment  hereunder.  The  resignation  or  removal  of  the
predecessor Trustee or Securities  Administrator shall then 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 like effect as if
originally named as Trustee or Securities  Administrator herein. The predecessor
Trustee or Securities  Administrator shall after payment of its outstanding fees
and  expenses   promptly   deliver  to  the  successor   Trustee  or  Securities
Administrator,  as  applicable,  all assets and  records of the Trust held by it
hereunder,   and  the  Depositor  and  the  predecessor  Trustee  or  Securities
Administrator,  as applicable, shall execute and deliver such instruments and do
such other things as may  reasonably  be required  for more fully and  certainly
vesting and confirming in the successor Trustee or Securities Administrator,  as
applicable, all such rights, powers, duties and obligations.

      (b)  No  successor  Trustee  or  Securities   Administrator  shall  accept
appointment  as  provided  in  this  Section  9.09  unless  at the  time of such
acceptance such successor Trustee or Securities  Administrator shall be eligible
under the provisions of Section 9.06.

      (c) Upon  acceptance of appointment  by a successor  Trustee or Securities
Administrator  as  provided  in this  Section  9.09,  the  successor  Trustee or
Securities  Administrator shall mail notice of the succession of such Trustee or
Securities  Administrator hereunder to all Certificateholders at their addresses
as shown in the Certificate  Register and to the Rating Agencies and Radian. The
Company shall pay the cost of any mailing by the successor Trustee or Securities
Administrator.

      Section   9.10   Merger  or   Consolidation   of  Trustee  or   Securities
Administrator.

      Any state bank or trust company 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 state bank or trust  company  or  national
banking  association  resulting from any merger,  conversion or consolidation to
which the  Trustee or the  Securities  Administrator,  respectively,  shall be a
party,  or any state  bank or trust  company  or  national  banking  association
succeeding to all or  substantially  all of the corporate  trust business of the
Trustee or the Securities Administrator, respectively, shall be the successor of
the Trustee or the Securities Administrator,  respectively,  hereunder, provided
such  state bank or trust  company  or  national  banking  association  shall be
eligible under the provisions of Section 9.06.  Such  succession  shall be valid
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 9.11 Appointment of Co-Trustee or Separate Trustee.

      (a)  Notwithstanding  any other  provisions  hereof,  at any time, for the
purpose of meeting any legal  requirements of any jurisdiction in which any part
of the Trust or property  constituting the same may at the time be located,  the
Depositor and the Trustee acting jointly

                                     -115-
<PAGE>

shall have the power and shall  execute and deliver all  instruments  to appoint
one or  more  Persons  approved  by the  Trustee  and  the  Depositor  to act as
co-trustee  or  co-trustees,  jointly with the Trustee,  or separate  trustee or
separate  trustees,  of all or any part of the Trust, and to vest in such Person
or Persons, in such capacity, such title to the Trust, or any part thereof, and,
subject to the other  provisions  of this Section  9.11,  such  powers,  duties,
obligations,  rights and trusts as the  Depositor  and the Trustee may  consider
necessary or desirable.

      (b) If the Depositor shall not have joined in such  appointment  within 15
days after the receipt by it of a written  request so to do, the  Trustee  shall
have the power to make such appointment without the Depositor.

      (c) No co-trustee or separate trustee  hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 9.06 hereunder and
no notice to  Certificateholders of the appointment of co-trustee(s) or separate
trustee(s) shall be required under Section 9.08 hereof.

      (d) In the case of any  appointment  of a co-trustee  or separate  trustee
pursuant to this  Section  9.11,  all  rights,  powers,  duties and  obligations
conferred  or imposed  upon the Trustee and  required  to be  conferred  on such
co-trustee  shall be conferred or imposed upon and exercised or performed by the
Trustee and such separate  trustee or co-trustee  jointly,  except to the extent
that under any law of any  jurisdiction  in which any particular act or acts are
to be  performed  (whether as Trustee  hereunder  or as  successor to the Master
Servicer hereunder),  the Trustee shall be incompetent or unqualified to perform
such act or acts,  in which event such rights,  powers,  duties and  obligations
(including the holding of title to the Trust or any portion  thereof in any such
jurisdiction)  shall be  exercised  and  performed by such  separate  trustee or
co-trustee at the direction of the Trustee.

      (e) 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.

      (f) To  the  extent  not  prohibited  by  law,  any  separate  trustee  or
co-trustee may, at any time, request the Trustee, its agent or attorney-in-fact,
with full power and  authority,  to do any  lawful act under or with  respect to
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.

      (g) No trustee under this Agreement  shall be personally  liable by reason
of any act or omission of another  trustee under this  Agreement.  The Depositor
and the Trustee  acting  jointly may at any time  accept the  resignation  of or
remove any separate trustee or co-trustee.

                                     -116-
<PAGE>

      Section    9.12    Federal    Information    Returns    and   Reports   to
Certificateholders; REMIC Administration.

      (a) For federal income tax purposes,  the taxable year of each REMIC shall
be a calendar year and the Securities  Administrator shall maintain or cause the
maintenance of the books of each such REMIC on the accrual method of accounting.

      (b) The  Securities  Administrator  shall  prepare and file or cause to be
filed with the Internal Revenue Service, and the Trustee shall sign, Federal tax
information  returns or elections  required to be made hereunder with respect to
each REMIC, the Trust Fund, if applicable,  and the Certificates containing such
information and at the times and in the manner as may be required by the Code or
applicable   Treasury   regulations,   and  shall  furnish  to  each  Holder  of
Certificates  at any time  during the  calendar  year for which such  returns or
reports are made such  statements or  information at the times and in the manner
as may be required thereby, including,  without limitation,  reports relating to
interest,  original  issue  discount  and market  discount  or premium  (using a
constant prepayment  assumption of 250% PSA). The Securities  Administrator will
apply for an Employee  Identification Number from the IRS under Form SS-4 or any
other acceptable method for all tax entities.  In connection with the foregoing,
the  Securities  Administrator  shall timely  prepare and file,  and the Trustee
shall  sign,  IRS Form 8811,  which  shall  provide  the name and address of the
person who can be contacted to obtain information required to be reported to the
holders of regular  interests in each REMIC (the "REMIC Reporting  Agent").  The
Trustee  shall make  elections to treat each REMIC as a REMIC  (which  elections
shall apply to the taxable  period  ending  December 31, 2004 and each  calendar
year thereafter) in such manner as the Code or applicable  Treasury  regulations
may  prescribe,  and as described by the Securities  Administrator.  The Trustee
shall sign all tax  information  returns filed  pursuant to this Section and any
other  returns  as may be  required  by the  Code.  The  Holder of the Class R-I
Certificate is hereby designated as the "Tax Matters Person" (within the meaning
of Treas.  Reg.  ss.ss.1.860F-4(d))  for REMIC I, the  Holder of the Class  R-II
Certificate  is hereby  designated as the "Tax Matters  Person" for REMIC II and
the  Holder of the Class  R-III  Certificate  is hereby  designated  as the "Tax
Matters Person" for REMIC III. The Securities Administrator is hereby designated
and  appointed  as the agent of each such Tax  Matters  Person.  Any Holder of a
Residual   Certificate  will  by  acceptance   thereof  appoint  the  Securities
Administrator  as agent and  attorney-in-fact  for the  purpose of acting as Tax
Matters Person for each REMIC during such time as the  Securities  Administrator
does  not own any  such  Residual  Certificate.  In the  event  that the Code or
applicable  Treasury  regulations  prohibit  the  Trustee  from  signing  tax or
information  returns or other statements,  or the Securities  Administrator from
acting as agent for the Tax  Matters  Person,  the  Trustee  and the  Securities
Administrator shall take whatever action that in its sole good faith judgment is
necessary for the proper filing of such information returns or for the provision
of a tax  matters  person,  including  designation  of the  Holder of a Residual
Certificate to sign such returns or act as tax matters person.  Each Holder of a
Residual Certificate shall be bound by this Section.

      (c) The Securities Administrator shall provide upon request and receipt of
reasonable  compensation,  such information as required in Section 860D(a)(6)(B)
of the  Code to the  Internal  Revenue  Service,  to any  Person  purporting  to
transfer a Residual Certificate to a Person other than a transferee permitted by
Section 5.05(b), and to any regulated investment company, real estate investment
trust, common trust fund, partnership,  trust, estate, organization described in

                                     -117-
<PAGE>

Section  1381 of the Code,  or nominee  holding an  interest  in a  pass-through
entity  described in Section  860E(e)(6) of the Code, any record holder of which
is not a transferee  permitted by Section 5.05(b) (or which is deemed by statute
to be an entity with a disqualified member).

      (d) The  Securities  Administrator  shall  prepare and file or cause to be
filed,  and the Trustee shall sign, any state income tax returns  required under
Applicable State Law with respect to each REMIC or the Trust Fund.

      (e) Notwithstanding any other provision of this Agreement, the Trustee and
the  Securities   Administrator   shall  comply  with  all  federal  withholding
requirements  respecting payments to  Certificateholders of interest or original
issue  discount  on the  Mortgage  Loans,  that the  Trustee  or the  Securities
Administrator  reasonably believes are applicable under the Code. The consent of
Certificateholders shall not be required for such withholding.  In the event the
Trustee or the  Securities  Administrator  withholds any amount from interest or
original issue discount  payments or advances  thereof to any  Certificateholder
pursuant to federal  withholding  requirements,  the  Trustee or the  Securities
Administrator    shall,    together   with   its   monthly    report   to   such
Certificateholders, indicate such amount withheld.

      (f) The Trustee and the  Securities  Administrator  agree to indemnify the
Trust  Fund  and the  Depositor  for any  taxes  and  costs  including,  without
limitation,  any  reasonable  attorneys fees imposed on or incurred by the Trust
Fund,  the  Depositor  or the  Master  Servicer,  as a result of a breach of the
Trustee's covenants and the Securities Administrator's covenants,  respectively,
set forth in this Section 9.12; provided, however, such liability and obligation
to  indemnify in this  paragraph  shall not be joint and several and neither the
Trustee nor the  Securities  Administrator  shall be liable or be  obligated  to
indemnify  the Trust Fund for the failure by the other to perform any duty under
this Agreement or the breach by the other of any covenant in this Agreement.

                                     -118-
<PAGE>

                                    ARTICLE X
                                   Termination

      Section 10.01 Termination Upon Repurchase by the Depositor or its Designee
or Liquidation of the Mortgage Loans.

      (a)   Subject  to  Section   10.02,   the   respective   obligations   and
responsibilities  of the  Depositor,  the Trustee,  the Master  Servicer and the
Securities  Administrator  created  hereby,  other  than the  obligation  of the
Trustee to make payments to  Certificateholders  as hereinafter  set forth shall
terminate upon:

            (i) the  repurchase  by or at the  direction of the Depositor or its
      designee  of all of the  Mortgage  Loans  and  all  related  REO  Property
      remaining in the Trust at a price (in each case, the "Termination Purchase
      Price") equal to the sum of (a) 100% of the Outstanding  Principal Balance
      of each Mortgage Loan (other than a Mortgage Loan related to REO Property)
      as of  the  date  of  repurchase,  net  of the  principal  portion  of any
      unreimbursed  Monthly  Advances  made  by  the  purchaser,  together  with
      interest at the applicable  Mortgage  Interest Rate accrued but unpaid to,
      but not  including,  the  first day of the  month of  repurchase,  (b) the
      appraised value of any related REO Property,  less the good faith estimate
      of the Depositor of liquidation expenses to be incurred in connection with
      its disposal thereof (but not more than the Outstanding  Principal Balance
      of the related  Mortgage  Loan,  together with interest at the  applicable
      Mortgage  Interest  Rate  accrued on that  balance  but unpaid to, but not
      including, the first day of the month of repurchase), such appraisal to be
      calculated by an appraiser  mutually  agreed upon by the Depositor and the
      Trustee at the  expense of the  Depositor  plus  payment due Radian of all
      Radian Reimbursement  Amounts, (c) unreimbursed out-of pocket costs of the
      Master  Servicer,   including  unreimbursed  servicing  advances  and  the
      principal  portion  of any  unreimbursed  Monthly  Advances,  made  on the
      Mortgage Loans prior to the exercise of such repurchase  right and (d) any
      unreimbursed  costs  and  expenses  of  the  Trustee  and  the  Securities
      Administrator payable pursuant to Section 9.05; or

            (ii)  the  later  of  the  making  of the  final  payment  or  other
      liquidation,  or any advance with respect  thereto,  of the last  Mortgage
      Loan  remaining  in the  Trust  Fund or the  disposition  of all  property
      acquired with respect to any Mortgage Loan; provided, however, that in the
      event that an advance has been made, but not yet recovered, at the time of
      such termination, the Person having made such advance shall be entitled to
      receive,   notwithstanding   such   termination,   any  payments  received
      subsequent thereto with respect to which such advance was made; or

            (iii)  the  payment  to the  Certificateholders  and  Radian  of all
      amounts required to be paid to them pursuant to this Agreement.

      (b) In no event,  however,  shall the Trust created hereby continue beyond
the  expiration  of 21  years  from  the  death  of  the  last  survivor  of the
descendants  of Joseph P. Kennedy,  the late  Ambassador of the United States to
the Court of St. James's, living on the date of this Agreement.

                                     -119-
<PAGE>

      (c) The right of the  Depositor  or its  designee  to  repurchase  all the
assets of the Trust Fund as described in Subsection  10.01(a)(i)  above shall be
exercisable  only  if (i)  the  aggregate  Scheduled  Principal  Balance  of the
Mortgage  Loans  at the  time of any  such  repurchase  is less  than 10% of the
Cut-Off Date Balance,  or (ii) the  Depositor,  based upon an Opinion of Counsel
addressed to the Depositor,  the Trustee and the Securities  Administrator,  has
determined that the REMIC status of REMIC I, REMIC II or REMIC III has been lost
or that a  substantial  risk exists that such REMIC  status will be lost for the
then-current  taxable year. At any time  thereafter,  in the case of (i) or (ii)
above,  the Depositor may elect to terminate  REMIC I, REMIC II and REMIC III at
any  time,  and  upon  such  election,  the  Depositor  or its  designee,  shall
repurchase all the assets of the Trust Fund described in Subsection  10.01(a)(i)
above.

      (d)  The   Trustee   shall  give   notice  of  any   termination   to  the
Certificateholders,   with  a  copy  to  the  Master  Servicer,  the  Securities
Administrator, Radian and the Rating Agencies, upon which the Certificateholders
shall  surrender  their  Certificates  to the  Trustee  for payment of the final
distribution and cancellation.  Such notice shall be given by letter, mailed not
earlier  than the l5th day and not  later  than the 25th day of the  month  next
preceding  the  month of such  final  distribution,  and shall  specify  (i) the
Distribution Date upon which final payment of the Certificates will be made upon
presentation  and  surrender  of the  Certificates  at the office of the Trustee
therein designated, (ii) the amount of any such final payment and (iii) that the
Record Date otherwise  applicable to such  Distribution  Date is not applicable,
payments being made only upon  presentation and surrender of the Certificates at
the office of the Trustee therein specified.

      (e) If the option of the Depositor to  repurchase or cause the  repurchase
of all the  assets in the Trust  Fund as  described  in  Subsection  10.01(a)(i)
above,  is  exercised,  the Depositor  and/or its designee  shall deliver to the
Trustee for deposit in the  Distribution  Account,  by the Business Day prior to
the applicable  Distribution  Date, an amount equal to the Termination  Purchase
Price.   Upon   presentation   and   surrender  of  the   Certificates   by  the
Certificateholders,  the Trustee shall distribute to such  Certificateholders as
directed by the  Securities  Administrator  in writing an amount  determined  as
follows:  with  respect  to each  Certificate  (other  than  the  Interest  Only
Certificates and the Class R Certificates),  the outstanding  Current  Principal
Amount,  plus  with  respect  to  each  Certificate  (other  than  the  Class  R
Certificates), one month's interest thereon at the applicable Pass-Through Rate;
and with respect to the Class R Certificates,  the percentage interest evidenced
thereby  multiplied  by the  difference,  if any,  between  the above  described
repurchase  price and the aggregate  amount to be  distributed to the Holders of
the  Certificates  (other than the Class R  Certificates).  If the proceeds with
respect  to the  Mortgage  Loans  are not  sufficient  to pay all of the  Senior
Certificates  in full,  any such  deficiency  shall be allocated  first,  to the
Subordinate  Certificates,  in inverse order of their numerical designations and
then to the  Senior  Certificates  on a pro  rata  basis.  Upon  deposit  of the
Termination  Purchase  Price and following  such final  Distribution  Date,  the
Trustee shall release promptly to the Depositor and/or its designee the Mortgage
Files for the remaining  Mortgage  Loans,  and the Accounts with respect thereto
shall terminate, subject to the Trustee's obligation to hold any amounts payable
to the  Certificateholders in trust without interest pending final distributions
pursuant to Subsection  10.01(g).  Any other  amounts  remaining in the Accounts
will belong to the Depositor.

      (f) In the  event  that  this  Agreement  is  terminated  by reason of the
payment or liquidation of all Mortgage Loans or the  disposition of all property
acquired with respect to all Mortgage Loans under Subsection 10.01(a)(ii) above,
the Master Servicer shall deliver to the

                                     -120-
<PAGE>

Trustee  for  deposit in the  Distribution  Account  all  distributable  amounts
remaining in the Master Servicer Collection  Account.  Upon the presentation and
surrender of the  Certificates,  the Trustee  shall  distribute to the remaining
Certificateholders,   pursuant  to  the  written  direction  of  the  Securities
Administrator   and  in  accordance  with  their   respective   interests,   all
distributable amounts remaining in the Distribution Account. Upon deposit by the
Master  Servicer  of  such  distributable  amounts,  and  following  such  final
Distribution  Date,  the Trustee shall release  promptly to the Depositor or its
designee the Mortgage  Files for the remaining  Mortgage  Loans,  and the Master
Servicer  Collection  Account  and the  Distribution  Account  shall  terminate,
subject  to  the  Trustee's  obligation  to  hold  any  amounts  payable  to the
Certificateholders   in  trust  without  interest  pending  final  distributions
pursuant to this Subsection 10.01(f).

      (g)  If  not  all  of  the   Certificateholders   shall   surrender  their
Certificates for cancellation  within six months after the time 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,  not all the  Certificates  shall have been
surrendered for cancellation, the Trustee may take appropriate steps, or appoint
any agent to take appropriate steps, to contact the remaining Certificateholders
concerning  surrender of their Certificates,  and the cost thereof shall be paid
out of the funds and other assets which remain subject to this Agreement.

      Section 10.02 Additional Termination Requirements.

      (a) If the option of the Depositor to repurchase all of the Mortgage Loans
under Subsection  10.01(a)(i) above is exercised,  the Trust Fund and each REMIC
shall be terminated in accordance  with the following  additional  requirements,
unless the  Trustee and Radian  have been  furnished  with an Opinion of Counsel
addressed  to the Trustee and Radian to the effect that the failure of the Trust
to comply with the requirements of this Section 10.02 will not (i) result in the
imposition of taxes on "prohibited  transactions"  as defined in Section 860F of
the Code on any REMIC or (ii)  cause any REMIC to fail to  qualify as a REMIC at
any time that any Regular Certificates are outstanding:

            (i)  within 90 days  prior to the final  Distribution  Date,  at the
      written  direction  of the  Depositor,  the  Trustee,  as  agent  for  the
      respective Tax Matters Persons, shall adopt a plan of complete liquidation
      of each REMIC in the case of a termination  under Subsection  10.01(a)(i),
      provided  to it by  the  Depositor,  which  meets  the  requirements  of a
      "qualified liquidation" under Section 860F of the Code and any regulations
      thereunder;

            (ii) the Depositor  shall notify the Trustee at the  commencement of
      such 90-day  liquidation  period and, at or prior to the time of making of
      the final payment on the Certificates, the Trustee shall sell or otherwise
      dispose of all of the  remaining  assets of the Trust  Fund in  accordance
      with the terms hereof; and

            (iii) at or after the time of  adoption  of such a plan of  complete
      liquidation of each REMIC, and at or prior to the final  Distribution Date
      relating thereto, the Trustee shall sell for cash all of the assets of the
      Trust  to or at the  direction  of the  Depositor,  and each  REMIC  shall
      terminate at such time.

                                     -121-
<PAGE>

      (b) By their acceptance of the Residual Certificates,  the Holders thereof
hereby (i) agree to adopt such a plan of  complete  liquidation  of the  related
REMIC upon the  written  request of the  Depositor,  and to take such  action in
connection  therewith as may be  reasonably  requested by the Depositor and (ii)
appoint  the   Depositor   as  their   attorney-in-fact,   with  full  power  of
substitution,  for purposes of adopting such a plan of complete liquidation. The
Trustee shall adopt such plan of liquidation by filing the appropriate statement
on the final tax  return  of each  REMIC.  Upon  complete  liquidation  or final
distribution  of all of the  assets of the Trust  Fund,  the Trust Fund and each
REMIC shall terminate.

                                     -122-
<PAGE>

                                   ARTICLE XI
                            Miscellaneous Provisions

      Section 11.01 Intent of Parties.

      The  parties  intend that each of REMIC I, REMIC II and REMIC III shall be
treated as a REMIC for federal  income tax purposes and that the  provisions  of
this Agreement should be construed in furtherance of this intent.

      Section 11.02 Amendment.

      (a) This  Agreement  may be amended from time to time by the Company,  the
Depositor,  the Master Servicer,  the Securities  Administrator and the Trustee,
with the  consent of Radian but  without  notice to or the consent of any of the
Certificateholders,  to  cure  any  ambiguity,  to  correct  or  supplement  any
provisions  herein or therein  that may be defective  or  inconsistent  with any
other provisions herein or therein, to comply with any changes in the Code or to
make any other  provisions  with respect to matters or questions  arising  under
this  Agreement  which shall not be  inconsistent  with the  provisions  of this
Agreement;  provided,  however,  that such action  shall not, as evidenced by an
Opinion of Independent Counsel,  addressed to the Trustee and Radian,  adversely
affect  in  any  material   respect  the  interests  of  any   Certificateholder
(determined without regard to the Policy).

      (b) This  Agreement  may also be amended from time to time by the Company,
the  Master  Servicer,  the  Depositor,  the  Securities  Administrator  and the
Trustee,  with the consent of Radian and the Holders of Certificates  evidencing
Fractional  Undivided Interests  aggregating not less than 51% of the Trust Fund
or of the applicable Class or Classes, if such amendment affects only 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 Certificateholders; provided, however, that no such
amendment  shall (i) reduce in any manner the amount of, or delay the timing of,
payments  received on Mortgage Loans which are required to be distributed on any
Certificate  without the consent of the Holder of such Certificate,  (ii) reduce
the aforesaid  percentage of  Certificates  the Holders of which are required to
consent  to any such  amendment,  without  the  consent  of the  Holders  of all
Certificates then outstanding,  or (iii) cause any REMIC to fail to qualify as a
REMIC for federal income tax purposes, as evidenced by an Opinion of Independent
Counsel  addressed  to the  Trustee  and Radian  which  shall be provided to the
Trustee and Radian  other than at the  Trustee's  expense or  Radian's  expense.
Notwithstanding  any other  provision  of this  Agreement,  for  purposes of the
giving  or   withholding  of  consents   pursuant  to  this  Section   11.02(b),
Certificates registered in the name of or held for the benefit of the Depositor,
the  Securities  Administrator,  the  Master  Servicer,  or the  Trustee  or any
Affiliate thereof shall be entitled to vote their Fractional Undivided Interests
with respect to matters affecting such Certificates.

      (c) Promptly after the execution of any such amendment,  the Trustee shall
furnish a copy of such  amendment or written  notification  of the  substance of
such amendment to each Certificateholder, with a copy to the Rating Agencies and
Radian.

                                     -123-
<PAGE>

      (d) In the case of an amendment under Subsection  11.02(b) above, it shall
not be necessary for the  Certificateholders  to approve the particular  form of
such an amendment.  Rather,  it shall be  sufficient  if the  Certificateholders
approve the substance of the  amendment.  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.

      (e) Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive  and rely upon an Opinion of Counsel  addressed  to
the Trustee  stating that the  execution  of such  amendment  is  authorized  or
permitted by this Agreement.  The Trustee and the Securities  Administrator may,
but shall not be obligated to, enter into any such  amendment  which affects the
Trustee's or the Securities  Administrator's  own respective  rights,  duties or
immunities under this Agreement.

      Section 11.03 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
Mortgaged Properties are situated, and in any other appropriate public recording
office or elsewhere. The Depositor shall effect such recordation, at the expense
of the Trust 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.

      Section 11.04 Limitation on Rights of Certificateholders.

      (a) The death or incapacity of any  Certificateholder  shall not terminate
this  Agreement  or  the  Trust,  nor  entitle  such  Certificateholder's  legal
representatives  or  heirs  to claim an  accounting  or to take  any  action  or
proceeding  in any  court  for a  partition  or  winding  up of the  Trust,  nor
otherwise  affect the rights,  obligations and liabilities of the parties hereto
or any of them.

      (b) Except as expressly provided in this Agreement,  no Certificateholders
shall have any right to vote or in any manner  otherwise  control the  operation
and management of the Trust, or the obligations of the parties hereto, nor shall
anything  herein set forth,  or contained in the terms of the  Certificates,  be
construed  so as to  establish  the  Certificateholders  from  time  to  time as
partners or members of an association; nor shall any Certificateholders be under
any  liability  to any third Person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.

      (c) No  Certificateholder  shall have any right by virtue of any provision
of this  Agreement to institute  any suit,  action or proceeding in equity or at
law upon,  under or with respect to this Agreement  against the  Depositor,  the
Securities  Administrator,  the Master  Servicer  or any  successor  to any such
parties  unless (i) such  Certificateholder  previously  shall have given to the
Trustee a written notice of a continuing default,  as herein provided,  (ii) the
Holders of Certificates  evidencing  Fractional Undivided Interests  aggregating
not less than 51%

                                     -124-
<PAGE>

of the Trust Fund shall have made written  request upon the Trustee to institute
such action,  suit or proceeding in its own name as Trustee  hereunder and shall
have offered to the Trustee such reasonable  indemnity as it may require against
the costs and expenses and  liabilities to be incurred  therein or thereby,  and
(iii) 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.

      (d) No one or more  Certificateholders  shall  have any right by virtue of
any   provision   of  this   Agreement   to  affect  the  rights  of  any  other
Certificateholders  or to obtain or seek to obtain  priority or preference  over
any other such Certificateholder,  or to enforce any right under this Agreement,
except in the  manner  herein  provided  and for the equal,  ratable  and common
benefit of all  Certificateholders.  For the protection  and  enforcement of the
provisions  of this  Section  11.04,  each and every  Certificateholder  and the
Trustee  shall be entitled  to such  relief as can be given  either at law or in
equity.

      Section 11.05 Acts of Certificateholders.

      (a) Any request, demand, authorization, direction, notice, consent, waiver
or  other  action   provided  by  this   Agreement  to  be  given  or  taken  by
Certificateholders  may be embodied in and evidenced by one or more  instruments
of substantially similar tenor signed by such Certificateholders in person or by
an agent  duly  appointed  in  writing.  Except  as herein  otherwise  expressly
provided, such action shall become effective when such instrument or instruments
are  delivered  to the  Trustee  and,  where it is  expressly  required,  to the
Depositor.  Proof of execution of any such instrument or of a writing appointing
any such  agent  shall be  sufficient  for any  purpose  of this  Agreement  and
conclusive  in favor of the  Trustee  and the  Depositor,  if made in the manner
provided in this Section 11.05.

      (b)  The  fact  and  date  of the  execution  by any  Person  of any  such
instrument  or  writing  may be proved  by the  affidavit  of a witness  of such
execution or by a certificate of a notary public or other officer  authorized by
law to take  acknowledgments  of deeds,  certifying that the individual  signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity  other than his or her  individual
capacity,  such certificate or affidavit shall also constitute  sufficient proof
of his or her  authority.  The  fact  and  date  of the  execution  of any  such
instrument or writing,  or the authority of the  individual  executing the same,
may also be proved in any other manner which the Trustee deems sufficient.

      (c)  The  ownership  of  Certificates  (notwithstanding  any  notation  of
ownership  or other  writing  on such  Certificates,  except an  endorsement  in
accordance with Section 5.02 made on a Certificate  presented in accordance with
Section  5.04)  shall be proved by the  Certificate  Register,  and  neither the
Trustee, the Securities  Administrator,  the Depositor,  the Master Servicer nor
any  successor  to any such  parties  shall be  affected  by any  notice  to the
contrary.

      (d) Any request, demand, authorization, direction, notice, consent, waiver
or other action of the holder of any Certificate  shall bind every future holder
of the same  Certificate  and the holder of every  Certificate  issued  upon the
registration of transfer or exchange thereof, if applicable,  or in lieu thereof
with respect to anything done, omitted or suffered to be done by the

                                     -125-
<PAGE>

Trustee, the Securities Administrator, the Depositor, the Master Servicer or any
successor to any such party in reliance thereon, whether or not notation of such
action is made upon such Certificates.

      (e) In  determining  whether the Holders of the  requisite  percentage  of
Certificates  evidencing  Fractional Undivided Interests have given any request,
demand,   authorization,   direction,   notice,  consent  or  waiver  hereunder,
Certificates owned by the Trustee, the Securities Administrator,  the Depositor,
the Master  Servicer or any Affiliate  thereof shall be  disregarded,  except as
otherwise  provided in Section 11.02(b) and except that, in determining  whether
the  Trustee  shall be  protected  in  relying  upon any such  request,  demand,
authorization,  direction,  notice, consent or waiver, only Certificates which a
Responsible  Officer of the  Trustee  actually  knows to be so owned shall be so
disregarded.  Certificates which have been pledged in good faith to the Trustee,
the  Securities  Administrator,  the  Depositor,  the  Master  Servicer  or  any
Affiliate  thereof may be regarded as outstanding if the pledgor  establishes to
the  satisfaction of the Trustee the pledgor's right to act with respect to such
Certificates  and that the  pledgor  is not an  Affiliate  of the  Trustee,  the
Securities Administrator, the Depositor, or the Master Servicer, as the case may
be.

      Section 11.06 Governing Law.

      THIS AGREEMENT AND THE CERTIFICATES  SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK  WITHOUT  REFERENCE  TO ITS  CONFLICT  OF LAWS
RULES (OTHER THAN  SECTIONS  5-1401 AND 5-1402 OF THE GENERAL  OBLIGATIONS  LAW,
WHICH THE PARTIES  HERETO  EXPRESSLY  RELY UPON IN THE CHOICE OF SUCH LAW AS THE
GOVERNING LAW HEREUNDER) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

      Section 11.07 Notices.

      All demands and notices  hereunder shall be in writing and shall be deemed
given  when  delivered  at  (including  delivery  by  facsimile)  or  mailed  by
registered mail,  return receipt  requested,  postage prepaid,  or by recognized
overnight courier, to (i) in the case of the Depositor,  383 Madison Avenue, New
York, New York 10179, Attention:  Vice  President-Servicing,  telecopier number:
(212)  272-5591,  or to such other  address as may hereafter be furnished to the
other  parties  hereto  in  writing;  (ii) in the  case of the  Trustee,  at its
Corporate  Trust Office,  or such other address as may hereafter be furnished to
the other  parties  hereto in  writing;  (iii) in the case of the  Company,  383
Madison Avenue, New York, New York 10179, Attention:  Vice  President-Servicing,
telecopier number: (212) 272-5591,  or to such other address as may hereafter be
furnished to the other parties hereto in writing; (iv) in the case of the Master
Servicer or Securities  Administrator,  Wells Fargo Bank, National  Association,
P.O. Box 98, Columbia  Maryland 21046 (or, in the case of overnight  deliveries,
9062 Old Annapolis Road, Columbia,  Maryland 21045) (Attention:  Corporate Trust
Services - Prime 2004-1),  facsimile no.: (410) 715-2380,  or such other address
as may hereafter be furnished to the other parties hereto in writing; (v) in the
case of the Rating  Agencies,  Fitch,  Inc.  [address] and Standard & Poor's,  a
division of The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York
10041,  or (vi) in the case of Radian,  Radian Asset Assurance Inc., 335 Madison
Avenue, New York, New

                                     -126-
<PAGE>

York  10017,  AMSRM@radian.biz,  Attention:  Chief Risk  Officer and Chief Legal
Officer (Prime  Mortgage Trust 2004-1) or such other address as hereafter may be
furnished  to  the  other  parties  in  writing.  Any  notice  delivered  to the
Depositor,  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   when   mailed,   whether  or  not  the
Certificateholder receives such notice.

      Section 11.08 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  severed  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 11.09 Successors and Assigns.

      The  provisions of this  Agreement  shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.

      Section 11.10 Article and Section Headings.

      The article and section  headings  herein are for convenience of reference
only, and shall not limit or otherwise affect the meaning hereof.

      Section 11.11 Counterparts.

      This Agreement may be executed in two or more  counterparts  each of which
when so executed and  delivered  shall be an original but all of which  together
shall constitute one and the same instrument.

      Section 11.12 Notice to Rating Agencies.

      The article and section  headings  herein are for convenience of reference
only, and shall not limited or otherwise affect the meaning hereof.  The Trustee
shall  promptly  provide notice to each Rating Agency and Radian with respect to
each of the following of which a  Responsible  Officer of the Trustee has actual
knowledge:

      1. Any material  change or amendment  to this  Agreement or the  Servicing
Agreements;

      2. The occurrence of any Event of Default that has not been cured;

      3. The resignation or termination of the Master  Servicer,  the Trustee or
the Securities Administrator;

                                     -127-
<PAGE>

      4. The repurchase or substitution of Mortgage Loans;

      5. The final payment to Certificateholders; and

      6. Any change in the location of the Master Servicer Collection Account or
the Distribution Account.

      Section 11.13 Radian 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 I-A-5  Certificateholders shall also be sent at such time to Radian
at the notice address set forth in Section 11.07.

      (b) Radian shall be an express third party  beneficiary  of this Agreement
for the purpose of  enforcing  the  provisions  hereof to the extent of Radian'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
Policy.

                                     -128-
<PAGE>

      IN WITNESS WHEREOF,  the Depositor,  the Trustee,  the Master Servicer and
the  Securities  Administrator  have caused  their names to be signed  hereto by
their respective officers thereunto duly authorized as of the day and year first
above written.

                                   STRUCTURED ASSET MORTGAGE
                                   INVESTMENTS II INC., as Depositor

                                   By: /S/ BARON SILVERSTEIN
                                   ----------------------------------------
                                   Name: Baron Silverstein
                                   Title: Vice President

                                   U.S. BANK NATIONAL ASSOCIATION, as Trustee

                                   By: /S/ VANETA I BERNARD
                                   ----------------------------------------
                                   Name: Venata I. Bernard
                                   Title: Senior Vice President

                                   WELLS FARGO BANK, NATIONAL
                                   ASSOCIATION, as Master Servicer

                                   By: /S/ STACEY TAYLOR
                                   ----------------------------------------
                                   Name: Stacey Taylor
                                   Title: Assistant Vice President

                                   WELLS FARGO BANK, NATIONAL ASSOCIATION,
                                   as Securities Administrator

                                   By: /S/ STACEY TAYLOR
                                   ----------------------------------------
                                   Name: Stacey Taylor
                                   Title: Assistant Vice President

                                   EMC MORTGAGE CORPORATION

                                   By: /S/ DANA DILLARD
                                   ----------------------------------------
                                   Name:  Dana Dillard
                                   Title: Senior Vice President

                                     -129-
<PAGE>

Accepted and Agreed as to
Sections 2.01, 2.02, 2.03, 2.04 and 9.09(c)

in its capacity as Seller

EMC MORTGAGE CORPORATION

By:   /S/ DANA DILLARD
   ----------------------------
Name: Dana Dillard
Title: Senior Vice President

                                     -130-
<PAGE>

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

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared  Baron  Silverstein,  known  to me to be a(n)  Vice
President of Structured Asset Mortgage Investments II Inc., the corporation that
executed  the  within  instrument,  and also  known to me to be the  person  who
executed  it on behalf of said  corporation,  and  acknowledged  to me that such
corporation executed the within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -131-
<PAGE>

STATE OF MASSACHUSETTS           )
                                 ) ss.:
COUNTY OF SUFFOLK                )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally appeared Vaneta I Bernard, known to me to be a Vice President
of  U.S.  Bank  National  Association,  the  entity  that  executed  the  within
instrument,  and also known to me to be the person who  executed it on behalf of
said  entity,  and  acknowledged  to me that such  entity  executed  the  within
instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -132-
<PAGE>

STATE OF MARYLAND             )
                              ) ss.:
COUNTY OF HOWARD              )

      On the 30th day of  December,  2004 before me, a notary  public in and for
said State,  personally  appeared Stacey Taylor,  known to me to be an Assistant
Vice  President  of Wells  Fargo  Bank,  National  Association,  the entity that
executed  the  within  instrument,  and also  known to me to be the  person  who
executed it on behalf of said entity,  and  acknowledged  to me that such entity
executed the within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -133-
<PAGE>

STATE OF MARYLAND          )
                           ) ss.:
COUNTY OF HOWARD           )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally appeared Stacey Taylor, known to me to be a(n) Assistant Vice
President of Wells Fargo Bank,  National  Association,  the entity that executed
the within instrument,  and also known to me to be the person who executed it on
behalf of said  entity,  and  acknowledged  to me that such entity  executed the
within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -134-
<PAGE>

STATE OF TEXAS                )
                              ) ss.:
COUNTY OF DALLAS              )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared Sherri Lauritsen,  known to me to be Executive Vice
President of EMC Mortgage Corporation,  the corporation that executed the within
instrument,  and also known to me to be the person who  executed it on behalf of
said  corporation,  and  acknowledged to me that such  corporation  executed the
within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -135-
<PAGE>

STATE OF TEXAS                 )
                               ) ss.:
COUNTY OF DALLAS               )

      On the 30th day of July,  2004 before me, a notary  public in and for said
State,  personally  appeared Sherri Lauritsen,  known to me to be Executive Vice
President of EMC Mortgage Corporation,  the corporation that executed the within
instrument,  and also known to me to be the person who  executed it on behalf of
said  corporation,  and  acknowledged to me that such  corporation  executed the
within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                             ------------------------------
                                                      Notary Public

[Notarial Seal]

                                     -136-
<PAGE>

                                                                     EXHIBIT A-1

                       FORM OF CLASS [_]-A-[_] CERTIFICATE

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

      [THE CURRENT PRINCIPAL AMOUNT 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 CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.]

      UNLESS THIS  CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
THE  DEPOSITORY  TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE 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>
<S>                                                        <C>
Certificate No.1                                           [Adjustable][Fixed] Pass-Through Rate

Class [_-[A]-[_] Senior

Date of Pooling and Servicing Agreement                    Aggregate Initial [Current Principal][Notional] Amount
and Cut-off Date:
July 1, 2004                                               of this Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial [Current Principal][Notional] Amount of this
August 25, 2004                                            Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

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

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to  the  Class  [_-[A]-[_]  Certificates  with  respect  to a  Trust  Fund
      consisting  primarily of a pool of fixed rate  mortgage  loans  secured by
      first  liens  on  one-to-four  family   residential   properties  sold  by
      STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee 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 Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II 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 Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage

                                      A-1-2
<PAGE>

Loans") sold by Structured  Asset Mortgage  Investments II Inc. ("SAMI II"). The
Mortgage Loans were sold by EMC Mortgage  Corporation  ("EMC") to SAMI II. Wells
Fargo Bank, National  Association ("Wells Fargo") 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 EMC Mortgage Corporation, as seller and
company (the  "Seller"),  SAMI II, as depositor (the  "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,   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
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further  described  in the  Agreement.]  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 Business Day of the calendar month preceding the month of such Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  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  immediately  following  the month of the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the Current Principal Amount of this Class of Certificates will be reduced
to zero.]

      [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 (or, with respect to the first accrual period,  the
Closing Date) to and including the 24th day of the calendar  month in which that
Distribution Date occurs on the [Current Principal][Notional] Amount hereof at a
per annum rate  equal to the  Pass-Through  Rate set forth  above and as further
described in the Agreement.  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  Fractional  Undivided
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  immediately  following  the month of the latest
scheduled maturity date of any Mortgage Loan and is not likely to be the date on
which the  [Current  Principal][Notional]  Amount of this Class of  Certificates
will be reduced to zero.]

                                     A-1-3
<PAGE>

      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 by wire transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that  purpose and  designated  in such notice.  The
Initial  [Current  Principal][Notional]  Amount of this Certificate is set forth
above.  [The Current  Principal  Amount  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"),  issued in
twenty-three  Classes. 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,   the  Master  Servicer  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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  Fractional Undivided 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

                                     A-1-4
<PAGE>

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  Fractional  Undivided  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 the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.

                                     A-1-5
<PAGE>

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

Dated: __________, 20__                      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]-[_]  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 Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  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 [B-_] CERTIFICATE

      THIS  CERTIFICATE  IS  SUBORDINATED  IN RIGHT  OF  PAYMENT  TO THE  SENIOR
CERTIFICATES, [AND THE CLASS B-[_] 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 CURRENT  PRINCIPAL AMOUNT OF THIS CERTIFICATE WILL BE DECREASED BY THE
PRINCIPAL PAYMENTS HEREON AND ANY REALIZED LOSSES ALLOCABLE HERETO. ACCORDINGLY,
FOLLOWING THE INITIAL ISSUANCE OF THE CERTIFICATES, THE CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.

      [FOR  CLASS B-1,  CLASS B-2 AND CLASS B-3]  [UNLESS  THIS  CERTIFICATE  IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF  TRANSFER,  EXCHANGE OR PAYMENT,  ANY
CERTIFICATE  ISSUED WILL BE  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 WILL BE 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.]

      [FOR CLASS B-1,  CLASS B-2 AND CLASS B-3] [EACH  BENEFICIAL  OWNER OF THIS
CERTIFICATE  OR ANY  INTEREST  HEREIN  SHALL BE DEEMED TO HAVE  REPRESENTED,  BY
VIRTUE OF ITS  ACQUISITION OR HOLDING OF THIS  CERTIFICATE  OR INTEREST  HEREIN,
THAT  EITHER (I) IT IS NOT AN  EMPLOYEE  BENEFIT  PLAN  SUBJECT TO THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED  OR  SECTION  4975 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED ("PLAN"),  OR INVESTING WITH ASSETS OF
A PLAN OR (II) IT HAS ACQUIRED AND IS HOLDING  SUCH  CERTIFICATE  IN RELIANCE ON
PROHIBITED   TRANSACTION   EXEMPTION   90-30,  AS  AMENDED  FROM  TIME  TO  TIME
("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 STANDARD &
POOR'S,  FITCH, INC. OR MOODY'S INVESTORS SERVICE,  INC., AND THE CERTIFICATE IS
SO RATED OR (III) (1) IT

                                     A-2-1
<PAGE>

IS AN  INSURANCE  COMPANY,  (2) THE  SOURCE OF FUNDS USED TO ACQUIRE OR HOLD THE
CERTIFICATE OR INTEREST  HEREIN 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.]

      [FOR CLASS B-4, CLASS B-5 AND CLASS B-6][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.]

      [FOR CLASS B-4,  CLASS B-5 AND CLASS  B-6]  [THIS  CERTIFICATE  MAY NOT BE
ACQUIRED DIRECTLY OR INDIRECTLY BY, OR ON BEHALF OF, AN EMPLOYEE BENEFIT PLAN OR
OTHER  RETIREMENT  ARRANGEMENT  WHICH  IS  SUBJECT  TO  TITLE I OF THE  EMPLOYEE
RETIREMENT  INCOME  SECURITY  ACT OF 1974,  AS AMENDED,  OR SECTION  4975 OF THE
INTERNAL  REVENUE CODE OF 1986, AS AMENDED,  UNLESS THE TRANSFEREE  CERTIFIES OR
REPRESENTS  THAT THE  PROPOSED  TRANSFER  AND HOLDING OF A  CERTIFICATE  AND THE
SERVICING,  MANAGEMENT  AND OPERATION OF THE TRUST AND ITS ASSETS:  (I) WILL NOT
RESULT IN ANY PROHIBITED TRANSACTION WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR
CLASS  PROHIBITED  TRANSACTION  EXEMPTION,   INCLUDING,   BUT  NOT  LIMITED  TO,
PROHIBITED  TRANSACTION  EXEMPTION ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
OR PTE 96-23 AND (II) WILL NOT GIVE RISE TO ANY  ADDITIONAL  OBLIGATIONS  ON THE
PART OF THE DEPOSITOR, THE SECURITIES ADMINISTRATOR, THE MASTER SERVICER

                                     A-2-2
<PAGE>

OR THE  TRUSTEE,  WHICH WILL BE DEEMED  REPRESENTED  BY AN OWNER OF A BOOK-ENTRY
CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE OPINION  SPECIFIED IN SECTION
5.07 OF THE AGREEMENT IS PROVIDED.]

                                     A-2-3
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           Pass-Through Rate: ____%

Class [B-_] Subordinate

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date: July 1, 2004                                 Subordinate Certificate as of the Cut-off Date:
                                                           $[___________]

First Distribution Date:                                   Initial Current Principal Amount of this Subordinate
August 25, 2004                                            Certificate as of the Cut-off Date: $[_________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

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

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      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 fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee 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 Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II Inc., the Master  Servicer or any of their  affiliates
will have any obligation  with respect to any  certificate  or other  obligation
secured by or payable from payments on the Certificates.

      This certifies  that  [_______] is the registered  owner of the Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage

                                     A-2-4
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") 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  EMC as  seller  and  company  (the
"Seller"),  SAMI II, as depositor (the "Depositor"),  Wells Fargo Bank, National
Association as master servicer and securities  administrator  (in such capacity,
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
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further described in the Agreement. 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
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  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  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount 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 by wire transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that  purpose and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount hereof will be reduced to the extent of distributions
allocable to principal hereon and any Realized Losses allocable hereto.

      [For Class B-4,  Class B-5 and Class B-6][No  transfer of this Class [B-_]
Certificate   will  be  made  unless  such  transfer  is  (i)  exempt  from  the
registration  requirements  of the Securities  act of 1933, as amended,  and any
applicable state securities laws or is made in accordance with said Act and laws
and (ii) made in  accordance  with Section 5.02 of the  Agreement.  In the event
that such  transfer is to be made the Trustee  shall  register such transfer if,
(i) made to a transferee  who has  provided the Trustee with  evidence as to its
QIB status;  or (ii) (A) the  transferor has advised the Trustee in writing that
the Certificate is being transferred to an Institutional Accredited Investor and
(B) prior to such transfer the transferee furnishes to the

                                     A-2-5
<PAGE>

Trustee an Investment Letter;  provided that if based upon an Opinion of Counsel
to the effect  that (A) and (B) above are met  sufficient  to confirm  that such
transfer is being made pursuant to an exemption  from,  or in a transaction  not
subject  to,  the  registration  requirements  of the  Securities  Act and other
applicable laws.]

      [For Class B-1,  Class B-2 and Class B-3] [Each  beneficial  owner of this
Certificate  or any  interest  herein  shall be deemed to have  represented,  by
virtue of its  acquisition or holding of this  certificate  or interest  herein,
that  either (i) it is not an  employee  benefit  plan  subject to the  Employee
Retirement  Income  Security  Act of 1974,  as amended  or  section  4975 of the
Internal Revenue Code of 1986, as amended ("Plan"),  or investing with assets of
a Plan or (ii) it has acquired and is holding  such  certificate  in reliance on
Prohibited   Transaction   Exemption   90-30,  as  amended  from  time  to  time
("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 Standard &
Poor's,  Fitch, Inc. or Moody's Investors Service,  Inc., and the certificate is
so rated or (iii) (1) it is an insurance  company,  (2) the source of funds used
to acquire or hold the certificate or interest therein is an "insurance  company
general  account",  as such term is  defined  in  Prohibited  Transaction  Class
Exemption  ("PTCE") 95-60,  and (3) the conditions in Sections I and III of PTCE
95-60 have been satisfied.]

      [For Class B-4,  Class B-5 and Class  B-6]  [This  Certificate  may not be
acquired directly or indirectly by, or on behalf of, an employee benefit plan or
other  retirement  arrangement  which  is  subject  to  Title I of the  Employee
Retirement  Income  Security  Act of 1974,  as amended,  or Section  4975 of the
Internal  Revenue Code of 1986, as amended,  unless the transferee  certifies or
represents  that the  proposed  transfer  and holding of a  Certificate  and the
servicing,  management  and operation of the trust and its assets:  (i) will not
result in any prohibited transaction which is not covered under an individual or
class  prohibited  transaction  exemption,   including,   but  not  limited  to,
Prohibited  Transaction  Exemption ("PTE") 84-14, PTE 91-38, PTE 90-1, PTE 95-60
or PTE 96-23 and (ii) will not give rise to any  additional  obligations  on the
part of the Depositor, the Securities Administrator,  the Master Servicer or the
Trustee,  which  will  be  deemed  represented  by  an  owner  of  a  Book-Entry
Certificate or a Global  Certificate or unless the opinion  specified in section
5.07 of the Agreement is provided.]

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

                                     A-2-6
<PAGE>

      The Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,   the  Master  Servicer  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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  Fractional Undivided 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 Fractional  Undivided 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 the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

                                     A-2-7
<PAGE>

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.

                                     A-2-8
<PAGE>

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

Dated: __________, 20__                      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

                                     A-2-9
<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 Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  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-2-10
<PAGE>

                                                                     EXHIBIT A-3

                       FORM OF CLASS [__]- PO 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 CURRENT  PRINCIPAL AMOUNT 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 CURRENT PRINCIPAL AMOUNT
OF THIS CERTIFICATE WILL BE DIFFERENT FROM THE DENOMINATION SHOWN BELOW.  ANYONE
ACQUIRING THIS CERTIFICATE MAY ASCERTAIN ITS CURRENT PRINCIPAL AMOUNT BY INQUIRY
OF THE TRUSTEE NAMED HEREIN.

      UNLESS THIS  CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
THE  DEPOSITORY  TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE MADE TO
CEDE & CO., ANY  TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,  CEDE & CO., HAS
AN INTEREST HEREIN.

                                     A-3-1
<PAGE>

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

Class [_]- PO Senior

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date: July 1, 2004                                 Senior Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial Current Principal Amount of this Senior
August 25, 2004                                            Certificate as of the Cut-off Date: $[_____________]

Master Servicer:                                           CUSIP: [____________]
Wells Fargo Bank, National Association

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

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class [_]-PO  Certificates  with respect to a Trust Fund consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee 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 Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II 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 Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage

                                     A-3-2
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") 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 EMC Mortgage Corporation, as seller and
company (the  "Seller"),  SAMI II, as depositor (the  "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,   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 Business Day of the calendar  month  preceding the month of
such  Distribution  Date,  an  amount  equal to the  product  of the  Fractional
Undivided  Interest  evidenced  by this  Certificate  and the  amount  principal
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  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount 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 by wire transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that  purpose and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount 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"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

                                     A-3-3
<PAGE>

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      The Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,   the  Master  Servicer  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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  Fractional Undivided 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 Fractional  Undivided 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 the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding

                                     A-3-4
<PAGE>

Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.

                                     A-3-5
<PAGE>

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

Dated: __________, 20__                      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  [_]-PO  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-3-6
<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 Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  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-3-7
<PAGE>

                                                                     EXHIBIT A-4

                        FORM OF CLASS II-X-1 CERTIFICATE

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

      UNLESS THIS  CERTIFICATE IS PRESENTED BY AN AUTHORIZED  REPRESENTATIVE  OF
THE  DEPOSITORY  TRUST COMPANY TO THE TRUSTEE OR ITS AGENT FOR  REGISTRATION  OF
TRANSFER,  EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED WILL BE 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 WILL BE MADE TO
CEDE & CO., ANY  TRANSFER,  PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,  CEDE & CO., HAS
AN INTEREST HEREIN.

                                     A-4-1
<PAGE>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           [Fixed] Pass-Through Rate

Class I-X-1 Senior

Date of Pooling and Servicing Agreement and                Aggregate Initial Notional Amount of this Senior
Cut-off Date:  July 1, 2004                                Certificate as of the Cut-off Date:
                                                           $[_____________]

First Distribution Date:                                   Initial  Notional  Amount of this Senior  Certificate as
August 25, 2004                                            of the Cut-off Date: $[__________]

Master Servicer:
Wells Fargo Bank, National Association                     CUSIP: [____________]

Final Scheduled Distribution Date:
August 25, 2034
</TABLE>

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      evidencing a fractional undivided interest in the distributions  allocable
      to the Class II-X-1  Certificates  with respect to a Trust Fund consisting
      primarily of a pool of fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee 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 Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II 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 Fractional
Undivided  Interest  evidenced  hereby in the beneficial  ownership  interest of
Certificates of the same Class as this Certificate in a trust (the "Trust Fund")
primarily consisting of fixed rate mortgage loans secured by first liens on one-
to four- family residential properties (collectively, the "Mortgage Loans") sold
by Structured Asset Mortgage Investments II Inc. ("SAMI II"). The Mortgage

                                     A-4-2
<PAGE>

Loans were sold by EMC  Mortgage  Corporation  ("EMC") to SAMI II.  Wells  Fargo
Bank,  National  Association  ("Wells Fargo") 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  SAMI  II,  as  depositor   (the
"Depositor"),  Wells Fargo Bank,  National  Association  as Master  Servicer and
securities administrator (in such capacity, the "Securities Administrator"), EMC
Mortgage Corporation, as seller and company, 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
Notional  Amount hereof at a per annum rate equal to the  Pass-Through  Rate set
forth  above  and as  further  described  in the  Agreement.  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
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  Interest
evidenced by this  Certificate and the amount (of interest,  if any) required to
be  distributed  to the  Holders  of  Certificates  of the  same  Class  as this
Certificate.

      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 by wire transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that  purpose and  designated  in such notice.  The
Notional Amount 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"),  issued in
twenty-three  Classes. The Certificates,  in the aggregate,  evidence the entire
beneficial  ownership  interest  in  the  Trust  Fund  formed  pursuant  to  the
Agreement.

      The Certificateholder,  by its acceptance of this Certificate, agrees that
it will look solely to the Trust Fund for payment hereunder and that the Trustee
is not  liable to the  Certificateholders  for any  amount  payable  under  this
Certificate or the Agreement or, except as expressly  provided in the Agreement,
subject to any liability under the Agreement.

                                     A-4-3
<PAGE>

      This Certificate does not purport to summarize the Agreement and reference
is made to the Agreement for the  interests,  rights and  limitations of rights,
benefits,  obligations and duties evidenced hereby,  and the rights,  duties and
immunities of the Trustee.

      The Agreement  permits,  with certain  exceptions  therein  provided,  the
amendment  thereof and the  modification  of the rights and  obligations  of the
Depositor,   the  Master  Servicer  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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  Fractional Undivided 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 Fractional  Undivided 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 the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution Date on which the aggregate unpaid

                                     A-4-4
<PAGE>

principal  balance  of the  Mortgage  Loans is less than the  percentage  of the
aggregate  Outstanding  Principal  Balance  specified  in the  Agreement  of the
Mortgage  Loans at the Cut-off Date.  The exercise of such right will effect the
early retirement of the Certificates.  In no event, however, will the Trust Fund
created by the Agreement  continue  beyond the  expiration of 21 years after the
death of certain persons identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.

                                     A-4-5
<PAGE>

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

Dated: __________, 20__                      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  II-X-1  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-4-6
<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 Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  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-4-7
<PAGE>

                                                                     EXHIBIT A-5

                         FORM OF CLASS R-[_] CERTIFICATE

      THIS CERTIFICATE MAY NOT BE HELD BY OR TRANSFERRED TO A NON-UNITED  STATES
PERSON, A PUBLICLY TRADED PARTNERSHIP 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").

      THIS  CERTIFICATE  MAY NOT BE ACQUIRED  DIRECTLY OR  INDIRECTLY  BY, OR ON
BEHALF OF, AN EMPLOYEE  BENEFIT PLAN OR OTHER  RETIREMENT  ARRANGEMENT  WHICH IS
SUBJECT TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME  SECURITY ACT OF 1974, AS
AMENDED,  AND/OR SECTION 4975 OF THE INTERNAL  REVENUE CODE OF 1986, AS AMENDED,
UNLESS THE PROPOSED  TRANSFEREE  PROVIDES THE TRUSTEE WITH AN OPINION OF COUNSEL
ADDRESSED   TO  THE  TRUSTEE,   DEPOSITOR,   MASTER   SERVICER  AND   SECURITIES
ADMINISTRATOR  AND ON WHICH THEY MAY RELY THAT IS  SATISFACTORY  TO THE  TRUSTEE
THAT THE PURCHASE OF CERTIFICATES ON BEHALF OF SUCH PERSON WILL NOT RESULT IN OR
CONSTITUTE A NONEXEMPT PROHIBITED  TRANSACTION,  IS PERMISSIBLE UNDER APPLICABLE
LAW AND WILL  NOT GIVE  RISE TO ANY  ADDITIONAL  OBLIGATIONS  ON THE PART OF THE
DEPOSITOR, THE MASTER SERVICER, THE SECURITIES ADMINISTRATOR OR THE TRUSTEE.

      ANY RESALE,  TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE MAY BE MADE
ONLY IF THE PROPOSED  TRANSFEREE OBTAINS THE PRIOR WRITTEN CONSENT OF STRUCTURED
ASSET MORTGAGE INVESTMENTS II INC. AND THE SECURITIES ADMINISTRATOR AND PROVIDES
A TRANSFER  AFFIDAVIT TO STRUCTURED  ASSET  MORTGAGE  INVESTMENTS  II INC.,  THE
SECURITIES ADMINISTRATOR AND THE TRUSTEE THAT (1) SUCH TRANSFEREE IS NOT (A) THE
UNITED  STATES,  ANY  STATE  OR  POLITICAL   SUBDIVISION  THEREOF,  ANY  FOREIGN
GOVERNMENT, ANY INTERNATIONAL ORGANIZATION,  OR ANY AGENCY OR INSTRUMENTALITY OF
ANY OF THE FOREGOING,  (B) ANY ORGANIZATION (OTHER THAN A COOPERATIVE  DESCRIBED
IN SECTION 521 OF THE CODE) WHICH IS EXEMPT FROM THE TAX IMPOSED BY CHAPTER 1 OF
THE CODE UNLESS SUCH  ORGANIZATION  IS SUBJECT TO THE TAX IMPOSED BY SECTION 511
OF THE CODE,  (C) ANY  ORGANIZATION  DESCRIBED IN SECTION  1381(A)(2)(C)  OF THE
CODE, (ANY SUCH PERSON DESCRIBED IN THE FOREGOING  CLAUSES (A), (B) OR (C) BEING
HEREIN  REFERRED  TO AS A  "DISQUALIFIED  ORGANIZATION")  OR (D) AN  AGENT  OF A
DISQUALIFIED ORGANIZATION, (2) NO PURPOSE OF SUCH

                                     A-5-1
<PAGE>

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>

<TABLE>
<S>                                                        <C>
Certificate No.1                                           Pass-Through Rate: _____%

Class R-[_]

Date of Pooling and Servicing Agreement and                Aggregate Initial Current Principal Amount of this
Cut-off Date:  July 1, 2004                                Certificate as of the Cut-off Date:
                                                           $____________

First Distribution Date:                                   Initial Current Principal Amount of this Certificate as
August 25, 2004                                            of the Cut-off Date: $_________

Master Servicer:                                           CUSIP: [_____________]
Wells Fargo Bank, National Association

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

                           PRIME MORTGAGE TRUST 2004-1
                        MORTGAGE PASS-THROUGH CERTIFICATE
                                  SERIES 2004-1

      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 fixed rate mortgage loans secured by first liens on
      one-to-four  family  residential   properties  sold  by  STRUCTURED  ASSET
      MORTGAGE INVESTMENTS II INC.

      This  Certificate is payable solely from the assets of the Trust Fund, and
does not represent an obligation  of or interest in  Structured  Asset  Mortgage
Investments II Inc., the Master Servicer or the Trustee 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 Structured Asset Mortgage  Investments II Inc., the Master Servicer or the
Trustee or any of their affiliates or any other person. None of Structured Asset
Mortgage  Investments  II 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  Fractional  Undivided  Interest  evidenced  hereby  in  the  beneficial
ownership  interest of Certificates  of the same Class as this  Certificate in a
trust (the "Trust  Fund")  primarily  consisting of fixed rate  mortgages  loans
secured  by  first  liens  on  one-  to  four-  family  residential   properties
(collectively,   the  "Mortgage   Loans")  sold  by  Structured  Asset  Mortgage
Investments  II Inc.  ("SAMI II").  The Mortgage Loans were sold by EMC Mortgage
Corporation ("EMC") to SAMI

                                     A-5-3
<PAGE>

II. Wells Fargo Bank,  National  Association  ("Wells Fargo") 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 EMC Mortgage Corporation as seller
and company (the "Seller"), SAMI II, as depositor(the "Depositor"),  Wells Fargo
Bank, National  Association as master servicer and securities  administrator (in
such  capacity,  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
Current  Principal  Amount hereof at a per annum rate equal to the  Pass-Through
Rate set forth above and as further  described in the Agreement 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
Business  Day of the calendar  month  preceding  the month of such  Distribution
Date,  an amount  equal to the  product  of the  Fractional  Undivided  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  immediately  following the month of the latest scheduled  maturity
date of any Mortgage  Loan and is not likely to be the date on which the Current
Principal Amount 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 by wire transfer.
Notwithstanding  the above,  the final  distribution on this Certificate will be
made after due notice by the Trustee of the  pendency of such  distribution  and
only upon presentation and surrender of this Certificate at the office or agency
appointed by the Trustee for that  purpose and  designated  in such notice.  The
Initial Current  Principal  Amount of this  Certificate is set forth above.  The
Current  Principal  Amount hereof will be reduced to the extent of distributions
allocable to principal hereon and any Realized Losses allocable hereto.

      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
SAMI II, the Trustee and the Securities Administrator 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

                                     A-5-4
<PAGE>

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.

      This  certificate  may not be acquired  directly or  indirectly  by, or on
behalf of, an employee  benefit plan or other  retirement  arrangement  which is
subject to title I of the Employee  Retirement  Income  Security Act of 1974, as
amended,  and/or section 4975 of the Internal  Revenue Code of 1986, as amended,
unless the proposed  transferee  provides the Trustee with an opinion of counsel
addressed to the Trustee,  Master Servicer and the Securities  Administrator and
on which they may rely (which shall not be at the expense of the Trustee, Master
Servicer or the  Securities  Administrator)  which is acceptable to the Trustee,
that the  purchase  of this  Certificate  will not  result  in or  constitute  a
nonexempt prohibited  transaction,  is permissible under applicable law and will
not  give  rise  to any  additional  fiduciary  obligations  on the  part of the
Depositor, the Master Servicer or the Trustee.

      This  Certificate  is one  of a  duly  authorized  issue  of  Certificates
designated  as set  forth on the face  hereof  (the  "Certificates"),  issued in
twenty-three  Classes. 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,   the  Master  Servicer  and  the  Trustee  and  the  rights  of  the
Certificateholders  under the Agreement from time to time by the parties thereto
with the consent of the Holders of Certificates, evidencing Fractional Undivided
Interests  aggregating not less than 51% of the Trust Fund (or in certain cases,
Holders of  Certificates of affected  Classes  evidencing such percentage of the
Fractional Undivided Interests thereof).  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,

                                     A-5-5
<PAGE>

and  thereupon  one  or  more  new  Certificates  in  authorized   denominations
representing a like aggregate  Fractional  Undivided  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 Fractional  Undivided 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 the (A) final  payment or other  liquidation  (or Advance  with
respect  thereto) of the last Mortgage Loan  remaining in the Trust Fund and (B)
disposition  of all  property  acquired  upon  foreclosure  or  deed  in lieu of
foreclosure  of any Mortgage Loan and the  remittance of all funds due under the
Agreement,  or (ii) the optional  repurchase by the party named in the Agreement
of all the Mortgage Loans and other assets of the Trust Fund in accordance  with
the terms of the  Agreement.  Such  optional  repurchase  may be made only on or
after the Distribution  Date on which the aggregate unpaid principal  balance of
the Mortgage  Loans is less than the  percentage  of the  aggregate  Outstanding
Principal  Balance  specified  in the  Agreement  of the  Mortgage  Loans at the
Cut-off Date. The exercise of such right will effect the early retirement of the
Certificates. In no event, however, will the Trust Fund created by the Agreement
continue  beyond the  expiration of 21 years after the death of certain  persons
identified in the Agreement.

      Unless this Certificate has been countersigned by an authorized  signatory
of the Trustee by manual  signature,  this Certificate  shall not be entitled to
any benefit under the Agreement, or be valid for any purpose.

                                     A-5-6
<PAGE>

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

Dated: __________, 20__                      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

                                     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 Fractional  Undivided
Interest  evidenced by the within Mortgage  Pass-Through  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 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 Servicer;

(g)   the Servicing Rate;

(h)   the Net Rate;

(i)   the original term;

(j)   the maturity date;

(k)   the stated remaining term to maturity;

(l)   the original principal balance;

(m)   the first payment date;

(n)   the principal and interest payment in effect as of the Cut-off Date;

(o)   the unpaid principal balance as of the Cut-off Date;

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

(q)   paid-through date;

(r)   the insurer of any Primary Mortgage Insurance Policy;

(s)   the Gross Margin, if applicable;

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

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

                                       B-1
<PAGE>

(v)   the Periodic Rate Cap, if applicable;

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

(x)   which Mortgage Loans adjust after an initial fixed-rate period of three,
      five, seven or ten years;

(y)   The Loan Group; and

(z)   The Prepayment Charge Loans.

Such  schedule  also shall set forth for all of the  Mortgage  Loans,  the total
number of Mortgage Loans,  the total of each of the amounts  described under (k)
and (n) above, the weighted average by principal  balance as of the Cut-off Date
of each of the rates  described  under (e), (f) and (g) above,  and the weighted
average remaining term to maturity by unpaid principal balance as of the Cut-off
Date.

                                       B-2
<PAGE>

                                                                       EXHIBIT C

                                   [RESERVED]

                                       C-1
<PAGE>

                                                                       EXHIBIT D

                        REQUEST FOR RELEASE OF DOCUMENTS

To:   U.S. Bank National Association
      One Federal Street, 3rd Floor
      Boston, Massachusetts 02110

RE:   Pooling and Servicing Agreement dated as of
      July 1, 2004, among SAMI II,
      Wells Fargo Bank,
      National Association, as Master Servicer
       and Securities Administrator,
      EMC Mortgage Corporation, as Seller
      and company 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:______________________________

                                      D-1
<PAGE>

                                                                       EXHIBIT E

                                FORM OF 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 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 Structured Asset Mortgage Investments
II Inc., Prime Mortgage Trust, Mortgage Pass-Through Certificates, Series 2004-1
Class R-I, Class R-II, and R-III 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
Structured  Asset  Mortgage  Investments  II 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 ________________.

                                       E-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:

                                       E-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
executed  the  same as his  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___.

                                       E-3
<PAGE>

                                                                     EXHIBIT F-1

                            FORM OF INVESTMENT LETTER

                                                                          [Date]
[SELLER]

U.S. Bank National Association
One Federal Street, 3rd Floor
Boston, Massachusetts 02110

Structured Asset Mortgage Investments II Inc.
383 Madison Avenue
New York, New York 10179

      Re:   Structured Asset Mortgage Investments II Inc., Prime Mortgage Trust,
            Series 2004-1 Mortgage Pass-Through Certificates (the
            "Certificates"), including the Class B-4, Class B-5 and Class B-6
            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)

                                     F-1-1
<PAGE>

                  unless   subsequently   registered   under  the  Act  and  any
                  applicable state securities or "Blue Sky" laws or an exemption
                  from  the  registration   requirements  of  the  Act  and  any
                  applicable state securities or "Blue Sky" laws is available;

            (vi)  we agree that in the event that at some future time we wish to
                  dispose  of  or  exchange   any  of  the   Privately   Offered
                  Certificates (such disposition or exchange not being currently
                  foreseen or  contemplated),  we will not  transfer or exchange
                  any of the Privately Offered Certificates unless:

                        (A) (1) the sale is to an Eligible Purchaser (as defined
                  below), (2) if required by the Pooling and Servicing Agreement
                  (as defined below) a letter to  substantially  the same effect
                  as either  this  letter  or, if the  Eligible  Purchaser  is a
                  Qualified  Institutional  Buyer as defined  under Rule 144A of
                  the Act, the Rule 144A and Related Matters  Certificate in the
                  form  attached  to the  Pooling and  Servicing  Agreement  (as
                  defined  below)  (or  such  other   documentation  as  may  be
                  acceptable  to  the  Trustee)  is  executed  promptly  by  the
                  purchaser and delivered to the  addressees  hereof and (3) all
                  offers or solicitations  in connection with the sale,  whether
                  directly  or  through  any  agent  acting on our  behalf,  are
                  limited only to Eligible  Purchasers and are not made by means
                  of any form of general  solicitation  or  general  advertising
                  whatsoever; and

                        (B)  if  the  Privately   Offered   Certificate  is  not
                  registered  under the Act (as to which we acknowledge you have
                  no obligation), the Privately Offered Certificate is sold in a
                  transaction that does not require  registration  under the Act
                  and any applicable state securities or "blue sky" laws and, if
                  U.S. 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,  or  section  4975 of the  Internal
                  Revenue  Code of 1986,  as  amended,  or (ii) are  providing a
                  representation  to the effect that the  proposed  transfer and
                  holding of a Privately Offered  Certificate and the servicing,
                  management and operation of the Trust and its assets: (I) will
                  not result in any prohibited  transaction which is not covered
                  under an individual or class prohibited transaction exemption,
                  including,   but  not  limited  to,   Prohibited   Transaction
                  Exemption  ("PTE") 84-14,  PTE 91-38,  PTE 90-1, PTE 95-60, or
                  PTE 96-23 and (II) will not

                                     F-1-2
<PAGE>

                  give  rise to any  additional  obligations  on the part of the
                  Depositor,  the Master Servicer, the Securities  Administrator
                  or the  Trustee or (iii)  have  attached  hereto  the  opinion
                  specified in Section 5.07 of the Agreement.

            (ix)  We understand that each of the Privately Offered  Certificates
                  bears, and will continue to bear, a legend to substantiate the
                  following effect:  "THIS CERTIFICATE HAS NOT BEEN AND WILL NOT
                  BE  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933, AS AMENDED
                  (THE  "SECURITIES  ACT"), OR UNDER ANY STATE  SECURITIES LAWS.
                  THE HOLDER HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT
                  THIS  CERTIFICATE  MAY  BE  REOFFERED,   RESOLD,   PLEDGED  OR
                  OTHERWISE  TRANSFERRED  ONLY IN COMPLIANCE WITH THE SECURITIES
                  ACT AND OTHER  APPLICABLE  LAWS AND ONLY (1)  PURSUANT TO RULE
                  144A UNDER THE  SECURITIES  ACT ("RULE 144A") TO A PERSON THAT
                  THE HOLDER  REASONABLY  BELIEVES IS A QUALIFIED  INSTITUTIONAL
                  BUYER  WITHIN THE  MEANING OF RULE 144A (A "QIB"),  PURCHASING
                  FOR ITS OWN ACCOUNT OR A QIB  PURCHASING  FOR THE ACCOUNT OF A
                  QIB,  WHOM THE HOLDER  HAS  INFORMED,  IN EACH CASE,  THAT THE
                  REOFFER,  RESALE,  PLEDGE OR OTHER  TRANSFER  IS BEING MADE IN
                  RELIANCE  ON RULE 144A,  (2)  PURSUANT  TO AN  EXEMPTION  FROM
                  REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
                  AVAILABLE) OR (3) IN  CERTIFICATED  FORM TO AN  "INSTITUTIONAL
                  ACCREDITED  INVESTOR"  WITHIN  THE  MEANING  THEREOF  IN  RULE
                  501(a)(1),  (2),  (3) or (7) OF  REGULATION D UNDER THE ACT OR
                  ANY ENTITY IN WHICH ALL OF THE EQUITY  OWNERS COME WITHIN SUCH
                  PARAGRAPHS PURCHASING NOT FOR DISTRIBUTION IN VIOLATION OF THE
                  SECURITIES ACT, SUBJECT TO (A) THE RECEIPT BY THE TRUSTEE OF A
                  LETTER SUBSTANTIALLY IN THE FORM PROVIDED IN THE AGREEMENT AND
                  (B)  THE  RECEIPT  BY  THE  TRUSTEE  OF  SUCH  OTHER  EVIDENCE
                  ACCEPTABLE TO THE TRUSTEE THAT SUCH REOFFER, RESALE, PLEDGE OR
                  TRANSFER IS IN COMPLIANCE  WITH THE  SECURITIES  ACT AND OTHER
                  APPLICABLE  LAWS  OR IN  EACH  CASE  IN  ACCORDANCE  WITH  ALL
                  APPLICABLE  SECURITIES LAWS OF THE UNITED STATES AND ANY OTHER
                  APPLICABLE JURISDICTION.  THIS CERTIFICATE MAY NOT BE ACQUIRED
                  DIRECTLY  OR  INDIRECTLY  BY,  OR ON BEHALF  OF,  AN  EMPLOYEE
                  BENEFIT PLAN OR OTHER RETIREMENT  ARRANGEMENT WHICH IS SUBJECT
                  TO TITLE I OF THE EMPLOYEE  RETIREMENT  INCOME SECURITY ACT OF
                  1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL REVENUE CODE
                  OF 1986, AS AMENDED,  UNLESS THE PROPOSED TRANSFER AND HOLDING
                  OF A CERTIFICATE  AND THE SERVICING,  MANAGEMENT AND OPERATION
                  OF THE  TRUST

                                     F-1-3
<PAGE>

                  AND  ITS  ASSETS:  (1)  WILL  NOT  RESULT  IN  ANY  PROHIBITED
                  TRANSACTION  WHICH IS NOT COVERED UNDER AN INDIVIDUAL OR CLASS
                  PROHIBITED TRANSACTION EXEMPTION,  INCLUDING,  BUT NOT LIMITED
                  TO, PROHIBITED TRANSACTION EXEMPTION ("PTE") 84-14, PTE 91-38,
                  PTE  90-1,  PTE 95-60 OR PTE 96-23 AND (II) WILL NOT GIVE RISE
                  TO ANY  ADDITIONAL  OBLIGATIONS  ON THE PART OF THE DEPOSITOR,
                  THE  MASTER  SERVICER,  THE  SECURITIES  ADMINISTRATOR  OR THE
                  TRUSTEE,  WHICH  WILL BE DEEMED  REPRESENTED  BY AN OWNER OF A
                  BOOK-ENTRY  CERTIFICATE OR A GLOBAL  CERTIFICATE OR UNLESS THE
                  OPINION   PROVIDED  IN  SECTION  5.07  OF  THE   AGREEMENT  IS
                  PROVIDED."

      "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 July 1, 2004,  among
Structured  Asset  Mortgage  Investments  II Inc.,  Wells Fargo  Bank,  National
Association  as master  servicer  and  securities  administrator,  EMC  Mortgage
Corporation,  as seller and  company  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):________________________

                                     F-1-4
<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]

                                     F-1-5
<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]

                                     F-1-6
<PAGE>

                                                                       EXHIBIT G

                           FORM OF CUSTODIAL AGREEMENT

                               CUSTODIAL AGREEMENT

      THIS CUSTODIAL  AGREEMENT (as amended and supplemented  from time to time,
the  "Agreement'),  dated as of July 30, 2004,  by and among U.S.  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"), STRUCTURED ASSET MORTGAGE
INVESTMENTS II INC., as depositor (together with any successor in interest,  the
"Depositor"),  WELLS FARGO BANK,  NATIONAL  ASSOCIATION,  as master servicer and
securities  administrator  (together with any successor in interest or successor
under the  Pooling  and  Servicing  Agreement  referred  to below,  the  "Master
Servicer") and WELLS FARGO BANK,  NATIONAL  ASSOCIATION,  as custodian (together
with any  successor  in  interest  or any  successor  appointed  hereunder,  the
"Custodian").

                                WITNESSETH THAT:

      WHEREAS, the Depositor,  the Master Servicer, the Trustee and EMC Mortgage
Corporation (the "Seller") have entered into a Pooling and Servicing  Agreement,
dated as of July 1, 2004,  relating  to the  issuance  of Prime  Mortgage  Trust
2004-1, Mortgage Pass-Through  Certificates,  Series 2004-1 (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  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 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.

                                      G-1
<PAGE>

                                   ARTICLE II.
                          CUSTODY OF MORTGAGE DOCUMENTS

      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 MBIA Insurance Corporation.

      Section 2.2 Recordation of Assignments.  If any Mortgage File includes one
or more  assignments of Mortgage to the Trustee in a state which is specifically
excluded from the Opinion of Counsel  delivered by the Seller to the Trustee and
the  Custodian  pursuant to the  provisions  of Section  2.01 of the Pooling and
Servicing Agreement, each such assignment shall be delivered by the Custodian to
the Depositor for the purpose of recording it in the  appropriate  public office
for real property  records,  and the Depositor,  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 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  and Radian Asset Assurance  Inc., 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  Depositor  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  Depositor  and the  Trustee  a Final
Certification  in the form  annexed  hereto  as  Exhibit  Three  evidencing  the
completeness of the Mortgage Files.

                                      G-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 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
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 (a  "Request  for
Release")  substantially  in the form of Exhibit D to the Pooling and  Servicing
Agreement signed by a Servicing  Officer of the related 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 related  Servicer the related  Mortgage  File.  The  Depositor
shall deliver to the  Custodian and the Custodian  agrees to accept the Mortgage
Note and other  documents  constituting  the  Mortgage  File with respect to any
Substitute 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,  the related Servicer (or if the Servicer does not, 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  related  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 related Servicer. The related Servicer shall cause each Mortgage File or any
document  therein so  released to be  returned  to the  Custodian  when the need
therefore by the related 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  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 related Servicer

                                      G-3
<PAGE>

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

      At any time that a Servicer  is  required  to deliver to the  Custodian  a
Request for Release,  the Servicer  shall  deliver two copies of the Request for
Release if  delivered  in hard copy or the 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 followed by an
assignment of mortgage,  without  recourse,  representation or warranty from the
Trustee to the Seller and the related  Mortgage  Note shall be endorsed  without
recourse 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 related Servicer.

                                      G-4
<PAGE>

      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 related Servicing Agreement,
shall cause the related Servicer 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 as Bailee and Agent of the Trustee.  With respect to
each Mortgage Note, Mortgage and other documents constituting each Mortgage File
which are delivered to the Custodian,  the Custodian 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,  Radian
Asset Assurance Inc. and the  Certificateholders  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  Depositor,  the
Servicers 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.

      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,  Radian Asset Assurance Inc.

                                      G-5
<PAGE>

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 may remove the  Custodian  at any time with the consent of the
Master Servicer.  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
Servicer or 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,  MBIA Insurance  Corporation  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 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),
or in the case of Radian Asset Assurance Inc., to 335 Madison Avenue,  New York,
New York 10017 or by email at ABSRM@radian.biz, 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

                                      G-6
<PAGE>

hereto,  and neither the  Depositor,  the Master  Servicer nor the Trustee shall
enter into any amendment hereof except as permitted by the Pooling and Servicing
Agreement.  The  Trustee  shall  give  prompt  notice  to the  Custodian  of any
amendment or supplement  to the Pooling and Servicing  Agreement and furnish the
Custodian with written copies thereof.

      Section 4.3 GOVERNING LAW. THIS AGREEMENT  SHALL BE DEEMED A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE  CONSTRUED  AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

      Section  4.4  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  4.5  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.

                                      G-7
<PAGE>

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

Address:                                  U.S. BANK NATIONAL ASSOCIATION, not
                                          individually but solely as Trustee
One Federal Street, 3rd Floor
Boston, Massachusetts 02110
                                          By:__________________________________
Attention:                                Name: Vaneta I. Bernard
Telecopy:                                 Title: Vice President
Confirmation:
Address:                                  STRUCTURED ASSET MORTGAGE
                                          INVESTMENTS II INC.
383 Madison Avenue
New York, New York 10179                  By:__________________________________
                                          Name:  Baron Silverstein
                                          Title: Vice President

Address:                                  WELLS FARGO BANK, NATIONAL
                                          ASSOCIATION, as Master Servicer
9062 Old Annapolis Road
Columbia, Maryland 21045
                                          By:__________________________________
                                          Name:  Stacey Taylor
                                          Title: Assistant Vice President

Address:                                  WELLS FARGO BANK,
                                          NATIONAL ASSOCIATION, as Custodian
9062 Old Annapolis Road
Columbia, Maryland 21045                  By:__________________________________
                                          Name:  Stacey Taylor
                                          Title: Assistant Vice President

                                      G-8
<PAGE>

STATE OF MASSACHUSETTS       )
                             )ss.:
COUNTY OF BOSTON             )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State, personally appeared Vaneta I. Bernard, known to me to be a Vice President
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]

                                      G-9
<PAGE>

STATE OF MARYLAND                   )
                                    ) ss.:
COUNTY OF HOWARD                    )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State,  personally  appeared Stacey Taylor,  known to me to be an Assistant Vice
President  of  Wells  Fargo  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  national  banking  association,  and
acknowledged to me that such national  banking  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

[SEAL]

                                      G-10
<PAGE>

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

      On the 30th day of July 2004  before  me, a notary  public in and for said
State, personally appeared Baron Silverstein, known to me to be a Vice President
of Structured Asset Mortgage  Investments II Inc., one of the corporations  that
executed  the  within  instrument,  and also  known to me to be the  person  who
executed  it on behalf of said  corporation,  and  acknowledged  to me that such
corporation executed the within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                              ------------------------------
                                                      Notary Public

[Notarial Seal]

                                      G-11
<PAGE>

STATE OF MARYLAND                   )
                                    )ss.:
COUNTY OF HOWARD                    )

      On the 30th day of July 2004  before  me, a notary  public in and for said
State,  personally  appeared Stacey Taylor,  known to me to be an Assistant Vice
President of Wells Fargo Bank,  National  Association,  one of the  corporations
that executed the within  instrument,  and also known to me to be the person who
executed  it on behalf of said  corporation,  and  acknowledged  to me that such
corporation executed the within instrument.

      IN WITNESS  WHEREOF,  I have  hereunto set my hand and affixed my official
seal the day and year in this certificate first above written.

                                              ------------------------------
                                                      Notary Public

[Notarial Seal]

                                      G-12
<PAGE>

                                   EXHIBIT ONE

                     FORM OF CUSTODIAN INITIAL CERTIFICATION

                                                       July __, 2004

U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention: Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In  accordance  with  Section  2.3(a)  of  the  above-captioned  Custodial
Agreement,  and  subject  to  Section  2.02(a)  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,
                                           NATIONAL ASSOCIATION

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

                                      G-13
<PAGE>

                                   EXHIBIT TWO

                     FORM OF CUSTODIAN INTERIM CERTIFICATION

                                                     ___________, 20__

U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention:  Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In  accordance  with  Section  2.3(b)  of  the  above-captioned  Custodial
Agreement,  and  subject  to  Section  2.02(a)  of  the  Pooling  and  Servicing
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  relate 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,
                                           NATIONAL ASSOCIATION

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

                                      G-14
<PAGE>

                                  EXHIBIT THREE

                      FORM OF CUSTODIAN FINAL CERTIFICATION

                                                 _______, 20__

U.S. Bank National Association                    Structured Asset Mortgage
One Federal Street, 3rd Floor                     Investments II Inc.
Boston, Massachusetts 02110                       383 Madison Avenue
                                                  New York, New York 10179

Radian Asset Assurance Inc.
335 Madison Avenue
New York, New York 10017

Attention: Structured Asset Mortgage Investments II Inc.
Prime Mortgage Trust 2004-1, Mortgage Pass-Through Certificates, Series 2004-1

            Re:   Custodial  Agreement,  dated as of July 30, 2004, by and among
                  U.S.  Bank National  Association,  Structured  Asset  Mortgage
                  Investments II Inc. and Wells Fargo Bank, National Association
                  relating to Prime Mortgage Trust 2004-1, Mortgage Pass-Through
                  Certificates, Series 2004-1

Ladies and Gentlemen:

      In accordance with Section 2.3 of the above-captioned  Custodial Agreement
and  subject to Section  2.02(b) of the  Pooling and  Servicing  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  relate to the Mortgage Loans identified 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 or in the
Pooling and Servicing Agreement, as applicable.

W                                          ELLS FARGO BANK, NATIONAL ASSOCIATION

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

                                      G-15
<PAGE>

                                                                     EXHIBIT H-1

                               SERVICING AGREEMENT

                                   COUNTRYWIDE

                             [provided upon request]

                                     H-1-1
<PAGE>

                                                                     EXHIBIT H-2

                               SERVICING AGREEMENT

                                       EMC

                             [provided upon request]

                                     H-2-1
<PAGE>

                                                                     EXHIBIT H-3

                               SERVICING AGREEMENT

                                NEXSTAR FINANCIAl

                             [provided upon request]

                                     H-3-1
<PAGE>

                                                                     EXHIBIT H-4

                               SERVICING AGREEMENT

                                 Bank of America

                             [provided upon request]

                                     H-4-1
<PAGE>

                                                                     EXHIBIT H-5

                               SERVICING AGREEMENT

                                  national city

                             [provided upon request]

                                     H-5-1
<PAGE>

                                                                     EXHIBIT H-6

                               SERVICING AGREEMENT

                                     CENDANT

                             [provided upon request]

                                     H-6-1
<PAGE>

                                                                     EXHIBIT H-7

                               SERVICING AGREEMENT

                                      GMAC

                             [provided upon request]

                                     H-7-1
<PAGE>

                                                                     EXHIBIT H-8

                               SERVICING AGREEMENT

                                 CHASE MANHATTAN

                             [provided upon request]

                                     H-8-1
<PAGE>

                                                                     EXHIBIT H-9

                               SERVICING AGREEMENT

                                  CITIMORTGAGE

                             [provided upon request]

                                     H-9-1
<PAGE>

                                                                    EXHIBIT H-10

                               SERVICING AGREEMENT

                                      WFHM

                             [provided upon request]

                                     H-10-1
<PAGE>

                                                                       EXHIBIT I

                              ASSIGNMENT AGREEMENTS

                             [provided upon request]

                                       I-1
<PAGE>

                                                                       EXHIBIT J

                    FORM OF MORTGAGE LOAN PURCHASE AGREEMENT

      MORTGAGE  LOAN PURCHASE  AGREEMENT,  dated as of July 30, 2004, as amended
and  supplemented  by  any  and  all  amendments   hereto   (collectively,   the
"Agreement"),  by and between EMC MORTGAGE  CORPORATION,  a Delaware corporation
(the "Mortgage Loan Seller"), and STRUCTURED ASSET MORTGAGE INVESTMENTS II INC.,
a Delaware corporation (the "Purchaser").

      Upon the  terms and  subject  to the  conditions  of this  Agreement,  the
Mortgage  Loan Seller  agrees to sell,  and the  Purchaser  agrees to  purchase,
certain  conventional,  first lien mortgage  loans secured  primarily by one- to
four-family  residential   properties,   an  interest  in  shares  issued  by  a
cooperative   apartment  corporation  and  the  related  proprietary  lease  and
individual  condominium units (collectively,  the "Mortgage Loans") as described
herein.  The Purchaser  intends to deposit the Mortgage  Loans into a trust fund
(the "Trust Fund") and create Prime Mortgage Trust 2004-1, Mortgage Pass-Through
Certificates, Series 2004-1 (the "Certificates"),  under a pooling and servicing
agreement,  to be  dated  as  of  July  1,  2004  (the  "Pooling  and  Servicing
Agreement"),  among the  Purchaser,  as  depositor,  Wells Fargo Bank,  National
Association, as master servicer and securities administrator, U.S. Bank National
Association,  as trustee (the "Trustee") and EMC Mortgage Corporation, as seller
and company.

      The Purchaser has filed with the Securities and Exchange  Commission  (the
"Commission") a registration  statement on Form S-3 (Number 333-115122) relating
to its Mortgage  Pass-Through  Certificates  and the offering of certain  series
thereof  (including  certain classes of the  Certificates)  from time to time in
accordance  with Rule 415 under the Securities Act of 1933, as amended,  and the
rules and regulations of the Commission  promulgated thereunder (the "Securities
Act").  Such  registration  statement,   when  it  became  effective  under  the
Securities  Act, and the prospectus  relating to the public  offering of certain
classes of the  Certificates by the Purchaser (the "Public  Offering"),  as each
may be amended or supplemented  from time to time pursuant to the Securities Act
or otherwise,  are referred to herein as the  "Registration  Statement"  and the
"Prospectus,"   respectively.   The  "Prospectus  Supplement"  shall  mean  that
supplement,  dated July 29, 2004 to the Prospectus, dated May 14, 2004, relating
to certain classes of the  Certificates.  With respect to the Public Offering of
certain classes of the Certificates,  the Purchaser and Bear, Stearns & Co. Inc.
("Bear  Stearns") have entered into a terms  agreement dated as of July 29, 2004
to an underwriting agreement dated July 29, 2003, between the Purchaser and Bear
Stearns (collectively, the "Underwriting Agreement").

      Now, therefore, in consideration of the premises and the mutual agreements
set forth herein, the parties hereto agree as follows:

      SECTION 1.  Definitions.  Certain  terms are defined  herein.  Capitalized
terms used herein but not defined  herein shall have the  meanings  specified in
the Pooling and Servicing  Agreement.  The following  other terms are defined as
follows:

                                      J-1
<PAGE>

      Acquisition  Price:  Cash in an amount equal to $______  (plus  $______ in
accrued interest)(1).

      Bear Stearns: Bear, Stearns & Co. Inc.

      Closing Date: July 30, 2004.

      Cut-off Date: July 1, 2004.

      Cut-off Date Balance: approximately $294,347,747.

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

      Due Date:  With respect to each Mortgage  Loan,  the date in each month on
which its scheduled  payment is due if such due date is the first day of a month
and otherwise is deemed to be the first day of the following month or such other
date specified in the related Servicing Agreement.

      Fitch: Fitch, Inc. or its successor in interest.

      Master Servicer: Wells Fargo Bank, National Association.

      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.

      Mortgage:  The  mortgage  or deed of  trust  creating  a first  lien on an
interest in real property securing a Mortgage Note.

      Mortgage  File:  The  items  referred  to in  Exhibit  1  pertaining  to a
particular  Mortgage Loan and any additional  documents  required to be added to
such documents pursuant to this Agreement.

      Mortgage  Interest  Rate:  The annual rate of interest borne by a Mortgage
Note as stated therein.

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

      Net Rate:  For each  Mortgage  Loan,  the Mortgage  Interest Rate for such
Mortgage  Loan  less the  Servicing  Fee Rate and the  Lender-Paid  PMI Rate (if
applicable).

      Opinion of Counsel:  A written opinion of counsel,  who may be counsel for
the Mortgage Loan Seller or the Purchaser, reasonably acceptable to the Trustee.

----------
(1)   Please contact Bear, Stearns & Co. Inc. for Purchase Price.

                                      J-2
<PAGE>

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

      Purchase  Price:  With  respect  to any  Mortgage  Loan  (or any  property
acquired with respect  thereto)  required to be repurchased by the Mortgage Loan
Seller  pursuant to this  Agreement  or Article II of the Pooling and  Servicing
Agreement,  an  amount  equal  to the  sum of  (i)(a)  100%  of the  Outstanding
Principal  Balance of such Mortgage Loan as of the date of repurchase (or if the
related  Mortgaged  Property was  acquired  with  respect  thereto,  100% of the
Outstanding Principal Balance at the date of the acquisition),  plus (b) accrued
but unpaid interest on the Outstanding Principal Balance at the related Mortgage
Interest  Rate,  through and including the last day of the month of  repurchase,
plus (c) any unreimbursed Monthly Advances and servicing advances payable to the
Servicer of the Mortgage  Loan and (ii) 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 Agencies: Standard & Poor's and Fitch, each a "Rating Agency."

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

      Security Instrument: A written instrument creating a valid first lien on a
Mortgaged Property securing a Mortgage Note, which may be any applicable form of
mortgage,  deed of trust,  deed to secure debt or security  deed,  including any
riders or addenda thereto.

      Servicing Agreements:  Shall have the meaning assigned to such term in the
Pooling and Servicing Agreement.

      Standard  & Poor's:  Standard  & Poor's,  a  division  of The  McGraw-Hill
Companies, Inc. or its successors in interest.

      Substitute  Mortgage  Loan:  A  mortgage  loan  substituted  for a Deleted
Mortgage Loan which must meet on the date of such  substitution the requirements
stated   herein  and  in  the  Pooling  and  Servicing   Agreement;   upon  such
substitution, such mortgage loan shall be a "Mortgage Loan" hereunder.

      Value:  The value of the Mortgaged  Property at the time of origination of
the related  Mortgage Loan, such value being the lesser of (i) the value of such
property set forth in an appraisal accepted by the applicable  originator of the
Mortgage  Loan  or  (ii)  the  sales  price  of  such  property  at the  time of
origination.

      SECTION 2. Purchase and Sale of the Mortgage Loans and Related Rights. (a)
Upon satisfaction of the conditions set forth in Section 10 hereof, the Mortgage
Loan Seller agrees to sell, and the Purchaser agrees to purchase  Mortgage Loans
having an aggregate  outstanding  principal balance as of the Cut-off Date equal
to the Cut-off Date Balance.

                                      J-3
<PAGE>

      (b) The closing for the purchase  and sale of the  Mortgage  Loans and the
closing for the issuance of the Certificates will take place on the Closing Date
at the office of the  Purchaser's  counsel  in New York,  New York or such other
place as the parties shall agree.

      (c) Upon the  satisfaction  of the  conditions  set  forth in  Section  10
hereof, on the Closing Date, the Purchaser shall pay to the Mortgage Loan Seller
the Acquisition  Price for the Mortgage Loans in immediately  available funds by
wire transfer to such account or accounts as shall be designated by the Mortgage
Loan Seller.

      (d) In addition to the  foregoing,  on the Closing Date the Mortgage  Loan
Seller  assigns to the  Purchaser  all of its right,  title and  interest in the
Servicing  Agreements (other than its right to enforce the  representations  and
warranties set forth therein).

      SECTION 3.  Mortgage  Loan  Schedules.  The Mortgage Loan Seller agrees to
provide to the  Purchaser  as of the date  hereof a  preliminary  listing of the
Mortgage  Loans (the  "Preliminary  Mortgage Loan  Schedule")  setting forth the
information  listed on Exhibit 2 to this  Agreement  with respect to each of the
Mortgage  Loans being sold by the Mortgage Loan Seller.  If there are changes to
the Preliminary  Mortgage Loan Schedule,  the Mortgage Loan Seller shall provide
to the Purchaser as of the Closing Date a final  schedule  (the "Final  Mortgage
Loan  Schedule")  setting  forth the  information  listed  on  Exhibit 2 to this
Agreement  with respect to each of the Mortgage Loans being sold by the Mortgage
Loan  Seller  to the  Purchaser.  The  Final  Mortgage  Loan  Schedule  shall be
delivered  to the  Purchaser  on the  Closing  Date,  shall  be  attached  to an
amendment  to this  Agreement  to be executed on the Closing Date by the parties
hereto and shall be in form and  substance  mutually  agreed to by the  Mortgage
Loan Seller and the Purchaser (the "Amendment").  If there are no changes to the
Preliminary Mortgage Loan Schedule, the Preliminary Mortgage Loan Schedule shall
be the Final Mortgage Loan Schedule for all purposes hereof.

      SECTION 4. Mortgage Loan Transfer.

      (a) The Purchaser will be entitled to all scheduled  payments of principal
and interest on the Mortgage  Loans due after the Cut-off  Date  (regardless  of
when  actually  collected)  and  all  payments  thereon,  other  than  scheduled
principal and interest due on or before the Cut-off Date but received  after the
Cut-off  Date.  The  Mortgage  Loan Seller  will be  entitled  to all  scheduled
payments of principal  and  interest on the Mortgage  Loans due on or before the
Cut-off  Date  (including  payments  collected  after the Cut-off  Date) and all
payments  thereon,  other than  scheduled  principal  and interest due after the
Cut-off Date but received on or before the Cut-off Date. Such principal  amounts
and any interest  thereon  belonging  to the  Mortgage  Loan Seller as described
above will not be included in the aggregate outstanding principal balance of the
Mortgage  Loans as of the Cut-off Date as set forth on the Final  Mortgage  Loan
Schedule.

      (b)  Pursuant  to various  conveyancing  documents  to be  executed on the
Closing Date and pursuant to the Pooling and Servicing Agreement,  the Purchaser
will assign on the Closing  Date all of its right,  title and interest in and to
the Mortgage Loans to the Trustee for the benefit of the  Certificateholders and
Radian Asset  Assurance  Inc.. In connection with the transfer and assignment of
the Mortgage Loans, the Mortgage Loan Seller has delivered or will

                                      J-4
<PAGE>

deliver or cause to be  delivered  to the  Trustee by the  Closing  Date or such
later date as is agreed to by the  Purchaser  and the Mortgage Loan Seller (each
of the  Closing  Date and such later date is  referred  to as a  "Mortgage  File
Delivery Date"),  the items of each Mortgage File,  provided,  however,  that in
lieu of the  foregoing,  the  Mortgage  Loan Seller may  deliver  the  following
documents,  under the circumstances set forth below: (w) in lieu of the original
Security  Instrument,  assignments  to the  Trustee or  intervening  assignments
thereof which have been delivered,  are being delivered or will, upon receipt of
recording  information  relating  to  the  Security  Instrument  required  to be
included  thereon,  be delivered to recording offices for recording and have not
been  returned to the Mortgage  Loan Seller in time to permit their  delivery as
specified above, the Mortgage Loan Seller may deliver a true copy thereof with a
certification  by  the  Mortgage  Loan  Seller,   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"; (x) in lieu of the Security
Instrument,  assignments to the Trustee or intervening  assignments  thereof, if
the  applicable  jurisdiction  retains  the  originals  of  such  documents  (as
evidenced by a  certification  from the Mortgage Loan Seller to such effect) the
Mortgage Loan Seller may deliver  photocopies  of such  documents  containing an
original  certification by the judicial or other  governmental  authority of the
jurisdiction  where such documents  were  recorded;  (y) in lieu of the Mortgage
Notes relating to the Mortgage  Loans,  each identified in the list delivered by
the Purchaser to the Trustee on the Closing Date and attached  hereto as Exhibit
5, the Mortgage Loan Seller may deliver lost note  affidavits and indemnities of
the Mortgage Loan Seller; and (z) the Mortgage Loan Seller shall not be required
to deliver  intervening  assignments or Mortgage Note  endorsements  between the
related  Underlying  Seller and the Mortgage  Loan Seller,  between the Mortgage
Loan Seller and the  Depositor,  and between the Depositor and the Trustee;  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
Mortgage Loan Seller, in lieu of delivering the above documents,  may deliver to
the Trustee a  certification  by the Mortgage Loan Seller or the Master Servicer
to such effect and shall  deposit all amounts  paid in respect of such  Mortgage
Loans in the  Master  Servicer  Collection  Account  on the  Closing  Date.  The
Mortgage  Loan Seller  shall  deliver such  original  documents  (including  any
original  documents as to which certified  copies had previously been delivered)
or such certified  copies to the Trustee  promptly after they are received.  The
Mortgage Loan Seller shall cause the Mortgage and  intervening  assignments,  if
any, and the assignment of the Security Instrument to be recorded not later than
180 days after the Closing  Date,  unless such  assignment is not required to be
recorded under the terms set forth in Section 6(a) hereof.

      (c) In connection  with the assignment of any Mortgage Loan  registered on
the MERS(R) System,  the Mortgage Loan Seller further agrees that it will cause,
at the Mortgage  Loan  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 Mortgage Loan Seller to the Purchaser and by the Purchaser 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 Mortgage Loan Seller  further agrees that it will not, and
will not permit any Servicer or the Master  Servicer to, and the Master Servicer
agrees that it will not, alter the codes referenced in this paragraph

                                      J-5
<PAGE>

with respect to any Mortgage  Loan during the term of the Pooling and  Servicing
Agreement  unless and until such Mortgage Loan is repurchased in accordance with
the terms of the Pooling and Servicing Agreement.

      (d) The Mortgage Loan Seller and the Purchaser  acknowledge hereunder that
all of the Mortgage Loans and the related  servicing will ultimately be assigned
to U.S. Bank National Association, as Trustee for the Certificateholders, on the
date hereof.

      SECTION 5. Examination of Mortgage Files.

      (a) On or before the Mortgage File Delivery Date, the Mortgage Loan Seller
will have made the Mortgage  Files  available to the  Purchaser or its agent for
examination  which may be at the  offices of the  Trustee or the  Mortgage  Loan
Seller and/or the Mortgage Loan Seller's custodian.  The fact that the Purchaser
or its agent has  conducted  or has failed to conduct  any  partial or  complete
examination  of the Mortgage  Files shall not affect the  Purchaser's  rights to
demand  cure,  repurchase,  substitution  or other  relief as  provided  in this
Agreement. In furtherance of the foregoing,  the Mortgage Loan Seller shall make
the Mortgage Files  available to the Purchaser or its agent from time to time so
as to permit the Purchaser to confirm the Mortgage Loan Seller's compliance with
the delivery and recordation  requirements of this Agreement and the Pooling and
Servicing Agreement.  In addition,  upon request of the Purchaser,  the Mortgage
Loan  Seller  agrees  to  provide  to the  Purchaser,  Bear  Stearns  and to any
investors or prospective investors in the Certificates information regarding the
Mortgage Loans and their servicing,  to make the Mortgage Files available to the
Purchaser,  Bear Stearns and to such investors or prospective  investors  (which
may be at the offices of the  Mortgage  Loan  Seller  and/or the  Mortgage  Loan
Seller's  custodian) and to make  available  personnel  knowledgeable  about the
Mortgage  Loans  for  discussions  with the  Purchaser,  Bear  Stearns  and such
investors or  prospective  investors,  upon  reasonable  request  during regular
business  hours,  sufficient  to permit the  Purchaser,  Bear  Stearns  and such
investors or potential investors to conduct such due diligence as any such party
reasonably believes is appropriate.

      (b) Pursuant to the Pooling and Servicing  Agreement,  on the Closing Date
the   Custodian,   on  behalf  of  the   Trustee,   for  the   benefit   of  the
Certificateholders  and Radian Asset Assurance Inc., will acknowledge receipt of
each Mortgage  Loan, by delivery to the Mortgage Loan Seller,  the Purchaser and
the Trustee of an initial  certification  in the form attached as Exhibit One to
the Custodial Agreement.

      (c) Pursuant to the Pooling and Servicing Agreement, within 90 days of the
Closing Date (or,  with respect to any  Substitute  Mortgage  Loan,  within five
Business  Days after the  receipt  by the  Trustee or  Custodian  thereof),  the
Trustee will review or shall cause the Custodian to review items of the Mortgage
Files as set forth on Exhibit 1 and will  deliver to the  Mortgage  Loan Seller,
the Purchaser and the Trustee an interim certification substantially in the form
of Exhibit Two to the Custodial Agreement.  If the Trustee or Custodian,  as its
agent,  finds any  document  listed on  Exhibit 1 not to have been  executed  or
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
the Final Mortgage Loan Schedule or to appear defective on its face (a "Material
Defect"), the Trustee or the Custodian,  as its agent, shall promptly notify the

                                      J-6
<PAGE>

Mortgage  Loan Seller of such  Material  Defect.  The Mortgage Loan Seller shall
correct or cure any such Material  Defect within 90 days from the date of notice
from the Trustee or the Custodian,  as its agent,  of the Material Defect and if
the Mortgage  Loan Seller fails to correct or cure such  Material  Defect within
such period and such defect  materially  and adversely  affects the interests of
the  Certificateholders  in the related  Mortgage Loan, the Mortgage Loan Seller
will,  in  accordance  with the terms of the  Pooling and  Servicing  Agreement,
within 90 days of the date of notice,  provide  the  Trustee  with a  Substitute
Mortgage  Loan (if within two years of the Closing Date) or purchase the related
Mortgage Loan at the applicable  Purchase  Price;  provided that, if such defect
would cause the Mortgage Loan to be other than a "qualified mortgage" as defined
in Section  860G(a)(3) of the Code,  any such cure,  repurchase or  substitution
must occur  within 90 days from the date such breach was  discovered;  provided,
however,  that if such defect  relates  solely to the  inability of the Mortgage
Loan  Seller  to  deliver  the  original  Security   Instrument  or  intervening
assignments  thereof,  or  a  certified  copy  because  the  originals  of  such
documents,  or a  certified  copy,  have not  been  returned  by the  applicable
jurisdiction,  the Mortgage  Loan Seller shall not be required to purchase  such
Mortgage  Loan if the Mortgage Loan Seller  delivers such original  documents or
certified copy promptly upon receipt,  but in no event later than 360 days after
the Closing Date.  The foregoing  repurchase  obligation  shall not apply in the
event that the Mortgage Loan Seller cannot  deliver such original or copy of any
document  submitted for  recording to the  appropriate  recording  office in the
applicable  jurisdiction  because such  document  has not been  returned by such
office; provided that the Mortgage Loan Seller shall instead deliver a recording
receipt  of such  recording  office  or, if such  receipt  is not  available,  a
certificate confirming that such documents have been accepted for recording, and
delivery to the Trustee or the Custodian, as its agent, shall be effected by the
Mortgage Loan Seller within thirty days of its receipt of the original  recorded
document.

      (d) Pursuant to the Pooling and  Servicing  Agreement,  within 180 days of
the Closing Date (or, with respect to any Substitute  Mortgage Loan, within five
Business Days after the receipt by the Trustee or Custodian thereof) the Trustee
will review or cause the Custodian to review items of the Mortgage  Files as set
forth on Exhibit 1 and will deliver to the Mortgage  Loan Seller,  the Purchaser
and the Trustee a final certification substantially in the form of Exhibit Three
to the Custodial Agreement.  If the Trustee or Custodian,  as its agent, finds a
Material  Defect,  the Trustee or the  Custodian,  as its agent,  shall promptly
notify the Mortgage  Loan Seller of such  Material  Defect.  The  Mortgage  Loan
Seller shall  correct or cure any such  Material  Defect within 90 days from the
date of notice from the Trustee or the Custodian,  as its agent, of the Material
Defect and if the Mortgage  Loan Seller  fails to correct or cure such  Material
Defect within such period and such defect  materially and adversely  affects the
interests of the  Certificateholders  in the related Mortgage Loan, the Mortgage
Loan Seller  will,  in  accordance  with the terms of the Pooling and  Servicing
Agreement,  within 90 days of the date of notice,  provide  the  Trustee  with a
Substitute  Mortgage  Loan (if within two years of the Closing Date) or purchase
the related  Mortgage Loan at the applicable  Purchase Price;  provided that, if
such  defect  would  cause  the  Mortgage  Loan to be  other  than a  "qualified
mortgage"  as  defined  in  Section  860G(a)(3)  of the  Code,  any  such  cure,
repurchase or  substitution  must occur within 90 days from the date such breach
was  discovered;  provided,  however,  that if such defect relates solely to the
inability  of  the  Mortgage  Loan  Seller  to  deliver  the  original  Security
Instrument or intervening  assignments  thereof, or a certified copy because the
originals of such documents,  or a certified copy, have not been returned by the
applicable jurisdiction, the Mortgage Loan Seller

                                      J-7
<PAGE>

shall not be required to purchase such Mortgage Loan if the Mortgage Loan Seller
delivers such original documents or certified copy promptly upon receipt, but in
no event later than 360 days after the Closing Date.  The  foregoing  repurchase
obligation  shall not apply in the event that the  Mortgage  Loan Seller  cannot
deliver such  original or copy of any document  submitted  for  recording to the
appropriate  recording  office  in  the  applicable  jurisdiction  because  such
document has not been  returned by such office;  provided that the Mortgage Loan
Seller shall instead deliver a recording receipt of such recording office or, if
such receipt is not available, a certificate confirming that such documents have
been accepted for recording,  and delivery to the Trustee or the  Custodian,  as
its agent,  shall be effected by the Mortgage  Loan Seller within thirty days of
its receipt of the original recorded document.

      (e) At the  time of any  substitution,  the  Mortgage  Loan  Seller  shall
deliver or cause to be  delivered  the  Substitute  Mortgage  Loan,  the related
Mortgage File and any other  documents and payments  required to be delivered in
connection with a substitution  pursuant to the Pooling and Servicing Agreement.
At the time of any purchase or substitution,  the Trustee in accordance with the
terms of the Pooling and  Servicing  Agreement  shall (i) assign to the Mortgage
Loan Seller and cause the Custodian to release the documents (including, but not
limited to, the Mortgage, Mortgage Note and other contents of the Mortgage File)
in the  possession  of the Custodian  relating to the Deleted  Mortgage Loan and
(ii) execute and deliver such  instruments  of transfer or  assignment,  in each
case without recourse, as shall be necessary to vest in the Mortgage Loan Seller
title to such Deleted Mortgage Loan.

      SECTION 6. Recordation of Assignments of Mortgage.

      (a) The Mortgage  Loan Seller shall cause each  assignment of the Security
Instrument from the Mortgage Loan Seller to the Trustee to be recorded not later
than 180 days  after  the  Closing  Date,  unless  (a) such  recordation  is not
required by the Rating  Agencies  or an Opinion of Counsel has been  provided to
the Trustee (with a copy to the Custodian)  which states that the recordation of
such   assignments   is  not   necessary   to  protect  the   interests  of  the
Certificateholders  in the related  Mortgage  Loans or (b) MERS is identified on
the Mortgage or a properly recorded assignment of the Mortgage, as the Mortgagee
of record solely as nominee for the Mortgage Loan Seller and its  successors and
assigns; provided, however, notwithstanding the foregoing, each assignment shall
be submitted for  recording by the Mortgage Loan Seller in the manner  described
above, at no expense to the Trust or Trustee,  upon the earliest to occur of (i)
reasonable  direction  by the  Holders  of  Certificates  evidencing  Fractional
Undivided  Interests  aggregating  not  less  than  25% of the  Trust,  (ii) the
occurrence  of a  Event  of  Default,  (iii)  the  occurrence  of a  bankruptcy,
insolvency  or  foreclosure  relating to the  Mortgage  Loan Seller and (iv) the
occurrence  of a servicing  transfer as described in Section 8.02 of the Pooling
and Servicing Agreement.

      While each such Mortgage or assignment  is being  recorded,  if necessary,
the  Mortgage  Loan  Seller  shall  leave or cause to be left with the Trustee a
certified copy of such Mortgage or assignment.  All customary recording fees and
reasonable  expenses  relating to the recordation of the assignments of mortgage
to the Trustee or the Opinion of Counsel,  as the case may be, shall be borne by
the Mortgage Loan Seller.

                                      J-8
<PAGE>

      (b) It is the express  intent of the parties hereto that the conveyance of
the Mortgage Loans by the Mortgage Loan Seller to the Purchaser, as contemplated
by this  Agreement  be,  and be  treated  as, a sale.  It is,  further,  not the
intention of the parties that such conveyance be deemed a pledge of the Mortgage
Loans by the  Mortgage  Loan Seller to the  Purchaser  to secure a debt or other
obligation   of  the  Mortgage  Loan  Seller.   However,   in  the  event  that,
notwithstanding  the intent of the  parties,  the  Mortgage  Loans are held by a
court to  continue to be property of the  Mortgage  Loan  Seller,  then (a) this
Agreement shall also be deemed to be a security  agreement within the meaning of
Articles 8 and 9 of the applicable  Uniform Commercial Code; (b) the transfer of
the  Mortgage  Loans  provided  for herein  shall be deemed to be a grant by the
Mortgage  Loan  Seller to the  Purchaser  of a security  interest  in all of the
Mortgage Loan Seller's  right,  title and interest in and to the Mortgage  Loans
and all amounts  payable to the holders of the Mortgage Loans in accordance with
the terms thereof and all proceeds of the conversion,  voluntary or involuntary,
of the foregoing into cash,  instruments,  securities or other property,  to the
extent the Purchaser  would otherwise be entitled to own such Mortgage Loans and
proceeds  pursuant  to  Section 4 hereof,  including  all  amounts,  other  than
investment earnings,  from time to time held or invested in any accounts created
pursuant to the Pooling and  Servicing  Agreement,  whether in the form of cash,
instruments,  securities or other property;  (c) the possession by the Purchaser
or the Trustee of Mortgage  Notes and such other items of property as constitute
instruments,  money, negotiable documents or chattel paper shall be deemed to be
"possession  by the secured  party" for  purposes  of  perfecting  the  security
interest  pursuant to Section 9-313 (or comparable  provision) of the applicable
Uniform Commercial Code; and (d) notifications to persons holding such property,
and  acknowledgments,  receipts  or  confirmations  from  persons  holding  such
property,  shall be deemed  notifications  to, or  acknowledgments,  receipts or
confirmations from, financial intermediaries,  bailees or agents (as applicable)
of the  Purchaser for the purpose of perfecting  such  security  interest  under
applicable law. Any assignment of the interest of the Purchaser  pursuant to any
provision  hereof or pursuant to the Pooling and Servicing  Agreement shall also
be deemed to be an  assignment  of any security  interest  created  hereby.  The
Mortgage Loan Seller and the Purchaser shall, to the extent consistent with this
Agreement,  take such actions as may be reasonably  necessary to ensure that, if
this Agreement were deemed to create a security  interest in the Mortgage Loans,
such security  interest would be deemed to be a perfected  security  interest of
first  priority under  applicable law and will be maintained as such  throughout
the term of the Pooling and Servicing Agreement.

      SECTION  7.   Representations  and  Warranties  of  Mortgage  Loan  Seller
Concerning the Mortgage  Loans.  The Mortgage Loan Seller hereby  represents and
warrants to the  Purchaser  as of the Closing  Date or such other date as may be
specified below with respect to each Mortgage Loan being sold by it:

            (i) the  information  set forth in the Mortgage Loan Schedule hereto
      is true and correct in all material respects and the information  provided
      to the Rating Agencies,  including the Mortgage Loan level detail, is true
      and correct according to the Rating Agency requirements;

            (ii)  immediately  prior  to  the  transfer  to the  Purchaser,  the
      Mortgage Loan Seller was the sole owner of beneficial  title and holder of
      each  Mortgage and  Mortgage  Note  relating to the Mortgage  Loans and is
      conveying the same free and clear

                                      J-9
<PAGE>

      of any and  all  liens,  claims,  encumbrances,  participation  interests,
      equities,  pledges,  charges or security  interests  of any nature and the
      Mortgage  Loan Seller has full right and  authority  to sell or assign the
      same pursuant to this Agreement;

            (iii) Each  Mortgage  Loan at the time it was made  complied  in all
      material  respects with all applicable  laws and  regulations,  including,
      without  limitation,  usury,  equal  credit  opportunity,  disclosure  and
      recording laws and all predatory  lending laws; and each Mortgage Loan has
      been serviced in all material  respects in accordance  with all applicable
      laws and regulations,  including, without limitation,  usury, equal credit
      opportunity,  disclosure and recording laws and all predatory lending laws
      and the terms of the related  Mortgage  Note,  the Mortgage and other loan
      documents;

            (iv) there is no monetary default existing under any Mortgage or the
      related  Mortgage  Note and there is no  material  event  which,  with the
      passage  of time or with  notice and the  expiration  of any grace or cure
      period, would constitute a default,  breach or event of acceleration;  and
      neither the Mortgage Loan Seller,  any of its  affiliates nor any servicer
      of any related  Mortgage  Loan has taken any action to waive any  default,
      breach or event of  acceleration;  no foreclosure  action is threatened or
      has been commenced with respect to the Mortgage Loan;

            (v) the terms of the Mortgage  Note and the  Mortgage  have not been
      impaired,  waived,  altered or modified in any respect,  except by written
      instruments,  (i)  if  required  by  law in  the  jurisdiction  where  the
      Mortgaged  Property is located,  or (ii) to protect the  interests  of the
      Trustee on behalf of the Certificateholders;

            (vi) no selection procedure reasonably believed by the Mortgage Loan
      Seller  to be  adverse  to the  interests  of the  Certificateholders  was
      utilized in selecting the Mortgage Loans;

            (vii) each  Mortgage  is a valid and  enforceable  first lien on the
      property securing the related Mortgage Note and each Mortgaged Property is
      owned by the Mortgagor in fee simple  (except with respect to common areas
      in the case of condominiums, PUDs and de minimis PUDs) or by leasehold for
      a term longer than the term of the related  Mortgage,  subject only to (i)
      the lien of current real property taxes and  assessments,  (ii) covenants,
      conditions and restrictions, rights of way, easements and other matters of
      public  record  as of  the  date  of  recording  of  such  Mortgage,  such
      exceptions being acceptable to mortgage lending institutions  generally or
      specifically  reflected in the appraisal  obtained in connection  with the
      origination  of the related  Mortgage  Loan or referred to in the lender's
      title insurance policy delivered to the originator of the related Mortgage
      Loan and (iii) other matters to which like properties are commonly subject
      which do not  materially  interfere  with  the  benefits  of the  security
      intended to be provided by such Mortgage;

            (viii)  there is no  mechanics'  lien or claim  for  work,  labor or
      material affecting the premises subject to any Mortgage which is or may be
      a lien prior to, or

                                      J-10
<PAGE>

      equal  with,  the lien of such  Mortgage  except  those  which are insured
      against by the title insurance policy referred to in (xiiii) below;

            (ix)  as of the  Cut-off  Date,  to the  best of the  Mortgage  Loan
      Seller's knowledge, there was no delinquent tax or assessment lien against
      the  property  subject to any  Mortgage,  except where such lien was being
      contested in good faith and a stay had been granted against levying on the
      property;

            (x)  there  is no  valid  offset,  defense  or  counterclaim  to any
      Mortgage Note or Mortgage,  including  the  obligation of the Mortgagor to
      pay the unpaid principal and interest on such Mortgage Note;

            (xi) to the best of the Mortgage Loan Seller's knowledge,  except to
      the  extent  insurance  is in place  which will  cover  such  damage,  the
      physical  property  subject to any Mortgage is free of material damage and
      is in good repair and there is no proceeding pending or threatened for the
      total or partial condemnation of any Mortgaged Property;

            (xii) to the  best of the  Mortgage  Loan  Seller's  knowledge,  the
      Mortgaged   Property  and  all   improvements   thereon  comply  with  all
      requirements of any applicable zoning and subdivision laws and ordinances;

            (xiii) a lender's title  insurance  policy (on an ALTA or CLTA form)
      or  binder,  or  other  assurance  of  title  customary  in  the  relevant
      jurisdiction  therefor in a form  acceptable to Fannie Mae or Freddie Mac,
      was  issued on the date that each  Mortgage  Loan was  created  by a title
      insurance  company  which,  to the  best  of the  Mortgage  Loan  Seller's
      knowledge,  was  qualified  to do business in the  jurisdiction  where the
      related Mortgaged  Property is located,  insuring the Mortgage Loan Seller
      and its  successors and assigns that the Mortgage is a first priority lien
      on the related Mortgaged  Property in the original principal amount of the
      Mortgage  Loan.  The Mortgage  Loan Seller is the sole insured  under such
      lender's title insurance policy,  and such policy,  binder or assurance is
      valid and remains in full force and effect,  and each such policy,  binder
      or  assurance  shall  contain  all  applicable  endorsements  including  a
      negative amortization endorsement, if applicable;

            (xiv) at the time of  origination,  each Mortgaged  Property was the
      subject of an appraisal which conformed to the  underwriting  requirements
      of the  originator  of the Mortgage  Loan and, the  appraisal is in a form
      acceptable to Fannie Mae or FHLMC;

            (xv) as of the Closing  Date,  the  improvements  on each  Mortgaged
      Property  securing a  Mortgage  Loan is  insured  (by an insurer  which is
      acceptable  to the  Mortgage  Loan  Seller)  against loss by fire and such
      hazards as are covered under a standard extended  coverage  endorsement in
      the locale in which the Mortgaged Property is located,  in an amount which
      is not  less  than  the  lesser  of the  maximum  insurable  value  of the
      improvements  securing  such Mortgage  Loan or the  outstanding  principal
      balance of the  Mortgage  Loan,  but in no event in an amount less than an
      amount that is required

                                      J-11
<PAGE>

      to prevent the Mortgagor from being deemed to be a co-insurer  thereunder;
      if the improvement on the Mortgaged  Property is a condominium unit, it is
      included  under  the  coverage  afforded  by  a  blanket  policy  for  the
      condominium project; if upon origination of the related Mortgage Loan, the
      improvements  on the Mortgaged  Property  were in an area  identified as a
      federally  designated flood area, a flood insurance policy is in effect in
      an  amount  representing  coverage  not  less  than  the  least of (i) the
      outstanding  principal  balance of the Mortgage Loan,  (ii) the restorable
      cost of  improvements  located  on such  Mortgaged  Property  or (iii) the
      maximum coverage  available under federal law; and each Mortgage obligates
      the Mortgagor  thereunder  to maintain the insurance  referred to above at
      the Mortgagor's cost and expense;

            (xvi) each Mortgage Loan  constitutes a "qualified  mortgage"  under
      Section   860G(a)(3)(A)  of  the  Code  and  Treasury  Regulation  Section
      1.860G-2(a)(1);

            (xvii) each Mortgage Loan was  originated or funded by (a) a savings
      and  loan  association,  savings  bank,  commercial  bank,  credit  union,
      insurance company or similar  institution which is supervised and examined
      by a federal or state  authority (or originated by (i) a subsidiary of any
      of the foregoing  institutions which subsidiary is actually supervised and
      examined by  applicable  regulatory  authorities  or (ii) a mortgage  loan
      correspondent of any of the foregoing and that was originated  pursuant to
      the  criteria  established  by any of the  foregoing)  or (b) a  mortgagee
      approved by the  Secretary  of Housing and Urban  Development  pursuant to
      sections 203 and 211 of the National Housing Act, as amended;

            (xviii) 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  the Home Ownership and
      Equity Protection Act of 1994, as amended or (b) classified and/or defined
      as a "high  cost  home  loan"  under  any  federal,  state or  local  law,
      including, but not limited to, the States of Georgia or North Carolina;

            (xix) no loan is a  High-Cost  Home Loan under the New  Jersey  Home
      Ownership Security Act of 2002;

            (xx)  no loan  in the  transaction  originated  in New  Mexico  is a
      High-Cost Home Loan under the New Mexico Home Loan Protection Act;

            (xxi) the  information  set forth in  Schedule  A of the  Prospectus
      Supplement  with respect to the Mortgage  Loans is true and correct in all
      material respects;

            (xxii) no  Mortgage  Loan is a High Cost Loan or  Covered  Loan,  as
      applicable  (as such  terms are  defined in  Standard  & Poor's  LEVELS(R)
      Glossary,  Version 5.6 Revised,  Appendix E, attached hereto as Exhibit 6)
      and no Mortgage Loan  originated on or after October 1, 2002 through March
      6, 2003 is governed by the "Georgia Fair Lending Act";

                                      J-12
<PAGE>

            (xxiii) each  Mortgage Loan was  originated  in accordance  with the
      underwriting guidelines of the related originator;

            (xxiv) each original Mortgage has been recorded or is in the process
      of being recorded in accordance  with the  requirements of Section 2.01 of
      the Pooling  and  Servicing  Agreement  in the  appropriate  jurisdictions
      wherein such  recordation  is required to perfect the lien thereof for the
      benefit of the Trust Fund;

            (xxv) the related  Mortgage  File contains each of the documents and
      instruments listed in Section 2.01 of the Pooling and Servicing Agreement,
      subject to any exceptions,  substitutions  and  qualifications  as are set
      forth in such Section;

            (xxvi) the Mortgage Loans are currently being serviced in accordance
      with accepted servicing practices; and

            (xxvii) at the time of origination,  each Mortgaged Property was the
      subject of an appraisal which conformed to the  underwriting  requirements
      of the  originator  of the Mortgage  Loan,  and the appraisal is in a form
      which was acceptable to Fannie Mae or FHLMC at the time of origination.

      It is understood  and agreed that the  representations  and warranties set
forth  in this  Section  7 will  inure  to the  benefit  of the  Purchaser,  its
successors and assigns, notwithstanding any restrictive or qualified endorsement
on any  Mortgage  Note or  assignment  of  Mortgage  or the  examination  of any
Mortgage File. Upon any  substitution  for a Mortgage Loan, the  representations
and  warranties  set forth above shall be deemed to be made by the Mortgage Loan
Seller as to any Substitute Mortgage Loan as of the date of substitution.

      Upon  discovery  or receipt of notice by the  Mortgage  Loan  Seller,  the
Purchaser  or the Trustee of a breach of any  representation  or warranty of the
Mortgage Loan Seller set forth in this Section 7 which  materially and adversely
affects the value of the interests of the Purchaser,  the  Certificateholders or
the Trustee in any of the Mortgage Loans delivered to the Purchaser  pursuant to
this Agreement,  the party  discovering or receiving notice of such breach shall
give prompt  written  notice to the others.  In the case of any such breach of a
representation  or warranty set forth in this Section 7, within 90 days from the
date of  discovery by the Mortgage  Loan Seller,  or the date the Mortgage  Loan
Seller is notified by the party  discovering or receiving  notice of such breach
(whichever  occurs earlier),  the Mortgage Loan Seller will (i) cure such breach
in all  material  respects,  (ii)  purchase the  affected  Mortgage  Loan at the
applicable  Purchase  Price or (iii) if within  two years of the  Closing  Date,
substitute a qualifying  Substitute  Mortgage Loan in exchange for such Mortgage
Loan.  The  obligations  of the  Mortgage  Loan  Seller  to  cure,  purchase  or
substitute  a  qualifying   Substitute   Mortgage  Loan  shall   constitute  the
Purchaser's, the Trustee's and the Certificateholder's sole and exclusive remedy
under this  Agreement or otherwise  respecting  a breach of  representations  or
warranties  hereunder  with  respect  to the  Mortgage  Loans,  except  for  the
obligation  of the Mortgage  Loan Seller to  indemnify  the  Purchaser  for such
breach as set forth in and limited by Section 13 hereof.

                                      J-13
<PAGE>

      Any cause of action  against  the  Mortgage  Loan Seller or relating to or
arising out of a breach by the Mortgage Loan Seller of any  representations  and
warranties  made in this Section 7 shall accrue as to any Mortgage Loan upon (i)
discovery  of such breach by the Mortgage  Loan Seller or notice  thereof by the
party  discovering  such breach and (ii) failure by the Mortgage  Loan Seller to
cure such  breach,  purchase  such  Mortgage  Loan or  substitute  a  qualifying
Substitute Mortgage Loan pursuant to the terms hereof.

      SECTION 8.  Representations  and  Warranties  Concerning the Mortgage Loan
Seller.  As of the date hereof and as of the Closing  Date,  the  Mortgage  Loan
Seller  represents  and  warrants to the  Purchaser as to itself in the capacity
indicated as follows:

      (a) the Mortgage Loan Seller (i) is a corporation duly organized,  validly
existing and in good  standing  under the laws of the State of Delaware and (ii)
is qualified and in good standing to do business in each jurisdiction where such
qualification  is  necessary,  except where the failure so to qualify  would not
reasonably  be expected to have a material  adverse  effect on the Mortgage Loan
Seller's business as presently conducted or on the Mortgage Loan Sellers ability
to enter into this  Agreement and to consummate  the  transactions  contemplated
hereby;

      (b) the Mortgage Loan Seller has full power to own its property,  to carry
on its  business  as  presently  conducted  and to enter  into and  perform  its
obligations under this Agreement;

      (c) the  execution  and  delivery  by the  Mortgage  Loan  Seller  of this
Agreement have been duly  authorized by all necessary  action on the part of the
Mortgage Loan Seller;  and neither the execution and delivery of this Agreement,
nor the consummation of the  transactions  herein  contemplated,  nor compliance
with the  provisions  hereof,  will  conflict  with or result in a breach of, or
constitute a default under, any of the provisions of any law, governmental rule,
regulation, judgment, decree or order binding on the Mortgage Loan Seller or its
properties or the charter or by-laws of the Mortgage  Loan Seller,  except those
conflicts, breaches or defaults which would not reasonably be expected to have a
material adverse effect on the Mortgage Loan Seller's ability to enter into this
Agreement and to consummate the transactions contemplated hereby;

      (d) the execution, delivery and performance by the Mortgage Loan Seller of
this Agreement and the consummation of the transactions  contemplated  hereby do
not  require  the  consent  or  approval  of,  the  giving  of  notice  to,  the
registration  with,  or the taking of any other action in respect of, any state,
federal or other  governmental  authority  or  agency,  except  those  consents,
approvals,  notices,  registrations  or  other  actions  as  have  already  been
obtained,  given  or  made  and,  in  connection  with  the  recordation  of the
Mortgages, powers of attorney or assignments of Mortgages not yet completed;

      (e) this  Agreement  has been duly  executed and delivered by the Mortgage
Loan Seller and,  assuming  due  authorization,  execution  and  delivery by the
Purchaser,  constitutes  a valid and binding  obligation  of the  Mortgage  Loan
Seller enforceable against it in

                                      J-14
<PAGE>

accordance with its terms (subject to applicable  bankruptcy and insolvency laws
and other  similar laws  affecting  the  enforcement  of the rights of creditors
generally);

      (f)  there  are no  actions,  suits  or  proceedings  pending  or,  to the
knowledge of the  Mortgage  Loan Seller,  threatened  against the Mortgage  Loan
Seller,  before  or  by  any  court,   administrative   agency,   arbitrator  or
governmental  body (i) with respect to any of the  transactions  contemplated by
this Agreement or (ii) with respect to any other matter which in the judgment of
the Mortgage  Loan Seller will be  determined  adversely  to the  Mortgage  Loan
Seller and will if determined  adversely to the Mortgage Loan Seller  materially
and  adversely  affect  the  Mortgage  Loan  Seller's  ability  to  perform  its
obligations under this Agreement; and the Mortgage Loan Seller is not in default
with respect to any order of any court,  administrative  agency,  arbitrator  or
governmental  body so as to  materially  and adversely  affect the  transactions
contemplated by this Agreement; and

      (g) the Mortgage  Loan Seller's  Information  (as defined in Section 13(a)
hereof)  does not include  any untrue  statement  of a material  fact or omit to
state a material fact necessary in order to make the  statements  made, in light
of the circumstances under which they were made, not misleading.

      SECTION 9. Representations and Warranties Concerning the Purchaser.  As of
the date  hereof  and as of the  Closing  Date,  the  Purchaser  represents  and
warrants to the Mortgage Loan Seller as follows:

      (a) the Purchaser (i) is a corporation  duly organized,  validly  existing
and in good  standing  under  the  laws of the  State  of  Delaware  and (ii) is
qualified and in good standing as a foreign  corporation  to do business in each
jurisdiction where such qualification is necessary,  except where the failure so
to qualify would not reasonably be expected to have a material adverse effect on
the Purchaser's business as presently conducted or on the Purchaser's ability to
enter  into this  Agreement  and to  consummate  the  transactions  contemplated
hereby;

      (b) the Purchaser has full corporate  power to own its property,  to carry
on its  business  as  presently  conducted  and to enter  into and  perform  its
obligations under this Agreement;

      (c) the  execution and delivery by the  Purchaser of this  Agreement  have
been  duly  authorized  by all  necessary  corporate  action  on the part of the
Purchaser;  and neither the  execution and delivery of this  Agreement,  nor the
consummation of the transactions  herein  contemplated,  nor compliance with the
provisions hereof,  will conflict with or result in a breach of, or constitute a
default under, any of the provisions of any law, governmental rule,  regulation,
judgment,  decree or order  binding on the  Purchaser or its  properties  or the
articles of incorporation  or by-laws of the Purchaser,  except those conflicts,
breaches or defaults  which would not  reasonably be expected to have a material
adverse  effect on the  Purchaser's  ability to enter into this Agreement and to
consummate the transactions contemplated hereby;

      (d) the  execution,  delivery  and  performance  by the  Purchaser of this
Agreement and the  consummation of the transactions  contemplated  hereby do not
require the

                                      J-15
<PAGE>

consent or approval of, the giving of notice to, the  registration  with, or the
taking  of any  other  action  in  respect  of,  any  state,  federal  or  other
governmental  authority or agency,  except those consents,  approvals,  notices,
registrations or other actions as have already been obtained, given or made;

      (e) this  Agreement  has been duly executed and delivered by the Purchaser
and,  assuming due  authorization,  execution  and delivery by the Mortgage Loan
Seller,  constitutes a valid and binding obligation of the Purchaser enforceable
against it in accordance  with its terms  (subject to applicable  bankruptcy and
insolvency  laws and other similar laws affecting the  enforcement of the rights
of creditors generally);

      (f)  there  are no  actions,  suits  or  proceedings  pending  or,  to the
knowledge of the Purchaser,  threatened against the Purchaser,  before or by any
court,  administrative agency,  arbitrator or governmental body (i) with respect
to any of the  transactions  contemplated by this Agreement or (ii) with respect
to any other matter which in the judgment of the  Purchaser  will be  determined
adversely to the  Purchaser  and will if  determined  adversely to the Purchaser
materially  and  adversely  affect  the  Purchaser's   ability  to  perform  its
obligations  under this  Agreement;  and the  Purchaser  is not in default  with
respect  to any  order  of  any  court,  administrative  agency,  arbitrator  or
governmental  body so as to  materially  and adversely  affect the  transactions
contemplated by this Agreement; and

      (g) the Purchaser's  Information (as defined in Section 13(b) hereof) does
not include any untrue  statement of a material fact or omit to state a material
fact  necessary  in  order  to  make  the  statements  made,  in  light  of  the
circumstances under which they were made, not misleading.

      SECTION 10. Conditions to Closing.

      (a) The  obligations of the Purchaser under this Agreement will be subject
to  the  satisfaction,  on or  prior  to the  Closing  Date,  of  the  following
conditions:

            (i) Each of the  obligations of the Mortgage Loan Seller required to
      be performed at or prior to the Closing Date pursuant to the terms of this
      Agreement shall have been duly performed and complied with in all material
      respects;  all of the  representations and warranties of the Mortgage Loan
      Seller  under this  Agreement  shall be true and correct as of the date or
      dates specified in all material respects; and no event shall have occurred
      which,  with notice or the  passage of time,  would  constitute  a default
      under this  Agreement,  or the Pooling and  Servicing  Agreement;  and the
      Purchaser  shall  have  received  certificates  to that  effect  signed by
      authorized officers of the Mortgage Loan Seller.

            (ii) The Purchaser shall have received all of the following  closing
      documents,  in such forms as are agreed upon and reasonably  acceptable to
      the Purchaser, duly executed by all signatories (other than the Purchaser)
      as required pursuant to the respective terms thereof:

                                      J-16
<PAGE>

                  (1) If required  pursuant to Section 3 hereof,  the  Amendment
            dated as of the Closing Date and any documents referred to therein;

                  (2) If  required  pursuant  to  Section  3  hereof,  the Final
            Mortgage  Loan  Schedule  containing  the  information  set forth on
            Exhibit 2 hereto, one copy to be attached to each counterpart of the
            Amendment;

                  (3) The Pooling and Servicing Agreement, in form and substance
            reasonably  satisfactory  to the Trustee and the Purchaser,  and all
            documents required thereby duly executed by all signatories;

                  (4) A  certificate  of an officer of the Mortgage  Loan Seller
            dated as of the Closing Date, in a form reasonably acceptable to the
            Purchaser, and attached thereto the resolutions of the Mortgage Loan
            Seller authorizing the transactions  contemplated by this Agreement,
            together with copies of the charter and by-laws of the Mortgage Loan
            Seller;

                  (5) One or more  opinions of counsel  from the  Mortgage  Loan
            Seller's  counsel   otherwise  in  form  and  substance   reasonably
            satisfactory to the Purchaser, the Trustee and each Rating Agency;

                  (6) A letter  from each of the  Rating  Agencies  giving  each
            Class of  Certificates  set forth on Schedule A the rating set forth
            on Schedule A; and

                  (7) Such other documents,  certificates  (including additional
            representations  and  warranties)  and opinions as may be reasonably
            necessary to secure the intended ratings from each Rating Agency for
            the Certificates.

            (iii) The  Certificates  to be sold to Bear Stearns  pursuant to the
      Underwriting  Agreement and the Purchase  Agreement shall have been issued
      and sold to Bear Stearns.

            (iv) The Mortgage Loan Seller shall have  furnished to the Purchaser
      such other certificates of its officers or others and such other documents
      and  opinions of counsel to evidence  fulfillment  of the  conditions  set
      forth in this Agreement and the  transactions  contemplated  hereby as the
      Purchaser and its counsel may reasonably request.

      (b) The obligations of the Mortgage Loan Seller under this Agreement shall
be  subject  to the  satisfaction,  on or  prior  to the  Closing  Date,  of the
following conditions:

            (i) The obligations of the Purchaser  required to be performed by it
      on or prior to the Closing  Date  pursuant to the terms of this  Agreement
      shall have been duly performed and complied with in all material respects,
      and all of the  representations and warranties of the Purchaser under this
      Agreement  shall be true and  correct in all  material  respects as of the
      date hereof and as of the Closing Date, and no event shall have

                                      J-17
<PAGE>

      occurred  which  would  constitute  a  breach  by it of the  terms of this
      Agreement,  and the Mortgage Loan Seller shall have received a certificate
      to that effect signed by an authorized officer of the Purchaser.

            (ii) The Mortgage Loan Seller shall have  received  copies of all of
      the  following  closing  documents,  in such forms as are agreed  upon and
      reasonably  acceptable to the Mortgage  Loan Seller,  duly executed by all
      signatories  other than the Mortgage  Loan Seller as required  pursuant to
      the respective terms thereof:

                  (1) If required  pursuant to Section 3 hereof,  the  Amendment
            dated as of the Closing Date and any documents referred to therein;

                  (2) The Pooling and Servicing Agreement, in form and substance
            reasonably  satisfactory  to  the  Mortgage  Loan  Seller,  and  all
            documents required thereby duly executed by all signatories;

                  (3) A certificate  of an officer of the Purchaser  dated as of
            the Closing  Date, in a form  reasonably  acceptable to the Mortgage
            Loan Seller,  and attached  thereto the resolutions of the Purchaser
            authorizing the transactions  contemplated by this Agreement and the
            Pooling  and  Servicing  Agreement,  together  with  copies  of  the
            Purchaser's  articles of incorporation,  and evidence as to the good
            standing of the Purchaser dated as of a recent date;

                  (4) One or more  opinions  of  counsel  from  the  Purchaser's
            counsel  in  form  and  substance  reasonably  satisfactory  to  the
            Mortgage Loan Seller;

                  (5) Such other documents,  certificates  (including additional
            representations  and  warranties)  and opinions as may be reasonably
            necessary to secure the intended  rating from each Rating Agency for
            the Certificates;

      SECTION 11. Fees and Expenses.  Subject to Section 16 hereof, the Mortgage
Loan Seller shall pay on the Closing Date or such later date as may be agreed to
by the  Purchaser  (i) the fees  and  expenses  of the  Mortgage  Loan  Seller's
attorneys and the  reasonable  fees and expenses of the  Purchaser's  attorneys,
(ii) the fees and  expenses of Deloitte & Touche LLP,  (iii) the fee for the use
of Purchaser's  Registration Statement based on the aggregate original principal
amount of the  Certificates and the filing fee of the Commission as in effect on
the date on which the Registration  Statement was declared  effective,  (iv) the
fees and expenses  including  counsel's fees and expenses in connection with any
"blue  sky" and  legal  investment  matters,  (v) the fees and  expenses  of the
Trustee  which shall  include  without  limitation  the fees and expenses of the
Trustee  (and the fees and  disbursements  of its  counsel)  with respect to (A)
legal  and  document  review  of  this  Agreement,  the  Pooling  and  Servicing
Agreement,  the  Certificates  and related  agreements,  (B)  attendance  at the
Closing and (C) review of the Mortgage  Loans to be performed by the  Custodian,
(vi) the expenses for printing or otherwise  reproducing the  Certificates,  the
Prospectus  and the Prospectus  Supplement,  (vii) the fees and expenses of each
Rating Agency (both initial and ongoing),  (viii) the fees and expenses relating
to the preparation

                                      J-18
<PAGE>

and recordation of mortgage assignments (including intervening  assignments,  if
any and if available,  to evidence a complete chain of title from the originator
to the  Trustee)  from the  Mortgage  Loan Seller to the Trustee or the expenses
relating to the Opinion of Counsel  referred to in Section 6(a)  hereof,  as the
case  may  be,  and  (ix)  Mortgage  File  due  diligence   expenses  and  other
out-of-pocket expenses incurred by the Purchaser in connection with the purchase
of the  Mortgage  Loans and by Bear Stearns in  connection  with the sale of the
Certificates.  The Mortgage Loan Seller  additionally  agrees to pay directly to
any third party on a timely basis the fees  provided for above which are charged
by such third party and which are billed periodically.

      SECTION 12. Accountants' Letters.

      (a) Deloitte & Touche LLP will review the  characteristics  of a sample of
the  Mortgage  Loans  described  in the Final  Mortgage  Loan  Schedule and will
compare those characteristics to the description of the Mortgage Loans contained
in  the  Prospectus   Supplement  under  the  captions  "Summary  of  Prospectus
Supplement   -  The  Mortgage   Loans",   "The   Mortgage   Pool"  and  "Certain
Characteristics of the Mortgage Loans" in Schedule A thereto.  The Mortgage Loan
Seller will cooperate with the Purchaser in making available all information and
taking all steps reasonably necessary to permit such accountants to complete the
review and to  deliver  the  letters  required  of them  under the  Underwriting
Agreement.  Deloitte & Touche LLP will also confirm certain  calculations as set
forth  under  the  caption  "Yield  On  The   Certificates"  in  the  Prospectus
Supplement.

      (b) To the  extent  statistical  information  with  respect  to the Master
Servicer's  or a Servicer's  servicing  portfolio is included in the  Prospectus
Supplement  under the caption "The Master  Servicer and the Servicers," a letter
from the certified  public  accountant for the Master Servicer and such Servicer
or Servicers will be delivered to the Purchaser dated the date of the Prospectus
Supplement, in the form previously agreed to by the Mortgage Loan Seller and the
Purchaser, with respect to such statistical information.

      SECTION 13. Indemnification.

      (a) The  Mortgage  Loan  Seller  shall  indemnify  and hold  harmless  the
Purchaser and its  directors,  officers and  controlling  persons (as defined in
Section 15 of the Securities  Act) from and against any loss,  claim,  damage or
liability or action in respect thereof,  to which they or any of them may become
subject,  under the  Securities Act or otherwise,  insofar as such loss,  claim,
damage,  liability  or action  arises  out of, or is based  upon (i) any  untrue
statement of a material fact contained in the Mortgage Loan Seller's Information
as identified in Exhibit 3, the omission to state in the  Prospectus  Supplement
or Prospectus (or any amendment  thereof or supplement  thereto  approved by the
Mortgage Loan Seller and in which additional Mortgage Loan Seller's  Information
is  identified),  in reliance upon and in conformity with Mortgage Loan Seller's
Information a material  fact required to be stated  therein or necessary to make
the statements  therein in light of the  circumstances  in which they were made,
not  misleading,  (ii) any  representation  or warranty  assigned or made by the
Mortgage Loan Seller in Section 7 or Section 8 hereof  being,  or alleged to be,
untrue or incorrect, or (iii) any failure by the Mortgage Loan Seller to perform
its  obligations  under this  Agreement;  and the  Mortgage  Loan  Seller  shall
reimburse the Purchaser and each other indemnified party for any legal and

                                      J-19
<PAGE>

other expenses  reasonably  incurred by them in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action.

      The foregoing  indemnity  agreement is in addition to any liability  which
the Mortgage  Loan Seller  otherwise may have to the Purchaser or any other such
indemnified party.

      (b) The  Purchaser  shall  indemnify  and hold  harmless the Mortgage Loan
Seller and its  respective  directors,  officers  and  controlling  persons  (as
defined in Section 15 of the Securities  Act) from and against any loss,  claim,
damage or liability or action in respect  thereof,  to which they or any of them
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim,  damage,  liability  or action  arises  out of, or is based  upon (i) any
untrue statement of a material fact contained in the Purchaser's  Information as
identified in Exhibit 4, the omission to state in the  Prospectus  Supplement or
Prospectus  (or any  amendment  thereof or  supplement  thereto  approved by the
Purchaser and in which  additional  Purchaser's  Information is identified),  in
reliance upon and in conformity  with the  Purchaser's  Information,  a material
fact required to be stated therein or necessary to make the  statements  therein
in light of the circumstances in which they were made, not misleading,  (ii) any
representation  or warranty made by the Purchaser in Section 9 hereof being,  or
alleged to be,  untrue or  incorrect,  or (iii) any failure by the  Purchaser to
perform its obligations under this Agreement;  and the Purchaser shall reimburse
the Mortgage  Loan Seller,  and each other  indemnified  party for any legal and
other expenses  reasonably  incurred by them in connection with investigating or
defending  or  preparing to defend any such loss,  claim,  damage,  liability or
action. The foregoing  indemnity agreement is in addition to any liability which
the Purchaser  otherwise may have to the Mortgage Loan Seller, or any other such
indemnified party,

      (c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action,  such  indemnified  party
shall,  if a claim in respect  thereof is to be made  against  the  indemnifying
party under such subsection,  notify each party against whom  indemnification is
to be sought in  writing  of the  commencement  thereof  (but the  failure so to
notify an  indemnifying  party shall not relieve it from any liability  which it
may have under this Section 13 except to the extent that it has been  prejudiced
in any material  respect by such failure or from any liability which it may have
otherwise).  In case any such action is brought against any  indemnified  party,
and  it  notifies  an  indemnifying  party  of  the  commencement  thereof,  the
indemnifying party will be entitled to participate therein and, to the extent it
may elect by written notice delivered to the indemnified party promptly (but, in
any event,  within 30 days)  after  receiving  the  aforesaid  notice  from such
indemnified  party,  to assume  the  defense  thereof  with  counsel  reasonably
satisfactory  to such  indemnified  party.  Notwithstanding  the foregoing,  the
indemnified  party or  parties  shall  have the right to employ its or their own
counsel in any such case,  but the fees and expenses of such counsel shall be at
the expense of such  indemnified  party or parties  unless (i) the employment of
such counsel shall have been  authorized  in writing by one of the  indemnifying
parties in  connection  with the defense of such action,  (ii) the  indemnifying
parties  shall not have  employed  counsel to have charge of the defense of such
action within a reasonable time after notice of  commencement of the action,  or
(iii) such  indemnified  party or parties shall have  reasonably  concluded that
there  is  a  conflict  of  interest   between  itself  or  themselves  and  the
indemnifying  party  in the  conduct  of the  defense  of any  claim or that the
interests of the indemnified party or parties are not

                                      J-20
<PAGE>

substantially  co-extensive with those of the indemnifying  party (in which case
the indemnifying  parties shall not have the right to direct the defense of such
action on behalf of the  indemnified  party or parties),  in any of which events
such fees and expenses  shall be borne by the  indemnifying  parties  (provided,
however,  that the  indemnifying  party  shall be  liable  only for the fees and
expenses of one counsel in  addition  to one local  counsel in the  jurisdiction
involved.  Anything  in this  subsection  to the  contrary  notwithstanding,  an
indemnifying party shall not be liable for any settlement or any claim or action
effected without its written consent;  provided,  however, that such consent was
not unreasonably withheld.

      (d) If the indemnification  provided for in paragraphs (a) and (b) of this
Section  13 shall  for any  reason be  unavailable  to an  indemnified  party in
respect  of any loss,  claim,  damage or  liability,  or any  action in  respect
thereof, referred to in Section 13, then the indemnifying party shall in lieu of
indemnifying  the indemnified  party contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability,  or
action in respect thereof, in such proportion as shall be appropriate to reflect
the relative  benefits  received by the Mortgage Loan Seller on the one hand and
the Purchaser on the other from the purchase and sale of the Mortgage Loans, the
offering of the Certificates and the other transactions  contemplated hereunder.
No person found liable for a fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution  from any
person who is not also found liable for such fraudulent misrepresentation.

      (e) The parties hereto agree that reliance by an indemnified  party on any
publicly available  information or any information or directions furnished by an
indemnifying  party  shall  not  constitute  negligence,  bad  faith or  willful
misconduct by such indemnified party.

      SECTION 14. Notices.  All demands,  notices and  communications  hereunder
shall be in writing but may be delivered by facsimile transmission  subsequently
confirmed in writing.  Notices to the Mortgage  Loan Seller shall be directed to
EMC Mortgage  Corporation,  Mac Arthur  Ridge II, 909 Hidden Ridge Drive,  Suite
200,  Irving,  Texas  75038  (Telecopy:  (972-444-2880)),  and  notices  to  the
Purchaser  shall be directed to Structured  Asset Mortgage  Investments II Inc.,
383  Madison  Avenue,  New  York,  New York  10179  (Telecopy:  (212-272-7206)),
Attention:  Baron  Silverstein;  or to any other  address  as may  hereafter  be
furnished  by one  party to the other  party by like  notice.  Any such  demand,
notice or  communication  hereunder shall be deemed to have been received on the
date  received at the premises of the addressee  (as  evidenced,  in the case of
registered or certified mail, by the date noted on the return receipt)  provided
that it is  received  on a business  day during  normal  business  hours and, if
received after normal business hours,  then it shall be deemed to be received on
the next business day.

      SECTION 15. Transfer of Mortgage Loans. The Purchaser retains the right to
assign the Mortgage Loans and any or all of its interest under this Agreement to
the Trustee  without the consent of the  Mortgage  Loan Seller,  and,  upon such
assignment,  the Trustee shall succeed to the applicable  rights and obligations
of the  Purchaser  hereunder;  provided,  however,  the  Purchaser  shall remain
entitled  to the  benefits  set forth in  Sections  11, 13 and 17 hereto  and as
provided in Section 2(a).  Notwithstanding the foregoing, the sole and exclusive
right and remedy of the Trustee  with respect to a breach of  representation  or
warranty of the Mortgage

                                      J-21
<PAGE>

Loan Seller shall be the purchase or  substitution  obligations  of the Mortgage
Loan Seller contained in Sections 5 and 7 hereof.

      SECTION 16.  Termination.  This  Agreement  may be  terminated  (a) by the
mutual  consent of the  parties  hereto  prior to the Closing  Date,  (b) by the
Purchaser,  if the conditions to the  Purchaser's  obligation to close set forth
under  Section  10(a)  hereof  are not  fulfilled  as and  when  required  to be
fulfilled or (c) by the Mortgage Loan Seller,  if the conditions to the Mortgage
Loan  Seller's  obligation to close set forth under Section 10(b) hereof are not
fulfilled  as and when  required to be  fulfilled.  In the event of  termination
pursuant to clause (b), the Mortgage  Loan Seller shall pay, and in the event of
termination  pursuant to clause (c), the  Purchaser  shall pay,  all  reasonable
out-of-pocket expenses incurred by the other in connection with the transactions
contemplated by this Agreement. In the event of a termination pursuant to clause
(a), each party shall be responsible for its own expenses.

      SECTION  17.   Representations,   Warranties  and  Agreements  to  Survive
Delivery.  All  representations,  warranties  and  agreements  contained in this
Agreement,  or contained in certificates of officers of the Mortgage Loan Seller
submitted  pursuant hereto,  shall remain operative and in full force and effect
and shall survive  delivery of the Mortgage  Loans to the Purchaser  (and by the
Purchaser to the Trustee).  Subsequent to the delivery of the Mortgage  Loans to
the  Purchaser,  the  Mortgage  Loan  Seller's  representations  and  warranties
contained herein with respect to the Mortgage Loans shall be deemed to relate to
the Mortgage Loans actually delivered to the Purchaser and included in the Final
Mortgage  Loan  Schedule  and any  Substitute  Mortgage  Loan  and not to  those
Mortgage Loans deleted from the Preliminary  Mortgage Loan Schedule  pursuant to
Section 3 hereof prior to the Closing.

      SECTION 18.  Severability.  If any  provision of this  Agreement  shall be
prohibited or invalid under  applicable  law, the Agreement shall be ineffective
only to such extent, without invalidating the remainder of this Agreement.

      SECTION 19. Counterparts.  This Agreement may be executed in counterparts,
each of which will be an original,  but which together shall  constitute one and
the same agreement.

      SECTION 20. Amendment. This Agreement cannot be amended or modified in any
manner without the prior written consent of each party.

      SECTION 21.  GOVERNING  LAW. THIS  AGREEMENT  SHALL BE DEEMED TO HAVE BEEN
MADE  AND  PERFORMED  IN THE  STATE OF NEW YORK  AND  SHALL  BE  INTERPRETED  IN
ACCORDANCE  WITH THE LAWS OF SUCH  STATE,  WITHOUT  REGARD TO  CONFLICT  OF LAWS
PRINCIPLES OF SUCH STATE.

      SECTION 22. Further Assurances.  Each of the parties agrees to execute and
deliver such  instruments  and take such actions as another party may, from time
to time,  reasonably request in order to effectuate the purpose and to carry out
the  terms of this  Agreement  including  any  amendments  hereto  which  may be
required by either Rating Agency.

      SECTION 23. Successors and Assigns.

                                      J-22
<PAGE>

      This  Agreement  shall bind and inure to the benefit of and be enforceable
by the Mortgage Loan Seller and the Purchaser and their permitted successors and
assigns and, to the extent  specified in Section 13 hereof,  Bear  Stearns,  and
their directors, officers and controlling persons (within the meaning of federal
securities  laws).  The Mortgage  Loan Seller  acknowledges  and agrees that the
Purchaser  may assign  its  rights  under  this  Agreement  (including,  without
limitation,  with  respect to the Mortgage  Loan  Seller's  representations  and
warranties  respecting the Mortgage Loans) to the Trustee. Any person into which
the Mortgage Loan Seller may be merged or consolidated  (or any person resulting
from any merger or consolidation involving the Mortgage Loan Seller), any person
resulting  from a change  in form of the  Mortgage  Loan  Seller  or any  person
succeeding to the business of the Mortgage Loan Seller,  shall be considered the
"successor"  of the Mortgage  Loan Seller  hereunder  and shall be  considered a
party hereto  without the execution or filing of any paper or any further act or
consent on the part of any party hereto. Except as provided in the two preceding
sentences, this Agreement cannot be assigned,  pledged or hypothecated by either
party hereto without the written  consent of the other parties to this Agreement
and any such assignment or purported assignment shall be deemed null and void.

      SECTION 24. The Mortgage  Loan Seller.  The Mortgage Loan Seller will keep
in  full  effect  all  rights  as are  necessary  to  perform  their  respective
obligations under this Agreement.

      SECTION 25. Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties with respect to the subject matter hereof,
and  supersedes  all  prior  and  contemporaneous  agreements,   understandings,
inducements and conditions,  express or implied,  oral or written, of any nature
whatsoever with respect to the subject matter hereof.

      SECTION 26. No  Partnership.  Nothing herein  contained shall be deemed or
construed to create a partnership or joint venture between the parties hereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      J-23
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto  have  caused  their names to be
signed hereto by their respective duly authorized  officers as of the date first
above written.

                                       EMC MORTGAGE CORPORATION

                                       By:
                                              --------------------------------
                                       Name:  Dana Dillard
                                       Title: Senior Vice President

                                       STRUCTURED ASSET MORTGAGE
                                       INVESTMENTS II INC.

                                       By:
                                              --------------------------------
                                       Name:  Baron Silverstein
                                       Title: Vice President

                                      J-24
<PAGE>

                                    EXHIBIT 1

                            CONTENTS OF MORTGAGE FILE

      With respect to each Mortgage  Loan,  the Mortgage File shall include each
of the following items, which shall be available for inspection by the Purchaser
or its  designee,  and which shall be delivered to the Purchaser or its designee
pursuant to the terms of the Agreement.

      Section 4.6 with respect to each  Mortgage  Loan (other than a Cooperative
Loan):

            (a) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the  originator  thereof to the Person  endorsing it to the Trustee,  or a
      lost note affidavit together with a copy of the related Mortgage Note;

            (b) 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 the  original is not  available,  a copy),  with
      evidence of such recording  indicated thereon (or if the original Security
      Instrument,  assignments to the Trustee or intervening assignments thereof
      which have been  delivered,  are being  delivered or will, upon receipt of
      recording  information  relating to the Security Instrument required to be
      included thereon, be delivered to recording offices for recording and have
      not been  returned  to the  Seller in time to permit  their  recording  as
      specified in Section 2.01(b) of the Pooling and Servicing Agreement, shall
      be in recordable form);

            (c) unless the Mortgage Loan is a MOM Loan, a certified  copy of the
      assignment (which may be in the form of a blanket  assignment if permitted
      in the  jurisdiction in which the Mortgaged  Property is located) to "U.S.
      Bank National  Association,  as Trustee",  with evidence of recording with
      respect to each  Mortgage  Loan in the name of the Trustee  thereon (or if
      (A) the  original  Security  Instrument,  assignments  to the  Trustee  or
      intervening  assignments  thereof  which  have been  delivered,  are being
      delivered or will, upon receipt of recording  information  relating to the
      Security  Instrument  required to be included  thereon,  be  delivered  to
      recording  offices for  recording and have not been returned to the Seller
      in time to permit their  delivery as  specified in Section  2.01(b) of the
      Pooling  and  Servicing  Agreement,  the  Seller  may  deliver a true copy
      thereof  with a  certification  by the  Seller,  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" or (B) the related
      Mortgaged  Property  is located  in a state  other  than  Maryland  and an
      Opinion of Counsel has been  provided  as set forth in Section  2.01(b) of
      the Pooling and Servicing Agreement, shall be in recordable form);

            (d) all  intervening  assignments  of the  Security  Instrument,  if
      applicable  and only to the extent  available to the Mortgage  Loan Seller
      with evidence of recording thereon;

                                      J-25
<PAGE>

            (e) the original or a copy of the policy or  certificate  of primary
      mortgage guaranty insurance, to the extent available, if any;

            (f)  the  original   policy  of  title   insurance  or   mortgagee's
      certificate  of  title   insurance  or  commitment  or  binder  for  title
      insurance; and

            (g) originals of all  modification  agreements,  if  applicable  and
      available.

      Section 4.7 with respect to each Cooperative Loan so assigned:

            (a) The original  Mortgage Note,  endorsed  without  recourse to the
      order of the Trustee and showing an unbroken  chain of  endorsements  from
      the originator thereof to the Person endorsing it to the Trustee,  or lost
      note affidavit, together with a copy of the related Mortgage Note;

            (b) A counterpart  of the  Cooperative  Lease and the  Assignment of
      Proprietary   Lease  to  the  originator  of  the  Cooperative  Loan  with
      intervening  assignments  showing  an  unbroken  chain of title  from such
      originator to the Trustee;

            (c) The related  Cooperative  Stock  Certificate,  representing  the
      related  Cooperative  Stock pledged with respect to such Cooperative Loan,
      together  with an  undated  stock  power  (or  other  similar  instrument)
      executed in blank;

            (d) The original  recognition  agreement by the  Cooperative  of the
      interests of the mortgagee  with respect to the related  Cooperative  Loan
      and any transfer documents related to the recognition agreement;

            (e) The Security Agreement;

            (f)  Copies  of the  original  UCC-1  financing  statement,  and any
      continuation statements,  filed by the originator of such Cooperative Loan
      as secured party, each with evidence of recording thereof,  evidencing the
      interest of the originator under the Security Agreement and the Assignment
      of Proprietary Lease;

            (g) Copies of the filed UCC-3  assignments of the security  interest
      referenced  in clause (vi) above  showing an unbroken  chain of title from
      the  originator to the Trustee,  each with evidence of recording  thereof,
      evidencing the interest of the originator under the Security Agreement and
      the Assignment of Proprietary Lease;

            (h) An executed  assignment of the interest of the originator in the
      Security  Agreement  and  Assignment  of  Proprietary  Lease,  showing  an
      unbroken chain of title from the originator to the Trustee; and

            (i) The  original  of each  modification,  assumption  agreement  or
      preferred loan agreement, if any, relating to such Cooperative Loan.

                                      J-26
<PAGE>

                                    EXHIBIT 2

                       MORTGAGE LOAN SCHEDULE INFORMATION

      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 city, state and zip code of the Mortgaged Property;

            (d) the property type;

            (e) the Mortgage Interest Rate;

            (f) the 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;

            (l) the first payment date;

            (m) the principal  and interest  payment in effect as of the Cut-off
      Date;

            (n) the unpaid principal balance as of the Cut-off Date;

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

            (p) paid-through date;

            (q) the insurer of any Primary Mortgage Insurance Policy;

            (r) the Gross Margin, if applicable;

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

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

            (u) the Periodic Rate Cap, if applicable;

            (v) the number of days delinquent, if any;

                                      J-27
<PAGE>

            (w) which Mortgage Loans adjust after an initial  fixed-rate  period
      of three, five, seven or ten years;

            (x) the Loan Group;

            (y) the Prepayment Charge Loans; and

            (z) the Servicer.

Such schedule also shall set forth for all of the Mortgage Loans, the total
number of Mortgage Loans, the total of each of the amounts described under (k)
and (n) above, the weighted average by principal balance as of the Cut-off Date
of each of the rates described under (e), (f) and (g) above, and the weighted
average remaining term to maturity by unpaid principal balance as of the Cut-off
Date.

                                      J-28
<PAGE>

                                    EXHIBIT 3

                       MORTGAGE LOAN SELLER'S INFORMATION

      All information in the Prospectus Supplement described under the following
Sections:  "SUMMARY  OF  PROSPECTUS  SUPPLEMENT  -- The  Mortgage  Loans,"  "THE
MORTGAGE  POOL" and  "SCHEDULE  A --  CERTAIN  CHARACTERISTICS  OF THE  MORTGAGE
LOANS."

                                      J-29
<PAGE>

                                    EXHIBIT 4

                             PURCHASER'S INFORMATION

      All information in the Prospectus  Supplement and the  Prospectus,  except
the Mortgage Loan Seller's Information.

                                      J-30
<PAGE>

                                    EXHIBIT 5

                             SCHEDULE OF LOST NOTES

                             Available Upon Request

                                      J-31
<PAGE>

                                    EXHIBIT 6

         APPENDIX E: Standard & Poor's Predatory Lending Categorization

      Standard & Poor's has categorized loans governed by anti-predatory lending
laws in the  Jurisdictions  listed  below  into  three  categories  based upon a
combination  of factors that include (a) the risk exposure  associated  with the
assignee  liability  and (b) the tests and  thresholds  set forth in those laws.
Note that  certain  loans  classified  by the  relevant  statute as Covered  are
included in  Standard & Poor's High Cost Loan  Category  because  they  included
thresholds and tests that are typical of what is generally  considered High Cost
by the industry.

<TABLE>
------------------------------------------------------------------------------------------------------------------
                               STANDARD & POOR'S HIGH-COST LOAN CATEGORIZATION

------------------------------------------------------------------------------------------------------------------
<S>                                                <C>
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Arkansas                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Cleveland Heights, Ohio                            Covered Loan
------------------------------------------------------------------------------------------------------------------
Colorado                                           Covered Loan
------------------------------------------------------------------------------------------------------------------
Connecticut                                        High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
District of Columbia                               Covered Loan
------------------------------------------------------------------------------------------------------------------
Florida                                            High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002 - March 6, 2003)             High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Georgia as amended (March 7, 2003 - current)       High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
HOEPA Section 32                                   High Cost Loan
------------------------------------------------------------------------------------------------------------------
Illinois                                           High Risk Home Loan
------------------------------------------------------------------------------------------------------------------
Kansas                                             High Loan-to-Value Consumer Loans and High APR Consumer Loans
------------------------------------------------------------------------------------------------------------------
Kentucky                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Los Angeles, Calif.                                High Cost Refinance Home Loan
------------------------------------------------------------------------------------------------------------------
Maine                                              High Rate High Fee Mortgage
------------------------------------------------------------------------------------------------------------------
Massachusetts                                      High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Nevada                                             Home Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
New York                                           High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
New Mexico                                         High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
North Carolina                                     High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Oakland, Calif.                                    High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
Ohio                                               Covered Loan
------------------------------------------------------------------------------------------------------------------
Oklahoma                                           Subsection 10 Mortgage
------------------------------------------------------------------------------------------------------------------
South Carolina                                     High Cost Home Loan
------------------------------------------------------------------------------------------------------------------
West Virginia                                      West Virginia Mortgage Loan Act Loan
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      J-32
<PAGE>

<TABLE>
------------------------------------------------------------------------------------------------------------------
                                STANDARD & POOR'S COVERED LOAN CATEGORIZATION

------------------------------------------------------------------------------------------------------------------
<S>                                                <C>
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003)               Covered Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         Covered Home Loan
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
                                 STANDARD & POOR'S HOME LOAN CATEGORIZATION
------------------------------------------------------------------------------------------------------------------
STATE/JURISDICTION                                 CATEGORY UNDER APPLICABLE ANTI-PREDATORY LENDING LAW
------------------------------------------------------------------------------------------------------------------
Georgia (Oct. 1, 2002-March 6, 2003)               Home Loan
------------------------------------------------------------------------------------------------------------------
New Jersey                                         Home Loan
------------------------------------------------------------------------------------------------------------------
New Mexico                                         Home Loan
------------------------------------------------------------------------------------------------------------------
North Carolina                                     Consumer Home Loan
------------------------------------------------------------------------------------------------------------------
Oakland, Calif.                                    Home Loan
------------------------------------------------------------------------------------------------------------------
South Carolina                                     Consumer Home Loan
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                      J-33
<PAGE>

                                   SCHEDULE A

                 REQUIRED RATINGS FOR EACH CLASS OF CERTIFICATES

                               Public Certificates

                 Class                            S&P                 Fitch
-------------------------------------         -----------          -----------
Class I-A-1..........................             AAA                  AAA
Class I-A-2..........................             AAA                  AAA
Class I-A-3..........................             AAA                  AAA
Class I-A-4..........................             AAA                  AAA
Class I-A-5..........................             AAA                  AAA
Class I-A-6..........................             AAA                  AAA
Class I-A-7..........................             AAA                  AAA
Class I-A-8..........................             AAA                  AAA
Class I-PO...........................             AAA                  AAA
Class II-A-1.........................             AAA                  AAA
Class II-A-2.........................             AAA                  AAA
Class II-A-3.........................             AAA                  AAA
Class II-PO..........................             AAA                  AAA
Class II-X-1.........................             AAA                  AAA
Class R-I............................             AAA                   NR
Class R-II...........................             AAA                   NR
Class R-III..........................             AAA                   NR
Class B-1............................             AA                    NR
Class B-2............................              A                    NR
Class B-3............................             BBB                   NR

None of the above ratings have been lowered since the respective dates of such
letters.

                              Private Certificates

                 Class                            S&P                 Fitch
-------------------------------------         -----------          -----------
Class B-4............................             BB                    NR
Class B-5............................              B                    NR
Class B-6............................             NR                    NR

                                      J-34
<PAGE>

None of the above ratings have been lowered since the respective dates of such
letters.

                                      J-35
<PAGE>

                                   SCHEDULE B

                             MORTGAGE LOAN SCHEDULE

                             [Provided upon request]

                                      J-36

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00070-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00070-of-00352.parquet"}]]